On Payments and Light Bulbs - Commission ready to write off SEPA via EU legislation? Commentary on Commission services’ Working Paper 'SEPA Migration-End Date' of June 2010 (EPC Newsletter)

This article by Chair Gerard Hartsink appears in Issue 7 (July 2010) of the Newsletter. Included here is a summary of this article.


Today, the majority of market participants recognise that successful completion of is contingent upon setting an end date through Regulation for migration to the single set of Schemes developed - at the request of regulators - by the . In June 2010, the Commission services tabled a Working Paper outlining a binding Community instrument which would set end dates for compliance of euro credit transfer and euro direct debit schemes with so-called "essential requirements". The Commission argues that the "essential requirements" approach has been successfully applied in (no joke) "other fields, for example in the case of the recently adopted Regulation on the phasing-out of non-efficient light bulbs".

The welcomes the Commission's willingness to legislate in the context of setting an end date for migration. However, there are fundamental differences between exchanging a light bulb in your kitchen and the integration of euro payment systems. Gerard Hartsink clarifies that, contrary to its misleading title (" Migration End-Date"), this piece of financial legislation now in the pipeline reflects political pretence rather than a regulatory intervention aimed at making a reality. If endorsed by lawmakers, the legislative act  currently envisaged would effectively derail the entire project and deprive bank customers of the benefits associated with the harmonisation initiative.


The proposes to set a binding end date for migration to the single set of Schemes developed by the in close dialogue with the customer community through Regulation. In line with expectations expressed by, amongst others, the Economic and Financial Affairs Council (ECOFIN), the European Parliament and the European Central Bank, such a Regulation should ensure that the high costs of running both legacy and Payment Schemes in parallel can be eliminated; i.e. this Regulation must stipulate end dates for the phasing out of existing national euro credit transfer and euro direct debit schemes.


The main points detailed in the article are:

The forthcoming regulatory intervention setting end dates for compliance of euro credit transfer and euro direct debit schemes with "essential requirements" as currently envisaged by the Commission services would:

  • Fail to establish definitive deadlines for the phasing out of legacy euro payment schemes.
  • Abandon, in consequence, the original vision aimed at creating one domestic euro payments market where there would be no differentiation between domestic and cross-border euro payment transactions anymore. Instead, the Commission now seems to be content with mandating cross-border reach for euro credit transfers and direct debits based on multiple (old and new), "interoperable" payment schemes (a "Mini " or less).
  • Prohibit increased competition in the supply of payments services to the advantage of bank customers contingent upon standardisation and market integration . Increased competition is contingent upon market integration, i.e. the replacement of a multitude of existing euro payment schemes by one single set of Schemes as previously requested by the Commission, the Economic and Financial Affairs Council (ECOFIN), the European Parliament and the European Central Bank.
  • Rule out cost savings resulting from the consolidation of cash management operations - again to the detriment of bank customers. Migration to a single set of Schemes is the precondition for consolidation to take place.
  • Stifle innovation due to payments being subjected to central planning by the Commission which lacks any experience in the market place. The Commission is now seemingly determined to unilaterally decree "essential requirements" and common standards applicable to euro payment schemes; i.e. to take over the development of payment functionalities. Such a procedure would directly prevent bank customers from accessing the most advanced payment services as innovation will be strangled by red tape.
  • Punish early movers both on the demand and supply sides who - in response to earlier calls by regulators including the Commission- have already invested in the renewal of their payment architecture to comply with the single set of Payment Schemes developed by the .
  • Introduce additional systemic risks in the area of payments given the request of the Commission now for the evolution of "multiple, competing" Schemes rather than one single set of Schemes to be established.

This article provides a link to the Commission services' Working Paper " Migration End-Date" of June 2010.



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