Recap: who does what with regard to Credit Transfer ( ) and Direct Debit ( )?
With the introduction of the euro currency in 1999, the European Union ( ) governments and institutions driving the process expected the banking industry to contribute the resources required to develop European instruments for electronic euro payments. In response to these expectations, the European banking sector created the European Payments Council ( ) in 2002. (The is an international not-for-profit association which makes all of its deliverables available to download free of charge on the Website. The is not part of the institutional framework and therefore, has no role in the adoption of legislation or other regulatory initiatives establishing compliance requirements.)
The role of the : in close dialogue with the stakeholder community, the developed, among other things, the and Schemes. The payment schemes, as set out in the and Rulebooks, continue to evolve based on a transparent change management process which provides any interested party with the opportunity to participate. This evolution reflects changes in market needs and updates of technical standards developed by international standards bodies, such as the International Organization for Standardization. It is important to keep in mind that the carries out the scheme management function subject to legal and regulatory conditions defined by the authorities.
The role of the European Commission and the co-legislators: the and Schemes must comply with the relevant requirements set out in Article 5 of, and in the Annex to, the ‘Regulation ( ) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the Regulation) adopted by the co-legislators, i.e. the European Parliament and the Council of the representing governments, in February 2012. Article 13 of the Regulation empowers the European Commission to amend the technical requirements detailed in the Annex to the Regulation through delegated acts. (For detailed information, refer to the Newsletter article, entitled ‘Evolution and Oversight of the and Schemes: the Role of the European Commission and of the European Central Bank’.)
The role of the European Central Bank (ECB): on 1 August 2014, the ECB commented in a press release: “Today marks a major milestone in the integration of retail payments in Europe. After 15 years of work, (…) has been successfully implemented for credit transfers and direct debits in the euro area. (…) The Eurosystem, which consists of the ECB and the national central banks of euro area Member States, has monitored the migration to and implementation of from its inception, facilitating open dialogue between all parties (banks, corporates, consumers, public authorities, governments and SMEs). This approach has contributed to the successful completion of for credit transfers and direct debits in the euro area, constituting one of the largest financial integration projects in the world.”1 Going forward, the evolution of the and Schemes, among other things, will also be addressed by the Euro Retail Payments Board, chaired by the ECB.
The composition and mandate of the Euro Retail Payments Board ( )
In 2010, the European Commission together with the ECB established the Council, which brought together representatives from both the demand and supply sides, including the , with a view to promoting the realisation of an integrated euro retail payments market by ensuring high level stakeholder involvement. On 19 December 2013 the ECB announced the launch of the , which replaces the Council. The will “help foster the development of an integrated, innovative and competitive market for retail payments in euro in the ”.
The ECB points out that the ’s composition and mandate are “broader than those of its predecessor”. Seven representatives from the demand side (e.g. consumers, retailers and corporations) and seven from the supply side (banks and payment and e-money institutions) sit on the Board (compared with five each on the Council). They are joined by five representatives from the euro area national central banks and one representative from the non-euro area national central banks (all on a rotating basis). The is chaired by the ECB. The European Commission is invited to join as an observer. The ’s work will consist mainly of identifying strategic issues and work priorities (including business practices, requirements and standards) and ensuring they are addressed. (The is a member of the .) Following its first meeting on 16 May 2014, the published a statement setting out its work plan for the period 2014 through 2016.
At that meeting the agreed on the creation of two working groups which were asked to deliver their results for the second meeting of the to take place in December 2014. It also held a discussion on an alternative direct debit scheme in that did not include the unconditional right to refunds.
These three items are described in further detail below.
working group on and post-migration issues
On 1 August 2014, the ECB pointed out that with migration to and complete, “every month more than 2 billion payments will now flow across the euro area in new standardised formats.” Market participants across the euro area confirmed that the transition went very smoothly. EuroTreasurer, for example, commented: “There have been no public complaints about problems with transactions, and banks and corporate treasurers that EuroTreasurer has been in contact with did not report any difficulties due to the deadline.”2
To ensure that any implementation and functioning issues which might prevent the payment schemes from delivering their full potential going forward, are addressed, the set up a working group on and post-migration issues. The working group is planning to address the following topics, among others: varying national implementations, additional optional services (AOS) and their effect on interoperability, various barriers (related to business rules) to the cross-border use of , accessibility (ability to use a single payment account in the euro area), reachability of payment service providers ( ) for and , the continued use of conversion services, the use and validation of creditor identifier for and implementation of R-transactions. (Possible exceptions to the normal execution of a direct debit collection include refunds, returns, rejects, refusals and reversals, commonly referenced as ‘R-transactions’ and described in detail in the Rulebooks. On 10 July 2014, the published the document ‘Guidance on Reason Codes for R-transactions’.)
