EPC Newsletter
Issue 18 - April 2013
There is Only Plan A: Get Ready for SEPA by 1 February 2014 in the Euro Area!
The April 2013 edition again offers information to support market participants in the euro area in getting ready for SEPA by February 2014, as mandated by European Union (EU) law.
Javier Santamaría, Chairman of the European Payments Council (EPC), points out that good progress has been achieved by the corporate sector preparing for the transition. The focus should now be on joining forces to assist, in particular, small and medium-sized enterprises (SMEs) and local public administrations in the euro area that must meet the 1 February 2014 deadline. This requires coordinated efforts by national public authorities, and trade associations representing businesses and banks.
Wiebe Ruttenberg of the European Central Bank summarises the main findings of the first SEPA migration report, published by the Eurosystem in March 2013. The Eurosystem strongly advocates that all payment service providers have their customer servicing channels ready for SEPA transactions by the end of the second quarter of 2013 and that all other stakeholders, including ‘big billers’, public administrations and SMEs, migrate at the earliest stage possible, preferably by the third quarter of 2013 at the latest. This approach avoids risks which otherwise could impact the wider supply chain and would put the SEPA migration at risk. For more information, refer to his article ‘SEPA Migration – Don’t Count on a Plan B’.
There is only Plan A. Act now.
Following up on the previous EPC Poll, entitled: ‘Vote on future EPC Newsletter topics! Which EU regulatory action impacting euro payments is most important to you?’ we analyse the impact of the proposal for a Regulation on electronic identification and trust services for electronic transactions in the internal market. Respondents to the poll also indicated strong interest in the pending European Commission’s review of both the SEPA governance structure and the Payment Services Directive. It has been suggested that the European Commission will publish related proposals before the summer of 2013. We will report on these initiatives once this information is available.
Please recommend the EPC Newsletter to your colleagues – subscription is free by clicking here. The next issue will be published in July 2013.
Focus: SEPA Migration
Learn to Love SEPA: the 1 February 2014 Migration Deadline Mandated by European Union Law Will Not Go AwayThe focus must now be on joining forces to ensure that every market participant in the euro area required to achieve SEPA compliance will meet this deadline
25.04.13 By Javier Santamaría
The European Union (EU) legislator agreed on the 1 February 2014 deadline for migration to SEPA in December 2011. More than one year later, some commentators contributing to the SEPA debate continue to entertain the following - erroneous - ideas: (1) Meeting the February 2014 deadline is a matter of choice or convenience for payment service users (PSUs) making payments in the euro area. (2) It is beneficial to request postponement of this deadline from parties, including the European Payments Council (EPC), not vested with any powers to adopt or amend EU law. In this article, Javier Santamaría, Chairman of the EPC, clarifies (again): the only party empowered to change the migration deadline is the EU legislator; i.e. the European Parliament and the Council of the EU representing the 27 EU Member States. The EU legislator has never indicated that it would consider such a motion. Consequently, there is only Plan A: get ready for SEPA in the euro area by 1 February 2014. Good progress has been achieved by the corporate sector now preparing for the transition. The first SEPA migration report published by the European Central Bank (ECB) in March 2013, however, finds that SEPA preparedness of small and medium-sized enterprises (SMEs) and local public administrations remains "rather poor." These findings are disappointing, considering that EU finance ministers already called on public authorities in all EU Member States (i.e., themselves) in December 2009 to "lead SEPA migration by example" and "encourage communication efforts" by public authorities to raise SEPA awareness at national level. The time to act is now. There is only plan A.
