EPC Newsletter
Issue 14 - April 2012
The EPC Newsletter April 2012 edition focuses on information supporting, in particular, payment service users in the euro area to get ready for the Single Euro Payments Area (SEPA) by 1 February 2014, as effectively mandated by the SEPA Regulation recently adopted by the European Union (EU) legislator.
The case studies featured in the EPC Newsletter highlight the lessons learnt by businesses and public entities which have successfully completed the transition to SEPA. In this issue, we report on the migration experience of the global ceramics manufacturing company Villeroy & Boch. This SEPA pioneer completed migration to SEPA Credit Transfer (SCT) in 2008 and migrated to SEPA Direct Debit (SDD) in 2011. Project managers who have already concluded the migration exercise unanimously recommend that organisations, which still have to adapt systems and operations to the SEPA payment schemes and technical standards, become active immediately.
This edition also takes forward the innovation in payments debate. In January 2012, the European Commission published its Green Paper ‘Towards an integrated European market for card, internet and mobile payments’ for consultation. Gerard Hartsink, Chair of the European Payments Council (EPC), delivers the EPC response to this Green Paper.
Considering that further EU action impacting the payments market is likely to be proposed, our commentator suggests taking a closer look at best practice established by innovation leaders such as Apple and Facebook. This might support the authorities to accurately assess future market needs.
Last but not least, all stakeholders are encouraged to make their voices heard in the 2012 SEPA Scheme change management cycle. Proposed amendments to the SCT and SDD Schemes are subject to a three-month public consultation. The 2012 public consultation will be launched in May.
Please recommend the EPC Newsletter to your colleagues – subscription is free by clicking here! The next issue will be published in July 2012.
Focus: On Integration and Innovation
EPC Response to the European Commission Green Paper 'Towards an Integrated European Market for Card, Internet and Mobile Payments'EPC identifies key policy considerations with regard to potential European Union initiatives impacting the euro payments market
27.04.12 By Gerard Hartsink
In January 2012, the European Commission (the Commission) published its Green Paper 'Towards an integrated European market for card, internet and mobile payments' for a three month consultation. The aim of the Green Paper, according to the Commission, is to identify the obstacles that potentially prevent integration in this area. The Commission stated that the contributions to the consultation will determine the need for European Union (EU) action on the various issues raised in the Green Paper and the form this action should take. Gerard Hartsink, Chair of the European Payments Council (EPC), outlines key policy considerations which, in the view of the EPC, should be observed when determining the need for EU action to address 'gaps' perceived by the Commission with regard to competition, choice, innovation and other 'market integration drivers'. The EPC does not support a number of related assumptions and suggestions put forth in the Green Paper. Consequently, the EPC believes that many of those suggestions will not help achieve the stated objectives and may even undermine their realisation. A thorough factual analysis of the EU payment landscape is however, a prerequisite for any conclusion that further regulatory action may be required. This analysis should recognise the following market realities: Europe is not a fully integrated market in terms of economic development, cultural background, customer preferences or regulatory framework; Europe and its payment markets cannot be considered in isolation as they are part of an increasingly integrated global economy; payments do not act as a main barrier to the development of e-commerce otherwise e-commerce would not have experienced continuous fast growth as evidenced by several market studies. The EPC regrets that the Green Paper seems to overlook major market achievements to date to progress SEPA. The detailed response of the EPC to the 32 questions tabled by the Commission with the Green Paper is set out at the end of this article.