The working group will gather and analyse information from relevant market participants and assess the issues in relation to their effect on the functioning of . It is not expected to deliver suggestions for and business requirements or for technical implementation specifications, as this is a task for the / scheme owner, i.e. the . The working group is co-chaired by the and the European Association of Corporate Treasurers (EACT) / BusinessEurope.
working group on pan-European electronic mandate solutions
The members took note of the diversity of both the existing and planned electronic mandate solutions for SDDs and the lack of pan-European solutions in the making. They agreed that there was a short-term need to clarify the rules of the Schemes governing electronic mandates in a way that was more open to all types of electronic mandate solutions. With regard to a longer-term perspective, the agreed that truly pan-European electronic mandate solutions needed to be found and implemented. This made it necessary to analyse the existing barriers to cross-border integration. This work will be conducted by an working group specifically created for this purpose.
The working group is expected to put forward high level recommendations to address legal, technical or any other issues which prevent pan-European e-mandate solutions from emerging and being used. The working group will gather and analyse information from market participants ( and payment service users, on both the creditor and the debtor side) for their considerations of using or not using electronic mandates both in the national and cross-border context for . Following this fact-finding exercise, it will assess the issues in relation to their effect on the functioning of . The working group is not expected to deliver suggestions for business requirements or for technical implementation specifications as this is a task for the / scheme owner, i.e. the . The working group is co-chaired by the and E-commerce Europe.
Alternative scheme that does not include the unconditional right to refunds
The members discussed the principles outlined in a note prepared by a multi-stakeholder task force that had analysed the feasibility of an alternative direct debit scheme in that did not include the unconditional right to refunds. Although the representative of consumers stressed the importance of the unconditional right to refunds for payers, the members of the agreed that – if permitted under law – such a scheme could be launched provided that it followed, inter alia, the seven principles outlined by the task force. These principles are: i) ensuring full transparency to consumers; ii) limiting the list of goods or services that the scheme could be used for; iii) making collections subject to a maximum amount; iv) the consumer refund rights for unauthorised transactions remaining fully intact to ensure full consumer protection; v) making it easy for to determine which creditors are entitled to use the scheme; vi) no requirements for to check or monitor individual underlying transactions; and vii) having the potential to reach the legally defined adherence threshold for a pan-European direct debit scheme. members agreed: i) to recommend to the European Commission and the legislators that they consider a legal solution to clarify the refund rights in the context of a review of the Payment Services Directive; and ii) that such an alternative direct debit scheme in could only be launched once the review of the Payment Services Directive was complete and thus provided a clear legal background to allow for this.
The next meeting of the is planned to take place in December 2014.
Jean-Yves Jacquelin is the Chair of the Payment Schemes Working Group. Francis De Roeck is the Chair of the Standards Support Group.
EPC Website: EPC publishes ‘Guidance for SEPA Direct Debit Business to Business (SDD B2B) Scheme Mandate Confirmations’ (This document is addressed to payment service providers participating in and creditors collecting payments under the B2B Scheme.)
EPC Blog (15 April 2014): PSD2 – The New Article 67, (‘Refunds for Payment Transactions Initiated By or Through a Payee’), Proposed by the European Commission Risks Undermining Consumer’s Unconditional Refund Right for Direct Debits Included with the SEPA Direct Debit Core Scheme
EPC Website: SEPA at a Glance – the Infographic (This infographic provides an overview of the actors involved in the process at the European level and their interaction.)
Related articles in this issue:
SCT and SDD Rulebooks: Modifications to the Rulebooks to Take Effect in November 2015 and November 2016, Respectively. Based on feedback received during the 2014 public consultation on changes to the rulebooks, the EPC resolved to update the release schedule applicable to the next rulebooks generations
European Payments Council 2.0: with SEPA Migration (Euro Area) Complete, the EPC Adapts its Structure to Further Enhance Governance and Stakeholder Involvement. The new EPC governance model will become operational in the first quarter of 2015
The New European Commission: a Closer Look at President Juncker’s Vision for the EU Internal Market and Economic and Monetary Union. The European Commission will continue to play a principal role in the SEPA process going forward
Next Step to Create the Digital Single Market: EU Lawmakers Adopt the New Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market. European Union authorities seek to enhance trust in electronic transactions
What Consumers and Online Retailers Want or Getting the Balance Right: Security and Simplicity in an Increasingly Mobile World. A commentary on the complexity involved in securing electronic and mobile commerce payments
Related articles in previous issue:
Evolution and Oversight of the SCT and SDD Schemes: the Role of the European Commission and of the European Central Bank. The SEPA payment schemes in the legal and regulatory context ( Newsletter, Issue 23, July 2014)
Join the Debate on the Further Evolution of the SCT and SDD Schemes: Less Flexibility, More Harmonisation? An overview of the options, variations, exceptions and exemptions possible in SEPA today ( Newsletter, Issue 22, April 2014)
Next Generation SCT and SDD Rulebooks: Three-Month Public Consultation Starts on 19 May 2014. All stakeholders are invited to provide feedback on possible modifications to the SCT and SDD Rulebooks ( Newsletter, Issue 22, April 2014)
1 European Central Bank press release (1 August 2014): ‘Single Euro Payments Area ( ) Reaches Major Milestone for Retail Payments’ http://www.ecb.europa.eu/press/pr/date/2014/html/pr140801.en.html.
2 Euro Treasurer: ‘Treasurers Use Momentum to Centralise’ http://www.eurotreasurer.com/features/road-to-sepa/treasurers-use-sepa-momentum-to-centralise/.
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