Percentage of banks in offering Credit Transfer services
As of October 2010, nearly 4500 banks in 32 countries offer Credit Transfer () services for euro payments. The payment service providers offering services today represent more than 95 per cent 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, which lists scheme participants (payment service providers offering services), is publicly available at http://epc.cbnet.info/content/adherence_database.
Percentage of Credit Transfer transactions compared to total volume generated by customers
According to the indicators compiled by the European Central Bank (ECB), the share of SCTs as a percentage of the total volume of credit transfers generated by bank customers amounts to 9.3 per cent as of August 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 non- instruments. The indicators are based on aggregated data provided by clearing and settlement infrastructures in the euro area processing transactions. This data avoids double counting by excluding, for example, transactions sent via links between infrastructures. The data also excludes "on-us" transactions (SCTs 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 ( Core) and the Business to Business Direct Debit Scheme ( B2B) on 2 November 2009. As of this date, banks throughout gradually started rolling out services to their customers. All branches of banks in the euro area must be reachable for cross-border direct debits; e.g. Core, 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 it is the location of the branch of a credit institution (whether it is inside or outside the euro area), and not the location of the parent company, that determines whether the reachability obligation and deadline applies. Furthermore, no distinction should be made between branches with head offices located outside the EU and those with head offices inside the EU.
As of October 2010 3884 banks representing more than 80 percent of payments volume have signed up to the Core Scheme. Of those, 3364 banks also adhere to the B2B Scheme. The Participant Registers for the Core and the B2B Schemes list scheme participants (payment service providers offering Core and / or B2B services) and are publicly available at http://epc.cbnet.info/content/adherence_database.
Percentage of Direct Debit transactions compared to total volume generated by customers
According to the indicators compiled by the ECB, the share of Core as a percentage of the total volume of direct debits generated by bank customers amounts to 0.07 per cent as of August 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, which aims to enable a consistent customer experience when making or accepting payments with cards throughout the euro zone. The 's Cards Framework (SCF) outlines high level principles and rules which will deliver this consistent experience when implemented by banks and card schemes. 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 Point Of Sale (POS) card transactions.
An important indicator on the progress in this area is the number of cards, POS and ATMs in the market that use CHIP and PIN for the authorisation of a card payment. More specifically, the percentage of EMV-compliant cards, POS and ATMs in is monitored.
According to latest findings, in the second quarter 2010 EMV compliance is 71.89 per cent for cards, 93.31 per cent for POS and 95.46 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 additionally 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 with cards issued outside the area. According to the ECB Card indicators, as of December 2009 some 52 per cent of card payment transactions are EMV-compliant (latest data provided by the ECB).
Last but not least, the ECB Card indicators also track cardholders' use of their cards when travelling abroad (cross-border use of cards). That use depends on three things: the technical capabilities of the card and the terminal; the merchant's acceptance of the card in question; and the extent to which people 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 per cent 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 percent 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.
Public sector: ready?
is a policy-maker-driven public harmonisation initiative launched by -governments, the European Commission (EC) and the European Central Bank. It is designed to complete the internal market and monetary union. As a matter of principle it may therefore be expected that the public sector will pioneer the new payment services.
The First Annual Progress Report on the State of Migration in 2008 (February 2009) issued by the EC 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 EC found that high-volume payment users such as public administrations - even if strongly committed to - were slow in migrating to with only 1.5 per cent weighted migration rate in September 20091. This falls significantly short of the overall migration rate in the euro area.
The Commission's Third Survey on Public Administrations' Preparedness and Migration to (October 2010), analyses the situation as of end February 2010 and confirms that public administrations clearly lag behind other users in terms of preparedness and migration to (a link to the survey is included below). The weighted migration rate for the replying public administrations in the euro area was 2.73 per cent. This is significantly below the overall migration rate in the euro area (6.2 % in February 2010).
"On the positive side", or so the survey states, "it should be noted that when compared to the last survey, the migration rate by public administrations has increased (from 1.5 per cent in September 2009) and is expected to rise further by the end of this year, when individual public administrations at central government or federal level in Belgium, Germany, France (see also separate article in this newsletter; a link is included below) and Portugal plan to migrate their domestic traffic to . The expected migration of a large share of payments initiated by central and local governments in France (contributing 60 million payments) and the migration of full payments traffic by the Federal Labour Agency in Germany (251 million payments), will substantially increase the public administration migration rate for ".
