Facing the Facts in April 2010

Facing the Facts in April 2010

The EPC Newsletter tracks the progress of SEPA implementation

22 October 12

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Percentage of banks in offering Credit Transfer services

As of April 2010, nearly 4500 banks in 32 countries offer Credit Transfer ( ) services for euro payments. The payment services providers offering services today represent roughly 95 percent of payment volumes in Europe. Due to mergers and acquisitions, the absolute number of scheme participants has slightly decreased compared to previous Market Uptake Reports featured in this Newsletter. The Participant Register listing scheme participants, e.g. payment services providers offering services, is publicly available at http://epc.cbnet.info/content/adherence_database.

Percentage of transactions compared to total volume generated by customers

According to the Indicators compiled by the European Central Bank (ECB), the share of Credit Transfers as a percentage of the total volume of credit transfers generated by bank customers amounts to 6.7 per cent as of February 2010.*** The ECB Indicators are publicly accessible at http://www.ecb.eu/paym/sepa/timeline/use/html/index.en.html.

A figure of 100 per cent would indicate that only services are used and have fully replaced the non- instruments. The Indicators are based on aggregated data provided by clearing and settlement infrastructures in the euro area processing transactions. These data exclude transactions sent for example via links between infrastructures to avoid double-counting. The data also exclude "on-us" transactions ( Credit Transfers between accounts at the same bank) as well as transactions cleared between banks bilaterally or via correspondent banking. The ECB Indicators also show market uptake by country.

Percentage of banks in offering Direct Debit services

The launched the Core Direct Debit Scheme ( ) and the Business to Business Direct Debit Scheme ( ) on 2 November 2009. As of this date, banks throughout are gradually starting to deliver Direct Debit services to their customers. All branches of banks in the euro area must be reachable for cross-border direct debits; e.g. Core Direct Debit, by 1 November 2010 as mandated by Regulation (EC) No 924/2009 (Article 8). In April 2010 the Commission services published a "Note on Application of Article 8 of Regulation (EC) No 924/2009 - Reachabillity for Direct Debit Transactions". For further information, refer  to Regulation (EC) 924/2009, the related guidance note published by the Commission services and the article "November 2010: Mandatory Reachability for cross-border Direct Debits" in this Newsletter (links are included below).

As of April 2010, 2692 banks representing about seventy per cent of payment volumes have signed up to the Core Direct Debit Scheme. Of those, 2442 banks have also adhered to the Business to Business Direct Debit Scheme. The Participant Registers for the and the Schemes listing Scheme Participants, e.g. payment services providers offering and / or services, respectively, are publicly available at http://epc.cbnet.info/content/adherence_database.

Percentage of transactions compared to total volume generated by customers

It is yet to be determined when the first ECB Indicators will be published.

for Cards: tracking EMV roll-out

As reported in the previous issues of the Newsletter, good progress is being made in the realisation of a for Cards. The latter's aim is to enable a consistent customer experience when making or accepting payments with cards. The 's Cards Framework (SCF) outlines high level principles and rules that when implemented by banks and card schemes will deliver this consistent experience. The SCF recognises the EMV standard for -wide acceptance of payments with cards at very high levels of security. EMV is an industry standard to implement CHIP and PIN security for card transactions.

An important indicator on the progress in this area is the number of cards, POS (points of sale: terminals at retailers' check outs) and ATMs now in the market that require the use of PIN and CHIP for the authorisation of a card payment. More specifically, the percentage of so called EMV-compliant cards, POS and ATMs in is monitored.

According to the latest findings of the Cards Working Group, as of first quarter 2010, EMV compliance is 70,05 per cent for cards, 77,98 per cent for POS and 93,63 per cent for ATMS. The progress of EMV roll-out based on the findings is also reflected by the ECB Card Indicators.

The Eurosystem has in addition developed a Card Indicator for migration to EMV at transaction level. An "EMV transaction" is understood to be a card payment transaction in which the following criteria are satisfied: an EMV-compliant card is used at an EMV-compliant terminal and EMV technology is used in the processing of the transaction. The indicator is calculated as the number of EMV transactions at POS terminals divided by the total number of transactions at POS terminals (irrespective of the country of issuance of the card). The indicator is affected slightly by transactions conducted using cards issued outside the area. According to the ECB Card Indicators, as of December 2009 some 52% of card payment transactions are EMV-compliant.