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Key Information in this Article In April 2012, the European Payments Council (EPC) published its response to the European Commission consultation on its Green Paper ‘Towards an integrated European market for card, internet and mobile payments’. With this response, the EPC shares the following key policy considerations which it believes are important when looking at potential European Union (EU) initiatives impacting the euro payments market:
A study carried out on behalf of the Executive Agency for Health and Consumers (EAHC) finds that none of the top five concerns stated by consumers about buying products online in another EU country relate to payments. The EAHC performs the tasks and activities entrusted to it by the Commission, and it works closely with the Commission‘s Health and Consumers Directorate General. Additional market research reveals that ‘fragmentation of payment systems’ does not rank within the top 15 issues having an impact on EU cross-border online trading. The detailed response of the EPC to the 32 questions tabled by the Commission with the Green Paper is set out at the end of this article. |
Fringe Observations on SEPA
On Innovation: What the European Union Could Learn from Apple and FacebookReflections on the evolution of SEPA in the new regulatory reality governing the euro payments market
27.04.12 By Javier Santamaría
Brian Solis, a leading analyst of the effects of emerging media, commented in Time magazine: "The way Mark Zuckerberg runs Facebook is reminiscent of the way Steve Jobs ran Apple. It's 'We're not going to wait for customers to tell us what they want. We're going to introduce what we think is in their best interest, and they will learn to love it.'" European Union (EU) policies affecting 500 million citizens are created based on exactly the same principle. So, what does this have to do with the future of SEPA? A lot, says Javier Santamaría. At this juncture in the SEPA process, it has to be recognised that the expertise of the banking industry, with regard to the evolution of the SEPA payment schemes, may come second to the requirements defined by the EU authorities: with adoption of the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the SEPA Regulation), the EU legislator empowered the European Commission to determine the technical requirements applicable to SEPA Credit Transfer and SEPA Direct Debit. EU action impacting card, internet and mobile payments is likely to be proposed. The European competition authority considers its policies crucial to promote innovation in payments. Upon assuming this responsibility, the EU institutions may wish to take a closer look at innovation leaders who have demonstrated the ability to accurately assess future customer needs: people love Facebook (close to a billion users globally) and Apple (the world's most valuable company). Latest data published by the European Commission however, finds that only 31 percent of European citizens have a positive image of the EU and only 34 percent have trust in the EU. This author wonders whether the processes deployed by the EU to identify the general interests of Europeans deserve to be revisited. This might support the shared objective to identify what Steve Jobs would have termed 'the next big thing' in payments.
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Key Information in this Article
European Union (EU) institutions have assumed responsibility for defining the most appropriate way to create innovative SEPA payment solutions. By taking a closer look at the principles followed by innovation leaders such as Apple and Facebook, the authorities might better assess future customer needs and preserve the freedom required to be creative. |
SEPA Case Studies
Villeroy & Boch: "The Long Term Benefits of SEPA Exceed the Short Term Efforts to Get There."The group completed migration to SEPA Credit Transfer in 2008 and migration to SEPA Direct Debit in 2011
27.04.12 By Dr Markus Warncke (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 payment schemes. The global ceramics manufacturing company Villeroy & Boch, headquartered in Germany, is a true SEPA pioneer. It completed migration to SEPA Credit Transfer (SCT) in 2008 and migration to SEPA Direct Debit (SDD) in 2011. Dr Markus Warncke, Group Financial Controller at Villeroy & Boch, confirms: "Our figures demonstrate that the benefits resulting from migration to the SEPA Schemes and standards exceeded the investment already in the first year. The earlier you start the migration project, the better." In February 2012, the European legislator adopted the 'Regulation establishing technical and business requirements for credit transfers and direct debits in euro' (the SEPA Regulation), which defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by SCT and SDD. Project managers who have already concluded the migration exercise, unanimously recommend that organisations which have yet to adapt systems and operations to the SEPA Schemes and technical standards, become active immediately.
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Key Information in this Article Villeroy & Boch opted for a two-step approach to SEPA migration. In 2007, the group decided to implement SEPA Credit Transfer (SCT) as the first step in the process. This project was concluded in 2008. Main challenges identified in the process included the conversion of customer account data to the International Bank Account Number (IBAN) and the Business Identifier Code (BIC). The SEPA Direct Debit (SDD) Core and the SDD Business to Business Schemes were implemented in the second stage. This project was launched in 2010 and was completed in 2011. Main challenges in the process resulted from the fact that at the time, there was not yet a solution available in Germany which would have ensured the continued legal validity of existing mandates; i.e. new mandates had to be obtained. (The SEPA Regulation adopted by the European Union legislator in February 2012 stipulates that mandates issued before February 2014 continue to be valid under the SDD Schemes; i.e. billers migrating to SDD will not have to exchange existing for new mandates). Villeroy & Boch also migrated to the ISO 20022 message standards. The company advocates further harmonisation regarding the use of this standard. Villeroy & Boch realised the following advantages due to migration to SEPA:
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Focus: ISO 20022 in the SEPA Context
Early Movers Confirm: ISO 20022 Message Standards Generate Tangible BenefitsA guide for payment service users on the impact of provisions in the SEPA Regulation regarding the use of the ISO 20022 message standards
27.04.12 By Francis De Roeck
In the world of payments processing, the role of the data format used to exchange information between the parties executing a payment can be compared to the role of language in communication between people. Today, dozens of different data formats are in place to process payments across different national and European clearing systems in SEPA. The realisation of an integrated euro payments market therefore requires agreement on a common set of data to be exchanged in a common syntax when executing a SEPA payment. The SEPA data formats as detailed in the implementation guidelines released by the European Payments Council with regard to the SEPA Credit Transfer and SEPA Direct Debit Schemes are based on the global ISO 20022 message standards developed by the International Organization for Standardization (ISO). The 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the SEPA Regulation) details the use of the ISO 20022 message standards by payment service providers (PSPs) and payment service users (PSUs). Article 5 (1) (d) of the SEPA Regulation states that PSPs "must ensure that where a PSU that is not a consumer or a micro-enterprise, initiates or receives individual credit transfers or individual direct debits which are not transmitted individually, but are bundled together for transmission", the ISO 20022 message formats are used. In this article, Francis De Roeck introduces the ISO 20022 message standards within the context of SEPA, what it means for PSUs such as corporates, public administrations and government agencies and offers some insights from early adopters.
