All building blocks required to build
re now in place
Direct Debit services enable customers - for the first time ever - to make and receive both domestic and cross-border euro direct debit payments throughout the 32 countries, i.e. the 27 Member States, Iceland, Liechtenstein, Norway, Switzerland and Monaco. The direct debit is a major payment instrument widely used in many euro area countries.
The introduction of the Direct Debit Schemes requires a uniform -wide legal framework for payments; the launch date of the schemes therefore aligns with the 1 November 2009 deadline for Member States to transpose the Payment Services Directive (PSD) into national law.
Following the introduction of euro notes and coins in 2002 the political drivers of the process - the Economic and Financial Affairs Council (ECOFIN), the European Commission, the European Parliament and the European Central Bank - called on the payments industry to bolster the common currency by developing a set of harmonised schemes and frameworks for electronic euro payments. The industry has delivered: the Credit Transfer Scheme, the Direct Debit Schemes and the Cards Framework developed by the in close dialogue with the customer community strengthen the monetary union. The schemes also support cross-border trade within the internal market.
First and foremost, offers significant benefits for bank customers
offers significant benefits for bank customers. The implementation of innovative and competitive payment services based on global ISO standards translates into efficiency gains for businesses and public administrations, while consumers can rely on a single set of euro payment instruments covering 32 countries: one bank account, one bank card, one Credit Transfer, one Direct Debit. Last but not least, according to the European Commission, holds a market potential of up to 123 billion euro in benefits over 6 years with a significant upside for bank customers.
The impact of , however, transcends monetary policy and payments services. The European Commission expects the legal and technical harmonisation exercise to facilitate the dematerialisation of business processes by replacing paper-based procedures with standardised electronic solutions such as e-invoicing.
Focus must now shift to migration
Today, more than 4500 banks offer Credit Transfer ( ) services. Eighteen months after the launch of the , 4.4 per cent of all euro credit transfers in the are actually based on the scheme. The current rate of market uptake is in line with expectations considering the average timelines required for the roll-out of other major integration initiatives. However, moving forward, the focus must be on accelerating migration to the new euro payment instruments.
The vision will not be realised through the existence of high-quality schemes and standards alone - and neither banks nor their customers should be blamed for that fact. The monetary union did not materialise by distributing euro notes and coins to the market hoping that those beloved national currencies would be enthusiastically abandoned. European integration is rarely carried forward by grassroots movements and is no exception to this rule.
The political drivers of the project therefore have to incentivise market transition now. The Roadmap recently published by the European Commission is a positive step in this direction. In addition, the European Commission, the European Central Bank and governments should implement a communication campaign comparable in impact to that afforded for the euro introduction. At the same time, public administrations - accountable for up to 20 per cent of electronic payments made in society - must speed up implementation. Moving public sector payments to will create critical mass and trigger implementation by other market participants.
Setting a deadline for migration to ensures planning security for all market participants
Political leadership is also required with regard to the ultimate goal of : eventually, existing national payment services will be replaced by services. A transformation process of this dimension must be transparent and predictable. The majority of concerned parties including the European Central Bank agree that an end date for phasing out legacy euro payment instruments creates awareness, ensures planning security for all market participants and confirms the commitment to making a reality. The European Parliament called on the European Commission to set a “clear, appropriate and binding end date, which date should not be later than 31 December 2012, for migrating to products”1.
The also recognises the value of setting a deadline for migration to as asked for by the European Parliament and the European Central Bank. In the view of the there should be one migration end date for both Credit Transfer and Direct Debit at European level. Mandating an -wide end date requires regulation. Such a regulation should oblige customers to use payment services rather than euro payment services based on the current national schemes, thereby not leaving migration responsibility only to the banking sector.
In this context it should also be kept in mind: migration to the euro would never have happened without a clear deadline for completion of the project. The market is now awaiting recommendations of the European Commission on the most effective way forward in this matter.
Gerard Hartsink is the Chair of the .
- European Parliament. Resolution on the implementation of the Single Euro Payments Area ( ). 11 March 2009
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