|
Key Information in this Article The European Union (EU) ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation) effectively mandates migration to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) in the euro area by 1 February 2014. There are no indications whatsoever that the EU legislator; i.e. the European Parliament and the Council of the EU representing the 27 EU Member States, would consider changing Article 6 – the provision of the SEPA Regulation which defines the compliance date (1 February 2014) applicable in the euro area. The SEPA Regulation affects not only payment service providers, but also payment service users (PSUs). Good progress has been achieved with regard to creating SEPA awareness in the corporate sector; however efforts must be intensified to engage small and medium-sized enterprises (SMEs) and local public administrations in the process. Supporting SMEs and local public administrations to achieve SEPA compliance requires coordinated efforts by national public authorities, and trade associations representing businesses and banks. The measures implemented in Belgium and Finland, for example, to assist SMEs and public administrations perhaps offer some valuable lessons to other euro area countries on how to achieve progress. Article 10 of the SEPA Regulation clarifies that EU Member States must designate the competent authorities responsible to ensure compliance with this Regulation. Public authorities in the euro area responsible for enforcing the SEPA Regulation must significantly step up their communication efforts, with particular regard to SMEs and local public administrations on the legal obligation to meet the 1 February 2014 deadline. |
Focus: SEPA Migration
SEPA Migration - Don't Count on a Plan BEuropean Central Bank publishes first SEPA Migration Report and warns against risks of late migration
25.04.13 By Wiebe Ruttenberg
With less than ten months left, SEPA migration is entering its most critical stage. End-users, such as public administrations and businesses, big and small, have to get ready for the SEPA payment instruments, otherwise they risk refusal of transfers by payment service providers from 1 February 2014. This is one of the key messages in the Eurosystem's first SEPA Migration Report published in March 2013. The Eurosystem is comprised of the European Central Bank and the national central banks of the European Union Member States whose currency is the euro. The report describes the state of play of the migration process in euro area countries and provides guidance on critical aspects of the transition process. The report stresses that late migration is highly undesirable in projects like SEPA, where many technical details need to be reflected in end-users' back-office systems and internal processes. The Eurosystem therefore strongly advocates that all payment service providers have their customer servicing channels ready for SEPA transactions by the end of the second quarter of 2013 and that all other stakeholders, including 'big billers', public administrations and small and medium-sized enterprises, migrate at the earliest stage possible, preferably by the third quarter of 2013 at the latest. This approach avoids risks which otherwise could impact the wider supply chain and would put the SEPA migration at risk. In this article, Wiebe Ruttenberg, Head of the Market Integration Division in the Directorate General Payments and Market Infrastructure of the European Central Bank, summarises the main findings of the report.
|
Key Information in this Article The ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ effectively mandates migration to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) in the euro area by 1 February 2014. There is no plan B: migration to SCT and SDD is required by law, not only for payment service providers, but also for payment users like big billers, small and medium-sized enterprises (SMEs), public administrations and consumers. Operating outside the law is not an option, neither in terms of reputation nor from the business perspective. The ability to initiate payments would come at a higher cost, and reconciliation would become more problematic. Payment service providers will be obliged to refuse further processing of payments that are not delivered to them in the right technical format after the 1 February 2014 deadline applicable in the euro area. Ignoring the risks of non-compliance, including the hope of a slow response on the part of the responsible authorities, would be a mistake. The SEPA migration deadline, in February next year, is not the final stage in the development of retail payments. Changes and tangible benefits will become more pronounced over time, for instance by way of innovative services. |
SEPA Case Studies
If You Have Not Migrated to SEPA Yet - Get Ready and Get Inspired: SEPA Pioneers on the Demand Side Share Best Practice The SEPA deadline will not move from 1 February 2014 so act today to ensure your compliance
25.04.13 By Javier Santamaría
European Union (EU) law effectively mandates migration to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) in the euro area by 1 February 2014. Calls from some quarters to delay this deadline will continue, logically, to fall on deaf ears with the EU legislator, so any late movers need to wake up to the reality that there will be no extension. Instead, organisations of all sizes should act immediately to ensure that they implement the required measures in order to be compliant before February next year. Where compliance is concerned, there is no 'Plan B'. Time spent fighting the deadline now will ultimately be time wasted; time which could be spent acting decisively and taking the necessary steps towards migration to SCT and SDD. In April 2011, the EPC Newsletter launched the series 'SEPA Case Studies' reporting on the experiences of businesses, public administrations and government agencies across Europe that have successfully pioneered SCT and SDD implementation. Javier Santamaría invites payment service users now working towards achieving SEPA compliance to take advantage of the lessons learnt by their peers. Links to the case studies cited and sources offering detailed information on how to get ready for SEPA at the level of individual organisations are included at the end of this article.