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Key Information in this Article The ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the SEPA Regulation) details the use of the ISO 20022 message standards by payment service providers (PSPs) and payment service users (PSUs). Article 5 (1) (d) of the SEPA Regulation states that PSPs “must ensure that where a PSU that is not a consumer or a micro-enterprise, initiates or receives individual credit transfers or individual direct debits which are not transmitted individually, but are bundled together for transmission”, the ISO 20022 message formats are used. PSUs should therefore 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. The implementation guidelines published by the European Payments Council with regard to the SEPA Credit Transfer and SEPA Direct Debit Schemes are a subset of the ISO 20022 message standards. ISO 20022 is a procedure proposed by the International Organization for Standardization (ISO) to develop message standards for all domains of the financial industry aimed at ensuring the highest possible degree of automation, ease of implementation, openness and cost-efficiency. The ISO 20022 approach offers a more efficient and faster way of developing and implementing message standards that serve as the basis for long term financial services solutions. Early adopters on the demand side of the payments market confirm that further harmonisation of the customer-to-bank communication based on the ISO 20022 message standards generates tangible benefits. |
EPC Latest News
EPC Scheme Change Management: Annual Public Consultation Starts in May 2012All stakeholders are invited to provide feedback on possible changes to the SEPA payment schemes
27.04.12 By Etienne Goosse
The SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Schemes, developed by the European Payments Council (EPC) in close dialogue with the payment service user community, evolve over time. This evolution reflects changes in market needs and updates of technical standards developed by international standards bodies, such as the International Organization for Standardization. The first step in the annual EPC scheme change management cycle is the introduction of suggestions for changes to the schemes by any interested party. Proposed changes to the SCT and SDD Schemes are then subject to a three-month public consultation. If the proposed changes are broadly accepted by all stakeholders, they are taken forward. Etienne Goosse invites all stakeholders to participate in the public consultation on possible modifications to the SCT and SDD Rulebooks. The consultation starts mid May 2012.
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Key Information in this Article The annual European Payments Council (EPC) scheme change management process is based on the following principles: Any stakeholder may introduce suggestions for changes to the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Rulebooks. All suggestions for changes to the rulebooks are evaluated by the EPC SEPA Payment Schemes Working Group (SPS WG) and consolidated into a single change request per rulebook. In this year, the change requests will be released for a three-month public consultation in May 2012. The link to the documentation relevant to the 2012 public consultation on modifications to the SCT and SDD Rulebooks is set out at the end of this article. Updated versions of the rulebooks will be published in November 2012. Payment service providers and their suppliers will have a one-year lead time to address rulebook updates prior to such updates taking effect. |
Opinion and Editorial
Challenges and Opportunities: 'The Social Media in Payments Report 2012'Latest research provides insight on the industry´s approach to new digital communication channels
27.04.12 By Simon Hardie
Between November and December 2011, Eurasia Insights and Payments, Cards & Mobile carried out the payment industry's first dedicated study focusing on the use of social media for professional communications. 'The Social Media in Payments Report 2012', which will be launched in June 2012, combines the findings of an online survey of close to 200 payment market participants across Asia, Europe and the US with the expertise of industry leaders. The report is designed to give an insight into the challenges, opportunities and successes of social media in the world of payments and retail financial services. The results reveal an industry split between those boldly embracing a new era of frequent, more transparent and often more personal communication, and those that are aware of social media but remain sceptical. In this article, Simon Hardie, Managing Director of Eurasia Insights, highlights the main findings of 'The Social Media in Payments Report 2012'.
