In February 2012, the European co-legislators, i.e. the European Parliament and the Council of the European Union (EU) representing EU governments, adopted the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’, also known as the Single Euro Payments Area () Regulation. This legislative act effectively mandates migration to SEPA Credit Transfer and SEPA Direct Debit in the euro area by 1 February 2014.
To avoid difficulties for non-compliant market participants, in February 2014 the European Commission, the European Parliament and EU governments agreed amending the SEPA Regulation to give the option to continue processing non-SEPA formats until 1 August 2014 (see link to ‘Regulation (EU) No 248/2014 amending Regulation (EU) No 260/2012 as regards the migration to Union-wide credit transfers and direct debits’ below). However, 1 August 2014 does not mark the end of the migration process. The following deadlines also apply:
1 February 2016:
- Transitional arrangements in EU Member States: 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 (until 1 February 2016) with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards by payment service users.
- Niche products, which have been granted an exemption: the SEPA Regulation, in particular, stipulates that credit transfer and direct debit transactions with a cumulative market share of less than 10 percent in an EU Member State must comply with the provisions set out in this legislative act only by 1 February 2016.
31 October 2016: non-euro countries will have to comply with the SEPA Regulation by 31 October 2016.
It is important that, following 1 August 2014, countries in- and outside of the euro area do not overlook these other deadlines, but rather actively prepare to ensure that they are ready to meet them on time. This blog summarises best practices identified in the euro area during the migration process. The recommendation is to take advantage of the lessons learnt when preparing for SEPA 2016.
Preparation is everything and time is of the essence
SEPA migration is coordinated at national level. Article 10 (“Competent authorities”) of the SEPA Regulation details how this legislative act is to be enforced. It clarifies that EU Member States must designate the competent authorities at national level responsible for ensuring compliance with this Regulation. The list of designated national authorities responsible to ensure compliance with the SEPA Regulation is available on the European Commission Website (see ‘related links’ below).
Coordination among all stakeholders involved in the migration process at national level is key
Meeting the next SEPA deadlines established by the EU lawmakers requires continued and coordinated efforts by the public authorities driving the SEPA process, the representatives of payment service users as well as banks and other service providers. In euro area countries that achieved high SEPA migration rates early in the process, the following factors contributed to ensuring an overall smooth transition: engagement and leadership by public authorities, cooperation of stakeholders based on a step-by-step implementation plan and targeted communication to ensure timely launch of migration projects at the level of individual organisations.
These actions are coordinated by National SEPA Coordination Committees. The European Central Bank makes available country-specific information including links to national SEPA websites and contact information of National SEPA Coordination Committees (see ‘related links’ below).
Early and targeted communication is required to raise awareness among payment service users and, in particular, small and medium-sized enterprises (SMEs) on the need to meet SEPA compliance requirements
The SEPA Regulation defines compliance requirements that have to be met by payment service providers and users, respectively. According to data made available by the European Central Bank, all payment service providers in the euro area were SEPA-ready by 1 February 2014. In the majority of euro area countries, payment service providers had already completed preparations in the third quarter of 2013.
The representatives of payment service users, who reported on their successfully completed SEPA migration projects in the Newsletter case studies section (see ‘related links’ below), confirm that timely migration to the new SEPA payment schemes and technical standards is manageable, feasible and beneficial. They also clarify however, that the scope of change required to ensure SEPA compliance is extensive. The data made available by the European Central Bank with regard to migration in the euro area showed that the corporate sector was generally well aware of the legal obligation to achieve SEPA compliance early in the process.
However, in May 2013 the Council of the EU representing EU governments recognised in its SEPA conclusions that – at the time – SMEs, small public administrations and local authorities in the euro area were “the least aware of SEPA migration and the least prepared for actual migration.” The Council of the EU therefore, called upon all EU Member States to “significantly intensify communication measures primarily at national level to eliminate existing public awareness gaps.” These communication measures, the Council of the EU stated, should especially target “SMEs, small public administrations and local authorities.” The Council of the EU proposed, among others, the following actions:
- National central banks, ministries of finance and other competent authorities, national banking federations and individual banks should enhance communication activities on SEPA migration through all relevant media channels.
- The European Commission and the European Central Bank should provide assistance and advice to the best of their abilities to fully support the SEPA migration process.
Taking into consideration the experience in the euro area, raising awareness among, in particular, SMEs and local public administrations in non-euro countries on the legal obligation to meet forthcoming SEPA migration deadlines should be a priority.
Payment service users in non-euro countries should avoid the risks of late migration
With its second SEPA migration report published in October 2013, the European Central Bank identified, among others, the following risks for payment service users stemming from late migration:
- The limited capacity and bottlenecks at payment service providers and software vendors. Even if many service providers are aware of the increased demand for their services in order to assist with the migration of payment service users by a given SEPA compliance date, there may simply not be enough resources if huge numbers of customers concentrate their changeover into a single very tight time frame.
- Insufficient end-to-end testing between end users and payment service providers. Even if systems are prepared for testing several weeks before the deadlines, there may be bottlenecks in resources and bandwidth. Payment service providers’ test systems are, generally-speaking, not designed to process files or data from a very large number of customers at the same time. This could prevent the payment service users from carrying out the proper end-to-end testing required before going live with their own systems.
The European Central Bank also pointed out that the experiences of those stakeholders in the euro area that have already completed migration show that there is a real need for a fine-tuning period after changeover. The recommendation is that payment service users in non-euro countries plan their migration projects keeping in mind these findings.
It is recommended that payment service providers make available SEPA-compliant customer-servicing channels early
In its first SEPA migration report published in March 2013, the European Central Bank stated: “There is a causality dilemma between the availability of SEPA-compliant customer-servicing channels and payment service users’ ability to complete their internal migration projects, owing to the need to align and test data streams.” The European Central Bank therefore, recommends that payment service providers should make available customer-servicing channels ready for SEPA transactions as soon as possible.
Last but not least, payment service users have the opportunity to take advantage of a host of tools offered by banks and other service providers supporting the transition to the SEPA payment schemes and technical standards. These include, for example, tools to facilitate the conversion of account data to the IBAN and to adapt to the usage of ISO 20022 XML message standards in the customer-to-bank space in relation to files of payment transactions.
In summary, preparation is everything and time is of the essence. This applies to all parties involved, i.e. public authorities, payment service providers and users.
Get ready for SEPA 2016. Act now.
- Regulation (EU) No 260/2012 Establishing Technical and Business Requirements for Credit Transfers and Direct Debits in Euro (the SEPA Regulation)
- Regulation (EU) No 248/2014 Amending Regulation (EU) No 260/2012 as Regards the Migration to Union-wide Credit Transfers and Direct Debits
- European Commission Website: Information on Transitional Arrangements in EU Member States Permissible Under Regulation 260/2012 (the SEPA Regulation) and List of Competent Authorities Responsible for Ensuring Compliance (Items Posted on 23.07.2013)
- European Central Bank Website: National SEPA Contact Links; Fact Sheets Providing Country-Specific Information Related to Regulation (EU) 260/2012 (the SEPA Regulation)
- Council of the European Union: Council Conclusions on SEPA (14 May 2013)
- European Central Bank: Second SEPA Migration Report (October 2013)
- European Central Bank: First SEPA Migration Report (March 2013)
- EPC Newsletter: Case Studies Highlighting Successful SEPA Migration Projects of Bank Customers (Series Started April 2011)
- The EPC Migration Tool Kit: Get Ready for SEPA
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