Article 8 of Regulation (EC) No 924/2009 establishes mandatory reachability for cross-border direct debits for all banks in the euro area
1 November 2010 marks an important target date for the roll-out of services by banks. Over the past twelve months, since the launch of the Schemes in November 2009, banks have been gradually rolling out these services. From 1 November 2010, however, all banks in the euro area have to become reachable for cross-border direct debits as mandated by EU Regulation (EC) No 924/2009 (see link below). Consequently, all banks in the euro area will become reachable for Core as this is the only direct debit scheme designed to provide -wide reach.
Article 8 (1) of the Regulation states that a 'payment service provider of a payer reachable for a national direct debit transaction denominated in euro on the payment account of that payer shall be reachable, in accordance with the direct debit scheme, for direct debit transactions denominated in euro initiated by a payee through a payment service provider located in any Member State.' Article 8 (2) further establishes that paragraph 1 shall only apply to direct debit transactions which are available to consumers under the direct debit scheme; Article 8 (3) mandates that payment service providers shall comply with the requirements of paragraphs 1 and 2 by 1 November 2010. Article 8 (4) specifies that 'payment service providers located in a Member State which does not have the euro as its currency shall comply with the requirements of paragraphs 1 and 2 for direct debit transactions denominated in euro by 1 November 2014. If, however, the euro is introduced as the currency of any such Member State before 1 November 2013, the payment service provider located in that Member State shall comply with the requirements of paragraphs 1 and 2 within 1 year of the date on which the Member State concerned joined the euro area.'
In April 2010, the Commission services clarified that the deadline to apply the reachability obligation to branches (1 November 2010 or 1 November 2014) of credit institutions is determined by the location of the branch (inside or outside the euro area), regardless of the location of the parent company. The Commission services argue that in this respect the equal treatment between third country branches and EU branches is ensured by the clear wording of Article 1 (1) (a) of the Payment Services Directive, which does not differentiate between branches of credit institutions having their head office inside or outside the EU. According to the interpretation of the Commission services, the deadline for the application of the reachability obligation to branches of credit institutions under Article 8 (1) is determined only by the location of the branch, regardless of the parent company's location. Furthermore, no distinction should be made between the branches with a head office located outside the EU and those with head offices inside the EU.
Consequently, all branches of banks located in the euro area are now reachable for cross-border transactions. Throughout , a total of 3384 payment service providers offer Core services. Of those, 3364 payment service providers offer B2B services.
For consumers, paying bills becomes significantly easier
In practice, this announcement means that any consumer who holds an account in the euro area, which provides the option to make euro direct debit payments at a national level, can now make cross-border payments by as well. This of course requires that companies selling goods and services make available the option to pay via to consumers who purchase these goods and services.. Since banks representing almost 100 per cent of payments volumes are also offering Credit Transfer services, consumers can now rely on one bank account to make domestic and cross-border euro payments across the euro area while enjoying highly competitive services provided by banks.
payments can be made to or from any accounts that are held with a bank located in . It is not necessary that the payer and / or the recipient of the payment (the biller) have an account in a country that has already adopted the euro as its national currency. For example, a consumer who holds an account in euro with a bank in Belgium can make a payment to a retailer who holds an account in zloty with a bank in Poland. In such a case, the payment takes place as follows: (1) the euro amount of the payment is debited to the Belgian consumer's account; (2) the exchange of funds between the Belgian bank and the Polish bank takes place in euro; (3) the amount of the payment is converted from euro to zloty when crediting the Polish retailer's account.
makes paying bills significantly easier for mobile European citizens including workers, students, holiday home owners, tourists or retirees living abroad. At the same time, benefits consumers who wish to purchase goods or services from retailers located in countries other than their home country.
For businesses and public administrations, offers significant efficiency gains
Full reach for Core throughout the euro area might also serve as an opportunity for businesses and public administrations to assess their current payment architecture and consider taking full advantage of this new payment and collection method. The Schemes offer businesses significant efficiency gains through the automation of payment processing and the ability of businesses to optimise the cash management process. The latter can be achieved by businesses consolidating accounts currently maintained in different European countries to handle local payments through one single account and subsequently centralising liquidity.
As a key milestone in the creation of an integrated euro payments market, the Schemes facilitate the expansion of businesses across national borders, by introducing a standardised payment infrastructure. The implementation of innovative end-to-end solutions based on global ISO standards also leads to decreased IT costs, streamlined back office functions and simplified reconciliation.
Businesses operating within and across countries stand to gain a great deal from the introduction of the Schemes, and an integrated euro payments market across generally. To realise these benefits, companies must become active - as a first step, the would recommend the formation of a dedicated team. A subsequent impact assessment would reveal the true value that might have on the business. To engage further in supporting and to stay up to date on developments, companies are welcome to liaise with Stakeholder Forums on a national level.
The Schemes defined by are instruction manuals for payment processing. In this context it is important to note that the development of payment services and products based on the Schemes, including all product-related features such as pricing, is outside the scope of the . The real deal for businesses is the competitive and custom-tailored services offered by individual banks. Companies are therefore encouraged to shop for the bank products that best fit their needs. It is expected that the roll-out of will increase competition among payment service providers to the benefit of bank customers.
The bottom line is that while payment tools, such as the Schemes, offer businesses many tangible benefits, as a whole offers companies the opportunity to reassess the way they currently operate and ultimately to add value to their business.
Now that all banks in the euro area are reachable for , the believes it is critical that the EU lawmakers quickly deliver the market certainty needed to underpin full implementation by setting a clear deadline for completing migration to the Schemes developed by the . This will enable all bank customers to realise the extensive benefits offered by in general and in particular.
Javier Santamaría is the Chair of the Payment Schemes Working Group. Kevin Brown is the Chair of the Legal Support Group.
publication "Shortcut to SEPA Direct Debit"
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:
Have it Your Way! The EPC e-Mandate option: a secure way to authorise a SEPA Direct Debit payment ( Newsletter, Issue 6, April 2010)
Better Business with SEPA Direct Debit. Corporate customers confirm benefits of SEPA implementation ( Newsletter, Issue 4, October 2009)
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