|
Key Information in this Article The European Union (EU) ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation) effectively mandates migration to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) in the euro area by 1 February 2014. SEPA pioneers on the demand side who successfully achieved compliance conclude: Legal implications of failure to meet deadline: any business or public administration that has not already started its migration to SEPA is definitely now cutting it fine and putting itself in danger of missing the February 2014 deadline. Market participants in the euro area should note that failure to comply with the core provisions of the SEPA Regulation by the 1 February 2014 deadline risks infringing EU law. Operational implications of failure to meet deadline: there are many practical risks associated with non-compliance should businesses and public administrations fail to meet the deadline. Potentially the most damaging is that payments could be disrupted if compliance is not achieved, with operational and business risks caused by late migration affecting the handling of payment orders. The SEPA Regulation impacts not only payment service providers, but all payment service users making credit transfer and direct debit payments in the euro area, so failure to comply by 1 February 2014 could cause widespread issues with potentially large numbers of transactions. Avoid risks of late migration: SEPA readiness should be achieved at the earliest stage possible, taking into consideration also that availability of external resources offered by banks and other service providers – including testing facilities – will be stretched to the limit towards the end of the year. Next steps: the first step to achieving compliance is to appoint a dedicated SEPA implementation team. The next stage is to prepare for the transition to the harmonised SEPA payment schemes and technical standards. This includes migration to the International Bank Account Number (IBAN) and the Business Identifier Code (BIC). Payment service users will also need to make arrangements to adapt to the usage of ISO 20022 XML message standards in the customer-to-bank space in relation to files of payment transactions. Begin immediately: the positive news is that compliance by the deadline is still possible for businesses and public administrations that have yet to address SEPA. SEPA compliance is manageable and feasible, but with less than ten months to go until the 1 February 2014 deadline, it is critical that any late movers put processes in place to begin their migration immediately. Banks and other service providers stand ready to support market participants during the transition. SEPA pays off: there is no doubt that the scope of change required to ensure SEPA compliance is extensive, but it does pay off. Full compliance will lead to more streamlined internal processes, lower IT costs, reduced costs based on bank charges, a consolidated number of bank accounts and cash management systems, and more efficiency and integration of any organisation’s payment business. |
Legal and Regulatory Issues
The Long Road to Harmonisation: Transitional Arrangements in European Union Member States Permissible Under Regulation 260/2012 (the SEPA Regulation)European Commission and European Central Bank provide information on national derogations
25.04.13 By Etienne Goosse
The European Union (EU) 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro' (the SEPA Regulation) mandates that credit transfers and direct debits in the euro area shall be carried out in accordance with the core provisions of this regulation by 1 February 2014. At the same time, the SEPA Regulation has introduced several possible exemptions regarding the use of the International Bank Account Number (IBAN), the Business Identifier Code (BIC) and the ISO 20022 XML message standards by the February 2014 deadline. EU Member States have discretion as to whether they will use any or all of the options to derogate from the 1 February 2014 deadline with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards. EU Member States were required to notify the European Commission (the Commission) by 1 February 2013 which derogations they will use. Related information is made available by the Commission and the European Central Bank. Etienne Goosse reports.