Last but not least, the ECB Card Indicators also track cardholders' actual use of their cards when travelling abroad. That use depends on three things: first, the technical capabilities of the card and the terminal; second, the merchant's acceptance of the card in question; and third, the extent to which people do indeed have a uniform "customer experience" across the area. This indicator is calculated as the number of POS transactions conducted using cards issued outside the country divided by the total number of POS transactions.

Cross-border transactions accounted for around 3.5% of POS transactions in the euro area at the beginning and end of 2008. However, the indicator also shows higher values during the period from July to September 2008. This might be a result of summer holidays, as more people travel during the summer months. In 2009, the indicator was around 1%-point higher compared to 2008, with a similar pattern occurring in summer. A move to a significantly higher level would indicate that had been successful in changing the card industry, the card acceptance practices of merchants and/or the payment behaviour of cardholders.

The information cited above as regards the ECB Card Indicators plus additional data provided by the ECB on this subject are available at http://www.ecb.int/paym/sepa/timeline/use/html/index.en.html

preparedness of the public sector

is a policy-maker-driven public harmonisation initiative launched by -governments, the European Commission and the European Central Bank, designed to complete the internal market and monetary union. As a matter of principle it may therefore be expected that the public sector will act as the launching customer of the new payment services.

The First Annual Progress Report on the State of Migration in 2008 (February 2009) issued by the European Commission concluded that  "since its launch, the uptake of in the public sector has been very limited." The Second Annual Progress Report on the state of migration in 2009 (November 2009) prepared by the Commission finds that high-volume payment users such as public administrations - even if strongly committed to - are slow in migrating to with only 1.5 per cent weighted migration rate in September 20091 and therefore being significantly below the overall migration rate in euro area. There are however 3 Member States which beat the general average migration trend by a large margin, namely Luxembourg, Slovenia and Belgium, with rates of 100 per cent, 60 per cent and 18 per cent respectively. For public administrations in the remaining Member States, the migration rate is either below the average national rate or even zero.

To ensure that migration to in the public sector does not get lost in translation, the publication " for the Public Sector" has been published in all languages courtesy of the European Central Bank. The wishes to express its appreciation for these translations provided by the ECB in cooperation with national central banks (a link to the translations is included below).

preparedness of the corporate sector

No new and / or additional data on the state of readiness in the corporate sector have become available since reporting the following in the previous issue of the Newsletter: the Readiness Survey 2009 by Deloitte focusing on the corporate sector finds that readiness has significantly increased compared to 2008. The Survey shows that those corporates which have a dedicated team and strategy in place are already deriving significant benefits from implementation. At the same, the majority of companies now identify not only as a compliance issue, but also as a business opportunity. For detailed findings of the Readiness Survey 2009 refer to the article " Survey 2009: Corporate Readiness on the Rise. The findings confirm that early movers have everything to gain"; a link to this article is set out below.

Validity of existing mandates under the Direct Debit Scheme

No new and / or additional information on the continued legal validity of existing direct debit mandates has become available since reporting the following in the previous issue of the Newsletter: in any direct debit scheme, a mandate is completed by the debtor (a customer purchasing goods or services) to authorise the creditor (the provider of goods or services) to collect payments via direct debit. At the same time, a mandate usually includes the authorisation of the debtor bank to pay these collections. To facilitate migration of customers to the Direct Debit Scheme, it is imperative that mandates existing today can be used under the scheme, even if these do not incidentally meet all the requirements of the mandate. Where necessary, Member States must device legislative solutions to ensure the continued legal validity of existing mandates under the Direct Debit Scheme.

According to the Second Annual Progress Report on the state of migration in 2009 this issue has been addressed in all Member States "with the important exception of Germany". Direct debits are used twice as much in Germany as in the whole of the European Union2.

Setting a deadline for migration to

The recognises the value of setting a deadline for migration to services. 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. In the view of the , mandating an -wide end date would require Regulation.

The European Central Bank (ECB) observes that "corporations and public administrations (...) still take a cautious approach" towards implementation. To break that circle of "wait and see", states the ECB, a migration end date from which point onwards only the European payment instruments will exist is needed3. 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"4. Commissioner Michel Barnier, head of the Directorate-General Internal Market and Services, reiterated in April 2010: "(...) we need to give (...) a renewed momentum. I believe that binding end-dates are important in this regard"5.

