How to successfully coordinate migration at country level: the Belgian approach
This is the third article published in the Newsletter since October 2009, which reports on the approach adopted in Belgium to successfully drive forward migration to the Single Euro Payments Area () (see 'related articles in previous issues' below). The Belgian migration model is based on the following principles:
Engagement of and leadership by public authorities: As reported in an earlier Newsletter article on migration in Belgium, the Belgian Federal Government has acted as a principal driver of implementation taking decisive action to promote adoption of Credit Transfer () across the market. In June 2008, the Belgian Council of Ministers approved the proposal to gradually introduce the standard form in the public services sector to ensure that all public sector credit transfers would be -compliant by 1 January 2009.
Starting in September 2008, the tax authorities sent 500,000 European transfer forms per month to Belgian citizens together with the notice requesting payment of the annual car tax. By the end of 2008, 3.35 million Belgian citizens had received a form attached to their tax calculation. The Belgian Federal Government stands alone in the EU as regards such a significant measure which increased domestic use of dramatically.
The Belgian Steering Committee on the Future Means of Payment (the Steering Committee), the forum which coordinates the migration approach across all stakeholder groups, is chaired by the National Bank of Belgium (NBB).
Coordination: Relevant stakeholders, including the public and business sectors, consumers and banks, initiated dialogue on migration in the Steering Committee well ahead of the launch of the Scheme in January 2008. Belgium was also one of the first euro area countries to designate a programme manager responsible for supporting the national implementation efforts.
Timely action: In line with the majority of European market participants, Belgian stakeholders had also identified mandatory migration deadlines to be established through EU Regulation as a prerequisite to successful integration of the euro payments market. In Belgium however, the implementation of coordinated migration efforts was not delayed until such EU Regulation did materialise in 2012. The step-by-step national implementation plan was rolled out in Belgium starting in 2008.
Communication: Also in 2008, the banking industry, the Federal Government and the business sector designed a multi-targeted communication campaign to create awareness across the market. As a result, the general public in Belgium is not only familiar with the use of the new payment schemes and technical standards, such as the International Bank Account Number (IBAN), but embraces it. This positive reception of the objectives among the general public reflects the commitment of all stakeholders cooperating in the Steering Committee to ensure that the information needs of their specific constituencies were addressed early in the migration process.
Progress achieved to date
In September 2012, the Steering Committee published its fourth progress report towards in Belgium (see 'related links' below) featuring the impressive results achieved to date based on the groundbreaking Belgian model. In July 2012, the share of SCTs in Belgium represented more than 58 percent of total credit transfers; the share of Direct Debits (SDDs) exceeded 15 percent. By comparison, according to the Indicators compiled by the European Central Bank, in July 2012 the share of SCTs in the euro area was 29.6 percent; the share of SDDs remained marginal at 1 percent1.
All market participants in the euro area are obliged to comply with the core provisions of the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro' (the Regulation) by 1 February 2014. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by and SDD.
Figure 1: Share of Credit Transfers in Belgium compared to euro area average (July 2012)
Figure 2: Share of Direct Debits in Belgium compared to legacy direct debits (July 2012)
With early and broad market uptake of accomplished, Belgium embarked on the SDD migration project in 2011
As reported in previous Newsletter articles highlighting the Belgian approach to migration, above-average market adoption of was achieved early on (see figure 1 above). Today, public administrations and the majority of payment service users in the private sector handling major payment volumes have completed the transition to .
In a next step, the Belgian market tackled migration to SDD. In Belgium, 13,728 creditors managing 31 million mandates use the direct debit payment instrument. The number of mandates managed and direct debits collected however varies considerably from one creditor to another. Available data shows that the ten biggest Belgian creditors generate 34 percent of direct debits; the twenty biggest creditors already account for 44 percent of direct debits. This data also indicates that 90 percent of direct debits in Belgium are collected by 200 companies. Consequently, the Steering Committee focused its communication efforts first on motivating these major creditors to embark on the SDD migration process. Since public administrations do not collect direct debits, the Steering Committee called on the private sector to jumpstart migration to SDD. At the end of July 2011, a total of 49 Belgian companies had initiated the implementation of SDD and 11 companies had completed the process.
By the end of that year, one of the biggest Belgian creditors, a public utility company, migrated to SDD. The company initiated the process mid November 2011 by converting direct debits from the Belgian legacy data format to the formats: the ISO 20022 message standards. This exercise was concluded in mid December 2011 and the company started collecting SDDs at that point in time. As a result, the Belgian SDD migration rate increased to 19 percent in December 2011. This reflects the fact that a high number of payments due quarterly, bi-annually or annually are collected in that month. Based on the average amount of collections per month, the share of SDDs, compared to all direct debits collected from Belgian bank customers, registered at more than 15 percent in July 2012.