|
Key Information in this Article Articles 6 (1) and (2) of the European Union (EU) ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation) stipulates that credit transfers and direct debits in the euro area shall be carried out in accordance with the relevant requirements set out in Article 5 and in the Annex to the Regulation by 1 February 2014. Article 16 however, permits individual EU Member States to extend this deadline for compliance with some of the regulation’s provisions; i.e. use of the International Bank Account Number (IBAN), the Business Identifier Code (BIC) and the ISO 20022 message standards, to 1 February 2016. Article 16 (7) of the SEPA Regulation states that EU Member States must have notified the European Commission (the Commission) by 1 February 2013 of the derogations that they intend to use. With publication of the EPC Newsletter in April 2013, notification by some EU Member States remains outstanding. The expectation is that EU Member States lagging behind the deadline will deliver this information as soon as possible. To ensure a smooth transition to SEPA by 1 February 2014 in the euro area, as effectively mandated with the SEPA Regulation, market participants urgently require clarification on which derogations will apply, when, where and how. The Commission published the document ‘Usage of Member States options - Article 16 of Regulation (EU) N°260/2012’. The European Central Bank (ECB) provides country-specific fact sheets on the transitional arrangements chosen by individual EU Member States. These documents can be downloaded by following the links to the Commission’s and the ECB’s websites included at the end of this article. |
Opinion and Editorial
On the Shelf Life of a Banknote or How to Promote the European Digital Market: Electronic Legal Tender Is Now a Matter of FairnessFresh thinking is required to bring greater coherence to the policy target of payment innovation
25.04.13 By Norbert Bielefeld
"Everything that can be digital, will be digital," predicts economist Kjell Nordström. European Union (EU) policy-makers, or so they say, endorse this vision. Promoting the single digital market and realising the potential offered by the digital economy is therefore high on the EU political agenda. Considering that payments are the backbone of society, the political drivers of the SEPA programme have consistently articulated the expectation that the integration of the euro payments market should contribute to incentivising increased use of electronic payment instruments. According to the European Commission's 'Digital Agenda for Europe', SEPA will "provide a launch platform" for value added services linked to payments that will help to make "online and cross border transactions straightforward." In this article, Norbert Bielefeld analyses the changing behaviour of the European 'payment citizen' in the digital world. Albeit cash is in general still the predominant payment method in Europe, latest data shows that buyers and sellers are adapting their preferences in response to a vast choice of non-cash payment options available to them. Supporting this trend requires coherence with regard to policies governing the issuance and re-circulation of euro cash; this author argues, and finds it wanting. In line with stated policy objectives, he advocates an alternative approach: a SEPA legal tender model spanning both cash and electronic payments. In such a model, the quality of legal tender would be awarded to any SEPA payment instrument. The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.
|
Key Information in this Article Although cash is still the predominant payment method in Europe, latest data indicates a trend towards increased use of non-cash, account-based payment instruments. The legal electronic tender is on the march, powered by popular acceptance rather than legislative mandate or administrative fiat, which in itself is a very positive message. It can be assumed that this trend will become common market practice with ‘digital natives’, who have never known anything other than internet and the mobile phone, coming of ‘paying age’. Policies governing the issuance and re-circulation of euro banknotes and cash must be aligned with the requirements of the digital market. This opportunity has been missed with the roll out of the second series of euro bank notes launched in 2013. In order to avoid an unacceptable societal paradigm, preparations for the third series of euro banknotes should begin now. This next generation must move away from the physical form factor. This author reiterates his invitation to European Union policy-makers to dare to be bold: a SEPA legal tender model spanning both cash and electronic payments is an option. |
EPC Latest News
EPC Plenary Meeting UpdateMain decisions taken in March 2013
25.04.13 By Javier Santamaría
The Plenary is the decision-making body of the European Payments Council (EPC). In this article, Javier Santamaría, Chair of the EPC, summarises the main items agreed in the EPC Plenary meeting, which took place in March 2013. The EPC welcomed the publication of the first report on the migration towards SEPA published by the European Central Bank (ECB) on 21 March 2013. The ECB "strongly advocates that all stakeholders, including 'big billers', public administrations and small-and-medium sized enterprises, migrate at the earliest stage possible, preferably by the third quarter of 2013 at the latest, in order to avoid risks which could impact the wider supply chain and would put the SEPA migration at risk." The Plenary approved publication of the document 'Improving the Efficiency of the Handling of Cash - Cash Cycle Models' for a three-month public consultation, which was launched on 15 April 2013. The Plenary also resolved to seek confirmation from the SEPA Council on whether there is market demand for a SEPA Direct Debit Fixed Amount Scheme. National direct debit instruments without a refund right for authorised transactions exist in a number of SEPA countries and are used for specific services and products. No comparable direct debit instrument at SEPA level is however available for the various customer groups currently using these national direct debit instruments. The SEPA Council, which brings together representatives of both the demand and supply sides of the payments market including the EPC, is chaired by the European Commission and the ECB.