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Key Information in this Article Main findings of ‘The Social Media in Payments Report 2012’ are: Concerns: Respondents identified four key concerns with regard to social media engagement: customer privacy, lack of understanding of social media (‘how does it work?’), resources including staff time required to build and maintain a continuous social media presence and company reputation. Benefits: 73 percent of respondents cite brand awareness as the key benefit of engaging with social media, followed by an improved network of contacts and increased media presence. Almost 30 percent of respondents reported improved lead generation, while nearly 20 percent reported improved sales and earnings as a result of social media activities. Relevance and state of preparation: More than half of respondents feel social media is important or very important to their marketing strategy, while a further 22 percent say it is likely to be so in future. Additionally, 29 percent of respondents say that they already have a social media strategy in place for business to business communications, with a further 27 percent in the planning stages. In the view of the authors of the report, the challenges should not be a deterrent to engage. Given the opportunities for greater customer advocacy, improved market visibility and, ultimately, higher sales, the authors argue that social media is fast becoming an essential digital channel for business to business and consumer communications alike. |
Get Ready for SEPA. Act Now
SEPA Migration: Facts and FiguresThe state-of-play in April 2012
27.04.12 By Etienne Goosse
Each issue of the EPC Newsletter monitors the latest available data reflecting the rate of SEPA market uptake. The European Union 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the SEPA Regulation), defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by SEPA Credit Transfer and SEPA Direct Debit. Etienne Goosse reports on progress achieved to date as regards migration to SEPA.
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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 (27 April 2012). As of February 2012, the share of SEPA Credit Transfers (SCTs), as a percentage of the total volume of credit transfers generated by bank customers, amounts to 24.8 percent in the euro area (European Central Bank (ECB) SEPA Indicators). As of February 2012, the share of SEPA Direct Debits (SDDs), as a percentage of the total volume of direct debits generated by bank customers, amounts to 0.4 percent (ECB SEPA Indicators). At the end of 2011 (estimates), 87.2 percent of cards, 94.2 percent of points of sale (POS) and 96.7 percent of automated teller machines (ATMs) in SEPA were EMV-compliant. EMV is an industry standard to implement chip and personal identification number (PIN) security for card transactions. |
Legal and Regulatory Issues
The Time to Act is Now: Impact of the SEPA Regulation on Payment Service UsersThe SEPA Regulation includes provisions relevant for both the demand and supply sides of the payments market
27.04.12 By Dermot Turing and Maria Troullinou
The European Union (EU) Regulation No. 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation EC No. 924/2009 (the SEPA Regulation), constitutes a major regulatory intervention in the area of payment services. The SEPA Regulation stipulates the mandatory deadlines for compliance with its rules for euro credit transfer and direct debit transactions. In the euro area, this will be 1 February 2014, subject to certain limited exemptions mentioned in the SEPA Regulation. Consequently, market participants need to evaluate its impact on their day-to-day operations. Dermot Turing and Maria Troullinou explain how the SEPA Regulation affects not only payment service providers, but also payment service users (PSUs) such as corporates, small and medium sized enterprises, public administrations and government agencies. In this article, the authors detail specific obligations for PSUs as defined in the SEPA Regulation. They also point out that Article 16 of the SEPA Regulation permits individual EU Member States to extend the deadline for compliance with some of its provisions to 1 February 2016. It is however, strongly recommended that PSUs analyse the impact of the SEPA Regulation on their operational models now, even if EU Member States opt to make use of the derogations permissible under Article 16. To date, the experience of early movers handling major payment volumes indicates that migration to SEPA Schemes and technical standards requires careful planning. The relevant actions and resources should be identified as soon as possible.
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Key Information in this Article The European Union (EU) Regulation No. 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation EC No. 924/2009 (the SEPA Regulation) will not only impact payment service providers but will also have implications on payment service users (PSUs). This article focuses on PSUs which are not consumers, i.e. corporates, small and medium sized enterprises, public administrations and government agencies. To achieve compliance with the core provisions of the SEPA Regulation, PSUs have to implement significant changes to their operational models, including investing in system upgrades, testing and staff training. The SEPA Regulation mandates PSUs to:
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Focus: SEPA Migration
Step Up to the Challenge: SWIFT White Paper Sets out Steps to Build a SEPA Migration PlanA strategy to achieve SEPA compliance by 1 February 2014
27.04.12 By Gottfried Leibbrandt and Harry Newman
With the adoption of 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the SEPA Regulation), the European Union legislator effectively mandates migration to SEPA Credit Transfer and SEPA Direct Debit by 1 February 2014 in the euro area. SWIFT (Society for Worldwide Interbank Financial Telecommunication), the financial messaging provider for more than 10,000 financial institutions and corporations in 210 countries, recently published a second white paper which sets out a step-by-step process to build an effective SEPA migration plan. The paper argues that with less than two years remaining to achieve SEPA compliance, stepping up to the migration challenge must become a priority for banks and corporates. Even organisations which have migration plans in place will have to refine their processes and applications to meet their obligations. In this article, Gottfried Leibbrandt and Harry Newman detail the strategy recommended in the SWIFT white paper, which will empower market participants on both the demand and supply sides to get ready for SEPA by 1 February 2014. The number one action item, as outlined by the authors, is to drop a 'wait and see' attitude and get moving ... now.