The Steering Committee is confident that the positive SDD migration experience of these early movers will inspire other creditors to follow suit shortly.
Next steps: The focus is on supporting small and medium-sized enterprises to make the transition
Supporting small and medium-sized enterprises (SMEs) in the migration process is now the priority of the coordinated efforts to achieve compliance in Belgium. At the end of 2011, the NBB together with Isabel, the main provider of e-banking services based in Belgium, carried out a survey among 231 SMEs to find out just how prepared they were to start using and SDD. 42 percent of the companies surveyed stated that they were ready to introduce , and 30 percent of the respondents had concluded the planning stage with regard to migration. Only 14 percent of the Belgian SMEs surveyed at the end of 2011 were aware of SDD. The companies that were aware of SDD at that time were also aware that both an Scheme and an SDD Business to Business (B2B) Scheme are available. Not surprisingly, at the end of 2011 only four percent of Belgian SMEs had started the process of migrating to and three percent had entered the planning stage. These figures were slightly higher with regard to the Scheme: at the time, five percent of the companies surveyed had started migration to and four percent had entered the planning stage.
This survey carried out at the end of 2011 also found:
- Almost 90 percent of SMEs were aware of the concept. At the time of the survey however, only 31 percent of respondents were aware of the forthcoming Regulation which would establish mandatory deadlines for migration to (the Regulation was only formally adopted by the legislator in February 2012).
- More than 50 percent of the SMEs surveyed are expecting to cut the cost of their payment transactions.
- More than 70 percent of respondents expect to reduce the execution time for payment transactions.
- Only seven percent of respondents expect that migration will instantly result in increased competition between banks and more international trade.
- Many SMEs stated that they did not yet have all the information about which they need.
The survey confirmed the determination of the Steering Committee to focus its efforts to support the transition of SMEs. Taking into consideration that this requirement has been identified more than two years prior to 1 February 2014, which is the point in time when market participants in the euro area must comply with the core provisions of the Regulation, the expectation is that migration to and SDD by smaller Belgian businesses will be completed in due time.
Figure 3: Introduction of Credit Transfer by small and medium-sized enterprises in Belgium
Quod erat demonstrandum: migration is manageable and feasible - not only at the level of individual organisations but across national markets. Act now!
Belgian progress towards replacing national legacy euro credit transfer and direct debit schemes with and SDD demonstrates that implementation of the new payment schemes and technical standards in a timely fashion is manageable and feasible. The Belgian model also emphasises the importance of coordinating the migration process involving all impacted stakeholder groups at national level. This author hopes that the lessons learnt and best practices established in Belgium provide inspiration to EU governments and National Coordination Committees acting in other euro area countries now preparing to meet the 1 February 2014 migration deadline established by the EU legislator with adoption of the Regulation.
The time to act is now.
Jan Vermeulen is a Senior Payments Systems Expert at the National Bank of Belgium and the Program Officer in Belgium. He organises the National Committee within the National Bank of Belgium.
Related articles in this issue:
Time is of the Essence: Get Ready for SEPA. Act Now! Market participants in the euro area must achieve compliance with the core provisions of the European Union Regulation (EU) 260/2012 by 1 February 2014
TUI Travel PLC: "SEPA Direct Debit Scheme Is Another Step Forward Towards Treasury Efficiency". The TUI Travel Accommodation & Destinations (TUI Travel A&D) sector's Finance Service Centre completed migration to SEPA Direct Debit Business to Business in February 2012
Related articles in previous issues:
How to Migrate to SEPA. Experience in Belgium: what works and what is difficult? ( Newsletter, Issue 9, January 2011)
Best of Class: the Netherlands. A case study in successful migration to SEPA ( Newsletter, Issue 9, January 2011)
Yes We Can - Part II. Belgium: a case study in successful migration to SEPA ( Newsletter, Issue 4, October 2009)
Yes We Can - Part I: Luxemburg: a case study in successful migration to SEPA ( Newsletter, Issue 3, July 2009)
1 The latest Indicators compiled by the European Central Bank (ECB) are available on the ECB Website.
If you would like to comment on this article, please identify yourself with your first and last name. Your name will appear next to your comment. Email addresses will not be published. Please note that by accessing or contributing to the discussion you agree to abide by the EPC website conditions of use.