According to the Single Euro Payments Area () Indicators compiled by the European Central Bank (ECB) (see ‘related links' below), as of July 2012 the share of Direct Debit (SDD) Core transactions, as a percentage of the total volume of direct debits generated by bank customers, amounts to 1.0 percent in the euro area. By comparison, the share of Credit Transfer () transactions amounts to 29.6 percent in July 2012. Article 6 of the Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro (the Regulation), defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by and SDD.
In other words, 99 percent of direct debit volumes currently processed in the euro area have to be migrated to SDD in less than 17 months. We have noticed that some market observers seem to be alarmed by this fact: these same observers however, appear unalarmed by the fact that 70 percent of credit transfer volumes also need to be moved to . We also witness a tendency in the debate, which implies that implementation of SDD is more complex than adapting processes and operations to . Both notions contradict the experiences of project managers, representing payment service users such as corporates, public administrations and government agencies, all of which have reported on their lessons learnt in the Newsletter (see case studies under ‘related links' below). Their experience demonstrates that implementation of and SDD is equally feasible and manageable. Early movers on the demand side who successfully concluded migration to the Schemes, identified the following main challenges which are the same with regard to both the and SDD Schemes:
- Conversion of customer account data to the International Bank Account Number (IBAN) and the Business Identifier Code (BIC).
- Adaptation to the usage of the ISO 20022 message standards.
practitioners among bank customers clarify that implementation of one Scheme is not more complex than the other, but each requires specific steps. Some of the specific requirements to be observed with regard to SDD implementation relate to, for example, mandate management, the time cycle and exception handling. The quarterly online Newsletter features a series of articles supporting billers migrating to SDD, which detail related SDD requirements (see ‘related links' below).
Article 7 of the Regulation (see ‘related links' below), states that any "valid payee authorisation to collect recurring direct debits in a legacy scheme prior to 1 February 2014 shall continue to remain valid after that date and shall be considered as representing the consent to the payer's [payment service provider] to execute the recurring direct debits collected by that payee in compliance with this Regulation in the absence of national law or customer agreements continuing the validity of direct debit mandates". This provision therefore, ensures that existing mandates under the Scheme continue to remain legally valid, thereby greatly contributing to facilitating the migration by bank customers to the SDD Scheme.
Early movers on the customer side who reported on their migration experience in the Newsletter, concur that migration to pays off. To give just two examples: The insurance company UNIQA Group Austria, which services approximately 7.5 million customers in 21 regional markets, already completed migration to and SDD by 2011. As Thomas Weissmann, Project Manager with the group, clarified: " is an excellent and necessary idea." He added: "Firstly, migrating to the harmonised payment schemes allows for more efficient account reconciliation. Secondly, being able to collect direct debits throughout Europe using the harmonised SDD Schemes is also a principal advantage for us."
The ceramics manufacturing company Villeroy & Boch, headquartered in Germany and represented in 125 countries around the world, is a true pioneer, having embraced the vision early. In 2007, the group decided to implement as the first step in the process. This project was concluded in 2008. The and the Schemes were implemented in the second stage. This project was launched in 2010 and was completed in 2011. Villeroy & Boch processes approximately 175,000 credit transfers with a volume of 310 million euros and 25,000 direct debits with a volume of 75 million euros annually. Dr Markus Warncke, Group Financial Controller at Villeroy & Boch, comments: "Our figures demonstrate that the benefits resulting from migration to the Schemes and standards exceeded the investment in the first year alone. In line with our expectations, we were able to streamline internal processes, lower IT costs, reduce costs based on bank charges and consolidate the number of bank accounts and cash management systems. In addition, we could further centralise our cash management. The fact that there is now one harmonised SDD Scheme, which allows collecting payments throughout Europe, is also a major advantage. We realised significant efficiency gains from the implementation of the ISO 20022 message standards. The reality is that the benefits of an integrated euro payments market outweigh the short-term efforts to get there. The earlier you start the better."
Last but not least, the wishes to stress again: Article 16 of the Regulation permits individual European Union (EU) Member States to extend the deadline for compliance with some of its provisions to 1 February 2016. It is however, strongly recommended that payment service users analyse the impact of the Regulation on their day-to-day operations now, even if EU Member States opt to make use of the derogations permissible under Article 16. As the experience of early movers on the demand side handling major payment volumes indicates, migration to Schemes and technical standards is beneficial, but requires careful planning. The relevant actions and resources should be identified as soon as possible. Banks and other service providers are making available the tools required to facilitate the transition.
Migration to and SDD by 1 February 2014 in the euro area is manageable and feasible. The time to act however, is now.
- Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009
- EPC Newsletter (follow this link to log your questions on the SEPA Regulation!): ‘Help is Here: Payments Regulatory Expert Group (PREG) Publishes Guidance Document on Regulation'
- EPC Blog Series (Parts I-V): Get Ready for SEPA by February 2014. Early Movers on the Customer Side Share Lessons Learnt
- EPC Video ‘SEPA for Billers. The Time to Act is Now': This Film is Available with Subtitles in the EU Languages
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