|
Key Information in this Article Main items addressed by the European Payments Council (EPC) Plenary in March 2013:
|
Get Ready for SEPA. Act Now
Progress Is Promising: First Qualitative SEPA Indicators Measure Level of Preparedness by Stakeholder Groups at Country LevelMore facts and figures on the state of SEPA migration in April 2013
25.04.13 By Etienne Goosse
Each issue of the EPC Newsletter monitors the latest available data reflecting the rate of SEPA market uptake. In March 2013 the Eurosystem, which is comprised of the European Central Bank and the national central banks of countries that have adopted the euro, published the first qualitative SEPA indicators. These indicators measure the level of SEPA preparedness of 'big billers', public administrations and payment service providers at country level. The data shows that in general good progress has been achieved among these stakeholder groups in the vast majority of euro area countries at the end of 2012. The qualitative SEPA indicators will be updated by the national central banks on a quarterly basis. They complement the quantitative SEPA indicators which measure the share of SEPA Credit Transfer and SEPA Direct Debit transactions as a percentage of the total volume of credit transfers and direct debits generated by bank customers in the euro area. The information available, however, also demonstrates that efforts must be reinforced to ensure full SEPA compliance, in particular, by local public administrations and small and medium-sized enterprises. Etienne Goosse analyses the latest facts and figures on the progress of SEPA roll out. He also reiterates that any organisation in the euro area, which has not yet initiated the migration process, risks missing the 1 February 2014 deadline and consequently infringing EU law. The time to act is now. There is only plan A.
|
Key Information in this Article Data reflecting the progress of migration to SEPA cited in this article represents the latest figures available at the time of EPC Newsletter publication (25 April 2013).
|
SEPA Case Studies
UNION TANK Eckstein: “SEPA Credit Transfer and SEPA Direct Debit Allow Everyone to Do More and Better Business across Europe”This company looks forward to 1 February 2014 when migration to SEPA will be completed in the euro area
25.04.13 By Thomas Wolpert (Interview)
The case studies featured in the EPC Newsletter highlight the lessons learnt by individual businesses, public administrations and government agencies, which have completed migration to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD). UNION TANK Eckstein GmbH & Co. KG (UTA) offers comprehensive services to companies transporting passengers and goods by road. With more than 47,000 points of acceptance in 38 countries, the UTA service card gives its customers access to a Europe-wide supply and cashless payment system ensuring expedient assistance. The company implemented the SDD Business to Business (B2B) Scheme followed by the SCT and SDD Core Schemes. "We recognised the significant benefits we could derive from the introduction of harmonised SEPA payment schemes and, in particular, the SDD B2B Scheme, early on. Considering that we operate in and across 38 European countries, this meant that in the pre-SEPA era we had to observe the rules, processes and formats of as many national direct debit schemes. As we are processing mostly business to business direct debits, we engaged in planning SDD B2B implementation practically as soon as the European Payments Council launched the scheme in November 2009," says Thomas Wolpert, Senior Credit and SEPA Project Manager with UTA.
|
Key Information in this Article UNION TANK Eckstein GmbH & Co. KG (UTA) implemented, in a first step, the SEPA Direct Debit (SDD) Business to Business (B2B) Scheme followed by the SEPA Credit Transfer (SCT) and the SDD Core Schemes. This article focuses on the UTA SDD B2B migration project. The main challenges throughout the implementation phase were unrelated to the particulars of the SDD and SCT Schemes, but resulted from the very distinct level of SEPA expertise among UTA business partners. To ensure a smooth transition, UTA made customer communication a priority and trained staff in all units to be able to assist customers with any SEPA-related questions. UTA identifies, among others, the following advantages of migrating to SEPA:
|
Legal and Regulatory Issues
Sign up! The European Commission's Proposal for a Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal MarketEuropean Commission follows up on key actions defined with the 'Digital Agenda for Europe' to boost cross-border e-commerce
25.04.13 By Gert Heynderickx
In January 2013, the European Payments Council (EPC) launched the poll 'Vote on future EPC Newsletter topics! Which European Union regulatory action impacting euro payments is most important to you?' This poll was open until mid April 2013. 29 percent of respondents indicated particular interest in the European Commission's proposal for a Regulation on electronic identification (eID) and trust services for electronic transactions in the internal market published in June 2012. In the legislative process leading to the adoption of the Regulation on eID and trust services for electronic transactions by the European Union (EU) legislator (i.e. the European Parliament and the Council representing EU Member States), the proposal will - in a next step - be considered by the European Parliament's Committee on Internal Market and Consumer Protection and the Committee on Industry, Research and Energy. The proposed regulation aims to enhance trust and convenience in electronic transactions in the EU. It builds on - and will replace - the existing Directive 1999/93/EC of 13 December 1999 on a Community framework for electronic signatures (the eSignature Directive). In this article, Gert Heynderickx provides an overview of the key provisions included with the proposal for a Regulation on eID and trust services for electronic transactions and outlines the implications for the European payments industry.