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Key Information in this Article The second SWIFT (Society for Worldwide Interbank Financial Telecommunication) white paper on SEPA sets out the following steps to define the target scenario and build a migration plan to ensure SEPA readiness by 1 February 2014: Plan the journey. All impacted organisations need a clear view of where they are starting, where they are heading and what they need to do to achieve SEPA compliance in time to meet the deadline. Establish the ‘as is’ picture. Organisations should develop a full inventory of their clearing activities, channel by channel and transaction type by transaction type. Create a ‘SEPA checklist’. The migration checklist should reflect all of an organisation’s workflows and obligations, including volumes and the strategic importance of payment instruments being used. Ensure strategic alignment. SEPA migration provides an opportunity to take a fresh look at flows and infrastructures with a view to streamlining processes. It is also essential to consider SEPA compliance in the context of other impending market changes. Develop a SEPA migration roadmap. The roadmap should reflect in-house projects, assess outsourcing opportunities and allow for close follow-up of projects and related timelines. |
SEPA Credit Transfer (SCT) & SEPA Direct Debit (SDD)
SEPA Direct Debit for Billers: Exception HandlingEPC Newsletter series provides support for billers preparing migration to the SDD Schemes
27.04.12 By Javier Santamaría and Herman Segers
This is the fifth article in a series which provides information on specific aspects of the SEPA Direct Debit (SDD) Schemes, relevant in particular to billers preparing for migration to SDD. In this context, the European Payments Council (EPC) invites readers to be mindful of the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro' (the SEPA Regulation), which defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by SEPA Credit Transfer and SDD. In this article, Javier Santamaría and Herman Segers detail the processes and timelines applicable to refunds, returns, rejects, reversals, revocations and requests for cancellation (commonly referenced as R-transactions).
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Key Information in this Article
One of the main benefits of the SEPA Direct Debit (SDD) Schemes is that the scheme rules streamline exception handling, both at the process level and the dataset level. This allows straight-through-processing and automated exception handling end-to-end. |
EPC Latest News
EPC Plenary Meeting Update: EPC Elects New Chair Javier Santamaría and Vice Chair Günther Gall to Take Office in June 2012Each edition of the EPC Newsletter reports on main decisions taken by the EPC Plenary
27.04.12 By Etienne Goosse
The Plenary is the decision-making body of the European Payments Council (EPC). At its meeting on 22 March 2012, the EPC elected Javier Santamaría as Chair and Günther Gall as Vice Chair. Mr Santamaría and Mr Gall will take office in June 2012. They will succeed current EPC Chair Gerard Hartsink and Vice Chair Claude Brun, whose mandates will end in June 2012. Etienne Goosse reports.
Read moreSEPA Standards
The History and Vision of CBIThe EPC Newsletter series provides an overview of banking communication standards in Europe
27.04.12 By Liliana Fratini Passi
In 2011, The European Payments Council (EPC) Newsletter launched a series of articles to showcase the electronic banking standards that have been adopted in different European countries to facilitate the communication between a bank and its clients. The aim of establishing these communication frameworks is to ensure that businesses can flexibly, securely and efficiently manage their cash requirements across different bank accounts, through the use of standardised processes. The standards discussed in this series are outside the scope of the EPC. The second standard to be focused upon is CBI (Interbank Corporate Banking) developed by the Italian CBI (Customer to Business Interaction) Consortium and is adopted by the Italian banking sector in the customer-to-bank area. In this article, Liliana Fratini Passi provides a brief history of the Italian approach to this standard and its key benefits.
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Key Information in this Article The Italian CBI (Customer to Business Interaction) Consortium defines the technical and regulatory standards that all Italian banks must comply with. It established this framework by:
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