On 2 December 2009, the ECOFIN (Economic and Financial Affairs Council - comprising the Economics and Finance Ministers of the Member States) stated that "establishing definitive end-dates for and migration would provide the clarity and the incentive needed by the market, ensuring that the substantial benefits of are rapidly achieved and that the high costs of running both legacy and products in parallel can be eliminated." The ECOFIN therefore invited the Commission, in collaboration with the ECB and in close cooperation with all actors concerned, to carry out a thorough assessment of whether legislation is needed to set binding end dates for and and to come up with a legislative proposal should this assessment confirm this need.

At the meeting of the European Commission's Payment Systems Market Expert Group (PSMEG) on 23 March 2010, the European Commission tabled a discussion paper titled " Migration End-Date", which contemplates, amongst others, legislative measures to set a mandatory deadline for migration to . For an commentary on this paper refer to the article "On and US Health Care Reform" in this Newsletter (a link is included below).

Herman Segers is the Secretary General of the .

***Please note: data, facts and figures cited in this article represent the latest data available as of the publication date of this issue of the Newsletter (29 April 2010).


Related links:

Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001

European Commission: Note on Application of Article 8 of Regulation (EC) No 924/2009 - Reachabillity for Direct Debit Transactions

Second Annual Progress Report on the state of SEPA migration in 2009 prepared by the Commission services

ECOFIN Conclusions on SEPA of December 2009


Related articles in this issue:

On SEPA and US Health Care Reform. EC paper "SEPA Migration End Date": a commentary

November 2010: Mandatory Reachability for cross-border Direct Debits . Commission services publish guidance note on application of Article 8 of Regulation (EC) No 924/2009

European ATM Fraud Losses Down 36 Percent. EMV rollout at ATMs in Europe is helping to reduce skimming losses in some countries


Related articles in previous issues:

Clarity and Incentives needed. ECOFIN conclusions of December 2009 on setting an end date for migration to SEPA (EPC Newsletter, Issue 5, January 2010)

Expectations are promising (and Patience is a Virtue). Results of the Second Annual Progress Report on the state of SEPA migration in 2009 (EPC Newsletter, Issue 5, January 2010)

SEPA Survey 2009: Corporate Readiness on the Rise. The findings confirm that early movers have everything to gain (EPC Newsletter, Issue 5, January 2010)

The X Factor. Are EU governments still committed to making SEPA a reality? (EPC Newsletter, Issue 4, October 2009)

Towards a SEPA migration end date? Commission services publish feedback on public consultation on possible end date(s) for SEPA migration (EPC Newsletter, Issue 4, October 2009)

SEPA only: the EPC Vision (EPC Newsletter, Issue 2, April 2009)


1 This rate decreased from 2.3 % shown in the second Commission services' survey on public administrations preparedness and migration to (status March 2009) to 1.5 % due to a statistical effect, namely that France provided an updated survey reply representing all of its PA transactions. Given that France has a very large number of PA transactions (852 million) and has not started to use yet, this drove down the euro area average considerably by increasing the statistical base compared to the previous survey. It is therefore important to note that this should not be perceived as an actual decline of transactions in the euro area compared to the survey results published in July 2009.

2 SEPA2008: Uniform Payment Instruments for Europe. Association of German Banks. 2nd revised edition. September 2008.

3 The Quest for the Holy Grail? - European Financial Integration: Achievements and Hurdles. Speech by Getrude Tumpel-Gugerell, Member of the Executive Board of the ECB. Workshop on "Securing the Future Critical Financial ICT-Infrastructure (CFI)" organized by Parsifal. Frankfurt, 16 March 2009.

4 European Parliament Resolutions on the Implementation of the Single Euro Payments Area: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P6-TA-2009-0139&language=EN&ring=B6-2009-0111 (March 2009) and

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P7-TA-2010-0057+0+DOC+XML+V0//EN (March 2010)

5 Michel Barnier, Commissioner for Internal Market and Services - Forging A New Deal Between Finance And Society: Restoring Trust In The Financial Sector - European Financial Services Conference, Brussels, 26 April 2010

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