|
Key Information in this Article To further support the rapidly growing market for e-commerce in the European Union (EU), Ecommerce Europe, the European collective of merchant organisations and their members, recommends the implementation of an EU-wide interoperable system for the recognition of electronic identification (eID) and electronic authentication. The European Commission (the Commission) Communication ‘A Digital Agenda for Europe’ states that fragmentation in the EU internal market “limits demand for cross-border e-commerce transactions. (...) This highlights the urgency of tackling the regulatory barriers holding back European businesses from trading cross-border.” The Digital Agenda for Europe stresses the importance of eID technologies and authentication services in this regard. In June 2012, the Commission published its proposal for a Regulation on eID and trust services for electronic transactions in the internal market. It aims to provide a legal framework for eID and notification, electronic signatures (eSignatures), electronic seals, time stamping, electronic documents admissibility, electronic delivery and website authentication. The proposal is based on the objectives identified by the Legislation Team (eIDAS) Task Force set up by the Commission. The task force leads the development, negotiation and basic implementation of the proposal for a Regulation on eID and trust services for electronic transactions. It is expected that the Regulation on eID and trust services will be adopted by the EU legislator (i.e. the European Parliament and the Council representing EU Member States) in the course of the next year. The forthcoming regulation will also generate new opportunities in the area of payments, for example by introducing three levels of eSignatures. Some concerns remain however, especially in the area of supervisory control. |
SEPA for Cash
What's Your View? EPC Launches Public Consultation: Improving the Efficiency of Cash Handling in SEPAStakeholders are invited to feedback on possible future cash cycle models by 14 July 2013
25.04.13 By Leonor Machado
One important objective of the SEPA initiative should be to encourage a shift from cash to electronic payments. Despite the fact that cash accounts for a falling proportion of retail payments, it is in general still the predominant payment method in Europe and the demand for cash continues to grow. Studies over the years have shown that the social cost of cash remains considerable. The European Payments Council (EPC) believes that actions by all stakeholders within the euro area could contribute towards reducing the high cost of processing and handling of cash. In 2010, the EPC and the European Security Transport Association (ESTA) established a joint task force to identify best practice principles and, where possible, develop recommendations on how to further improve deploying and re-circulating cash. The considerations of this task force are reflected in the document 'Improving the Efficiency of the Handling of Cash - Cash Cycle Models', which was published on the EPC Website on 15 April 2013 for a three-month public consultation. In this article, Leonor Machado outlines the main aspects addressed with this document and invites all stakeholders to join the debate.
|
Key Information in this Article The current SEPA landscape for the distribution and processing of cash is characterised by differing national infrastructures. This lack of harmonisation, common approach and sharing of best practice among participants in the commercial cash cycle increases the cost of cash processing and creates inefficiencies. The document ‘Improving the Efficiency of the Handling of Cash – Cash Cycle Models’, is the result of cooperation between the European Payments Council (EPC) and the European Security Transport Association (ESTA), started in 2010 through a joint task force. It aims to create awareness among participants in the commercial cash cycles established at national level on how to improve existing processes and reduce the overall cost of cash. The document addresses, among other things, the following aspects:
|
