Percentage of banks in offering Credit Transfer services
As of July 2010, nearly 4500 banks in 32 countries offer Credit Transfer ( ) services for euro payments. The payment services providers offering services today represent more than 95 percent of payment volumes in Europe. Due to mergers and acquisitions, the absolute number of scheme participants has slightly decreased compared to previous Single Euro Payments Area ( ) 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 8.1 per cent as of May 2010.* The ECB Indicators are publicly accessible at http://www.ecb.europa.eu/paym/sepa/about/indicators/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" (a link to this document is included below); this guidance note states that that the deadline for the application of the reachability obligation to branches of credit institutions is determined only by the location of the branch (inside or outside the euro area), regardless of the location of the parent company. Furthermore, no distinction should be made between the branches with head office located outside the and those with head offices inside the . Payment service providers seeking adherence to the Core Direct Debit Scheme in readiness of the 1 November 2010 deadline must submit their application to the by 10 September 2010.
As of July 2010, 2831 banks representing about seventy per cent of payment volumes have signed up to the Core Direct Debit Scheme. Of those, 2552 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
According to the Indicators compiled by the ECB, the share of Core Direct Debits as a percentage of the total volume of direct debits generated by bank customers amounts to 0.06 per cent as of May 2010.* The ECB Indicators are publicly accessible at http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html.
The figures are based on aggregated data from several clearing and settlement infrastructures/systems located in the euro area. As such, transactions which are cleared bilaterally or processed within the same institution are excluded from this indicator.
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 POS 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 our latest findings, as of end first quarter 2010; EMV compliance is 71,10 per cent for cards, 82,57 per cent for POS and 95,14 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.europa.eu/paym/sepa/about/indicators/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.
No new and / or additional data on the state of readiness in the public sector have become available since reporting the following in the previous issue of the Newsletter: 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.
A further update on the migration by public administrations is expected in the second half of 2010.
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 meet all the requirements of the mandate. Where necessary, Member States must devise 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. The proposes to set an end date for migration to the Schemes developed by the in close dialogue with the customer community through Regulation. This option has the advantage of a concrete and tangible basis for migration as requested by the political drivers of the initiative and is in line with expectations expressed by several authorities including the European Commission since the start of the programme. As confirmed by the findings of a study requested by the European Commission already in 2007, the benefits for bank customers inherent to the harmonisation exercise are contingent upon swift migration to a single set of payment instruments by both the demand and the supply sides3.
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 needed4. 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"5. 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"6.
On 2 December 2009, the Economic and Financial Affairs Council (ECOFIN - 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 (see link below to the ECOFIN Conclusions on of December 2009).
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 a detailed commentary on the European Commission's Discussion Paper of March 2010 refer to the article "On and US Health Care Reform" in the previous issue of this Newsletter (a link to this article is included below).
In June 2010, the Commission services published a Working Paper titled " Migration End-Date" outlining the provisions of a forthcoming Regulation which envisages setting end dates for euro credit transfer and euro direct debit schemes with so-called "essential requirements" and common standards (a link to the document is included below). In the view of the , this Regulation as currently described in the Commission services' Working Paper of June 2010 fails to define definitive end dates for the phasing out of legacy euro payment schemes and could trigger a number of consequences which might severely impact the competitiveness of payment services in Europe to the detriment of bank customers. For a detailed commentary on the Commission services' Working Paper of June 2010 refer to the article "On Payments and Light Bulbs. Commission ready to write off via Regulation?" in this Newsletter (a link is included below).
In his address to the Plenary on 23 June 2010, Michel Barnier, Commissioner of the Directorate-General Internal Market and Services, stated that he plans to introduce a formal proposal for a Regulation on " Migration End-Date" in September 2010. It remains to be seen whether this proposal will actually live up to its name, i.e. whether the Commission is committed to phasing out legacy euro payment schemes on national level in favour of harmonised payment instruments.
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 (19 July 2010).
Related article in this issue:
Related articles in previous issues:
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 (EPC Newsletter, Issue 6, April 2010)
1This 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.
2SEPA2008: Uniform Payment Instruments for Europe. Association of German Banks. 2nd revised edition. September 2008.
3 : Potential Benefits at Stake (Capgemini) available at http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=283
4The 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.
5European Parliament Resolutions on the Implementation of the Single Euro Payments Area:
http://www.europarl.europa.eu/sides/getDoc.do?type=TA&... (March 2009) and http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-/... (March 2010)
6Michel 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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