Belgium reaches full migration to Credit Transfer and Direct Debit by April 2014
In February 2012, the European Union (EU) co-legislators adopted the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the Single Euro Payments Area () Regulation), which effectively mandates migration to Credit Transfer () and Direct Debit (SDD) in the euro area by 1 February 2014. On 9 January 2014, the European Commission introduced a legislative proposal for a new EU Regulation amending the Regulation to “give an extra transition period of six months during which payments which differ from the format can still be accepted” in the euro area after 1 February 2014.
The co-legislators, i.e. the European Parliament and the Council of the representing governments1, adopted ‘Regulation () No 248/2014 amending Regulation () No 260/2012 as regards the migration to Union-wide credit transfers and direct debits’ in February 2014 (see ‘related links’ below). This new Regulation states, among other things (italics added): “In Article 16 of Regulation () No 260/2012, paragraph 1 is replaced by the following: (...) By way of derogation from Article 6(1) and (2), [payment service providers] may continue, until 1 August 2014, to process payment transactions in euro in formats that are different from those required for credit transfers and direct debits pursuant to this Regulation. [EU] Member States shall apply the rules on the penalties applicable to infringements of Article 6(1) and (2) (…) from 2 August 2014.” Regulation (EU) No 248/2014 entered into force on 21 March 2014. It applies, with retroactive effect, from 31 January 2014.
Different euro area countries decided on different timelines during which they made use of the option to continue processing non- formats (i.e. some countries did so during the full six months transition period agreed by the Commission, the European Parliament and the Council of the EU while others have opted for a shorter timeline).
In Belgium, the extended deadline to achieve compliance with the Regulation was 1 April 2014. According to the national quantitative indicators published by the European Central Bank (ECB) (see ‘related links’ below), the share of Credit Transfer () and Direct Debit (SDD) transactions in Belgium each amounted to 100 percent as of April 2014. By comparison, in April 2014 the share of SCTs in the euro area was 96.9 percent; the share of SDDs was 88.2 percent. The quantitative indicators measure the share of and SDD transactions as a percentage of the total volume of credit transfers and direct debits generated by bank customers.
Figure 1: Quantitative indicators Belgium. (Source: ECB.)
Coordinating migration at national level: the Belgian approach
migration is managed at country level by national Coordination Committees representing public authorities as well as representatives of the demand and supply sides of the payments market (see ‘related links’ below for related contact information made available by the ECB). Belgium has been a front runner among euro area countries regarding migration to harmonised payment schemes and technical standards throughout the transition. This is the fourth article featured in the Newsletter since October 2009 reporting on the approach adopted in Belgium to successfully drive forward migration to (see ‘related articles in previous issues’ below). The Belgian migration model is based on the following principles:
Coordination: 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). 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.
Engagement of and leadership by public authorities: The Belgian Federal Government has acted as a principal driver of implementation, taking decisive action to promote adoption of across the market early on. 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 an 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 and greatly contributed to familiarising the general public with the use of the International Bank Account Number (IBAN) replacing the national bank account number (BBAN).
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 materialised 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 was well educated on and embraced the use of the new payment schemes and technical standards, such as the IBAN. 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.
The communication policy in Belgium relied on a top-down approach: those steering the project inform the main users and user groups, who in turn pass on the information among individual stakeholders such as, for example, corporates and small and medium-sized enterprises (SMEs). Since Belgium opted for a gradual approach to migration, the communication activities also evolved on a step-by-step basis, according to specific target groups. The communication strategy was adapted as required to meet the information needs of a specific target group.
Progress reports on migration: In addition, the Steering Committee regularly published reports on the progress of migration in Belgium. This allowed all parties involved in coordinating the process to identify, in particular, instances where roll-out lagged behind expectations and to design appropriate interventions. (The fifth – and last – report on migration in Belgium, published in June 2013, is included in the ‘related links’ below.)
How to incentivise migration to SDD
Belgium reached high levels of migration to and SDD early in the process. To illustrate the point: in July 2012, the share of SCTs in Belgium reached more than 58 percent of total credit transfers; the share of SDDs exceeded 15 percent. By comparison, according to the indicators compiled by the ECB, in July 2012 the share of SCTs in the euro area was 29.6 percent; the share of SDDs remained marginal at 1 percent.
Despite the comparatively high migration rates achieved by mid-2012, the fifth report on migration in Belgium, published in June 2013, showed that progress, in particular, with regard to SDD migration stagnated compared to mid-2012. In fact, since one of the biggest Belgian billers had switched over to in November 2011, there had been no significant increase in SDD migration. The NBB noted, however, that some additional big businesses had started the planning to make the move to SDD early in 2013. Due to the complexity of the SDD migration process, most of these big companies would be changing over to during the course of the third quarter of 2013. In June 2013 the NBB therefore reiterated: “These developments will continue to be followed regularly within the Steering Committee on the Future of Means of Payment in Belgium. A successful switchover to is only possible if all those involved make sufficient effort to spread the word about and its constituent parts within a reasonable time scale. For this reason, all the various stakeholders must undertake to provide the necessary effort in terms of communication so as to inform their counterparties in good time.”