With regard to migration, the results show that with the exception of Belgium and Germany, public administrations have not yet started to migrate to . The weighted rate for the replying public administrations in the euro area was only 0.06 per cent. Although this figure is low it exceeds the overall migration rate for the euro area (0.04 per cent in February 2010). This figure is, however, expected to progressively increase after 1 November 2010, when the reachability obligation under Regulation (EC) No 924/2009 on cross-border payments in the European Community comes into force for euro area banks. As of that date, banks will have to be reachable for transactions, if they are reachable for national direct debit transactions denominated in euro. On the other hand, it must be recognised that the use of direct debits by public administrations is generally very low or even nil.
Corporate sector: ready?
No new or additional information has become available since reporting the following in the previous issues 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 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 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 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 devise legislative solutions to ensure the continued legal validity of existing mandates under the 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 EC since the start of the programme. As confirmed by the findings of a study requested by the EC 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. In line with expectations expressed by the Finance Ministers, the European Parliament and the European Central Bank, the believes that forthcoming Regulation must set end dates for the phasing out of existing national euro credit transfer and euro direct debit schemes to ensure that the high costs of running multiple payment schemes in parallel can be eliminated.
Gertrude Tumpel-Gugerell, Member of the Executive Board of the European Central Bank, recently reiterated: "To ensure the materialisation of benefits, a migration end date by regulation for credit transfer and direct debit is necessary and should be set by the legislator"4. In the Seventh Progress Report on published by the ECB / Eurosystem in October 2010 it is stated that the "Eurosystem expects and to become the credit transfer and direct debit schemes used for euro payments in the EU. After the migration end date, they will have replaced national legacy credit transfer and direct debit schemes for euro payments" (a link to the Progress Report is included below). The European Parliament called on the EC 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) considered "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". (see link below to the ECOFIN Conclusions on of December 2009).
At its inaugural meeting in June 2010, the Council - bringing together representatives of both the demand and supply sides including the - endorsed a formal declaration stressing "their strong support for the establishment of end-date(s) for migration to Credit Transfers and Direct Debits by means of legislation at level".
At the meeting of the European Commission's Payment Systems Market Expert Group (PSMEG) on 23 March 2010, the EC tabled a Discussion Paper titled ' Migration End-Date', which contemplates, among other things, legislative measures to set a mandatory deadline for migration to . For a detailed commentary on the EC'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' (a link to this document is included below) outlining the provisions of potential 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). 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?" (a link is included below).
In October 2010 the EC announced that a public hearing will be held on 17 November 2010, to ensure all market participants are consulted on the most appropriate approach to regulatory intervention related to . The EC further indicated that it will introduce a formal proposal for such regulation once the arguments brought forth at this public hearing have been evaluated; which might be in late 2010 or at the start of 2011. For further detailed comments on this subject refer to the article "So what's in a Name? Explaining payment schemes, instruments and systems" in this newsletter (a link is included below). In the view of the , clarity on payment terms is critical in the debate over the approach to setting end dates for migration to through Regulation.
Gerard Hartsink is the Chair 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 (25 October 2010).
Related articles in this issue:
So what's in a Name? Explaining payment schemes, instruments and systems. Clarity on payment terms is critical in the debate over the approach to setting end dates for migration to SEPA through EU regulation
Related articles in previous issues:
On Payments and Light Bulbs. Commission ready to write off SEPA via Regulation? ( Newsletter, Issue 7, July 2010)
On SEPA and US Health Care Reform. EC paper "SEPA Migration End Date": a commentary ( Newsletter, Issue 6, April 2010)
European ATM Fraud Losses Down 36 Percent. EMV rollout at ATMs in Europe is helping to reduce skimming losses in some countries ( Newsletter, Issue 6, April 2010)
SEPA Survey 2009: Corporate Readiness on the Rise. The findings confirm that early movers have everything to gain ( Newsletter, Issue 5, January 2010)
The X Factor. Are EU governments still committed to making SEPA a reality? ( 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 ( Newsletter, Issue 4, October 2009)
1 This rate decreased from 2.3 per cent shown in the second Commission services' survey on public administrations preparedness and migration to (status March 2009) to 1.5 per cent due to a statistical effect, namely that France provided an updated survey reply representing all of its public administration (PA) transactions. Given that France has a very large number of PA transactions (852 million) and has not started to use yet, this brought 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 : Potential Benefits at Stake (Capgemini) available at http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=283
4 "Priorities Of The Belgian Presidency Of The For The Financial Services Area", Speech by Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB, att the EUROFI Conference, Brussels, 28 September 2010 available at http://www.mondovisione.com/index.cfm?section=news&action=detail&id=93115 .
5 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)
6 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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