It is important to note that in Belgium – and some other countries – migration to SDD involved transitioning from a legacy national direct debit model based on the ‘debtor-driven mandate flow’ (DMF) to the ‘creditor-driven mandate flow’ (CMF). In the CMF model, the payer (debtor) completes and signs a mandate to authorise direct debit collection(s) and sends the mandate directly to the biller (creditor). The biller stores the original mandate. In the DMF model however, the payer used to send the mandate to its bank. In order to facilitate the migration of more than 30 million mandates, the NBB had put in place a central file allowing banks to exchange those mandates from the debtor’s bank to the creditor’s bank and finally to the creditors. (For detailed information on CMF, refer to the Website page ‘The Creditor-Driven-Mandate Flow (CMF)’ included in the ‘related links’ below.)
At the end of Summer 2013, the decision was made to re-design the sepabelgium.be website, mainly to reflect the demand from the market for a more practical approach with regard to the migration to SDD. The website was divided into two parts, one dedicated to consumers, the other one to companies, with a bigger chapter devoted to the migration to SDD by creditors.
To ensure the timely completion of SDD migration, the Steering Committee invited the main stakeholders, i.e. big companies, to information sessions on a more frequent basis as from September 2013.
In October 2013, five months ahead of the target date, the Steering Committee decided to organise a last information session dedicated to the main users of direct debits. The NBB, together with Isabel, the main provider of business e-banking services based in Belgium, and bank representatives, provided information on the migration to focusing on the Regulation, on the technical characteristics of the payment instruments and on the importance of a step-by-step approach in order to achieve compliance.
In November 2013, it was the turn of the providers of enterprise resource planning (ERP) software to be invited to an information session. Given the fact that the audience was a ‘technical’ one, this session was essentially dedicated to SDD and the changes in comparison with the national direct debit schemes.
How to engage the SME sector
The experience in most euro countries demonstrated that particular efforts were required to engage the SME sector in the migration process. According to the first migration report published by the ECB in March 2013, SMEs’ and local public administrations’ awareness of was still fragmented and the level of preparedness was rather poor.
The fourth progress report on migration in Belgium, published in September 2012, also found that many SMEs could not yet have started planning the transition. At the time, a very large proportion of transfers, especially those sent electronically in bulk to the issuing bank, were still in the domestic format. The main challenge at that stage consisted of informing the thousands of SMEs and encouraging them to go ahead with the conversion. These conclusions reflected the findings of a survey previously conducted at the end of 2011 by the NBB together with Isabel 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. This survey also found that many SMEs did not yet have all the necessary information about .
For a good many firms, the Isabel platform, very widely used in the market, was vital, because this is the channel enabling credit transfers and direct debits (as well as other financial information) to be transmitted to a number of banks. Migration of Belgian firms to the latest Isabel platform, which is compatible, should therefore drive forward readiness also of Belgian SMEs. The deadline for migration to the latest Isabel platform was end July 2012.
In addition to ensuring the compatibility of the Isabel platform by July 2012, the following measures were implemented to support, specifically, smaller Belgian businesses to achieve compliance:
- As was done with big creditors and with ERP providers, associations representing accountants and independent auditors were invited to share their concerns with the NBB and the banking sector during an information session. As a conclusion of the discussions, it was decided that the banks together with the NBB would send a one-page note on to these associations to be shared with their members. The message was reinforced that migration to SDD requires careful preparation and planning. This last action was considered of importance in an attempt to reach, in particular, smaller players, i.e. SMEs that might use direct debits to a lesser extent but had to make the move to SDD nonetheless.
- Finally, the Steering Committee held a press conference on 23 October 2013 dedicated to . The objective of the press conference was to alert the general public once again to the imminence of the 1 February 2014 migration deadline. On this occasion, the Minister of Finance stressed the importance of the project and its link with the introduction of the fiduciary euro. A representative of the Minister in charge of SMEs explained the opportunities as well as the challenges for smaller companies. The Governor of the NBB emphasised the social nature of the project implying that everyone has to participate, from private users to banks to bigger and smaller companies. The CEO of the Belgian Banking Federation reiterated that the banking sector was standing ready to help customers to manage the transition in a timely fashion.
The Belgian experience shows: timely migration to payment schemes and technical standards is manageable and feasible
Migration to in Belgium has been a success. The Belgian model emphasised the importance of coordinating the efforts of all stakeholder groups, i.e. public authorities, the representatives of payment service users, banks and other service providers, at a national level based on a clearly defined project plan. This author hopes that the lessons learnt and best practices established in Belgium provide inspiration to governments and national Coordination Committees acting in non-euro area countries now preparing to meet the 31 October 2016 deadline established by the legislator with adoption of the Regulation. The Belgian experience shows that progress towards replacing national legacy euro credit transfer and direct debit schemes with and SDD in a timely fashion is manageable and feasible.
Jean Hilgers is Director at the National Bank of Belgium.
Related article in this issue:
Related articles in previous issue:
Electrabel GDF Suez: “We Are Delighted to Offer Our Customers SEPA Direct Debit Services!” The biggest Belgian biller completes migration to SEPA Direct Debit (SDD) in December 2011 and boosts the national SDD migration rate to 19 percent in that month ( Newsletter, Issue 17, January 2013)
Belgium: A SEPA Success Story. In Belgium, SEPA Credit Transfer migration rate is 58 percent; SEPA Direct Debit migration rate is 15 percent (July 2012) ( Newsletter, Issue 16, October 2012)
How to Migrate to SEPA. Experience in Belgium: what works and what is difficult? ( Newsletter, Issue 9, January 2011)
Yes we can - Part II. Belgium: a case study in successful migration to SEPA ( Newsletter, Issue 4, October 2009)
1 (The Council of the European Union (EU) is the EU institution where the Member States’ government representatives sit, i.e. the ministers of each EU Member State with responsibility for a given policy area.)
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.