European Union Regulation sets deadline for migration to the Single Euro Payments Area
As previously reported, on 30 March 2012, the European Union (EU) ‘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’, was published in the Official Journal of the EU. This legislative act is commonly referenced as the Single Euro Payments Area () Regulation (see ‘related links’ below). The Regulation defines 1 February 2014 as the deadline in the euro area for compliance with its core provisions. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by Credit Transfer () and Direct Debit (SDD). The Regulation affects not only payment service providers (), but also payment service users (). All organisations making payments in the euro area must achieve compliance with the core provisions of the Regulation by 1 February 2014.
Number of banks in offering services
The European Payments Council () launched the Scheme in January 2008. As of October 2013, 4,564 offer services. The Participant Register, which lists the scheme participants, is publicly available at http://epc.cbnet.info/content/adherence_database. The absolute number of adhering to the Scheme has decreased slightly compared to previous reports due to merger and acquisition (M&A) activity.
Number of banks in offering SDD services
The launched the Scheme and the SDD Business to Business Direct Debit (B2B) Scheme on 2 November 2009. As of October 2013, 3,921 have signed up to the Scheme. As of October 2013, 3,466 also adhere to the Scheme. The separate Participant Registers for the and Schemes list the participants taking part in these schemes. These registers are publicly available at http://epc.cbnet.info/content/adherence_database. All branches of banks in the euro area reachable for direct debits at national level must be reachable for cross-border direct debits, e.g. the Scheme, since 1 November 2010 as mandated by Article 8 of Regulation (EC) No 924/2009 on cross-border payments in the Community. The absolute number of adhering to the SDD Schemes has decreased slightly compared to previous reports due to M&A activity.
ECB quantitative indicators measure the share of and SDD transactions
The quantitative indicators published on the European Central Bank (ECB) Website (see ‘related links’ below) measure the share of and SDD transactions as a percentage of the total volume of credit transfers and direct debits generated by bank customers in the euro area. According to the quantitative indicators, the share of transactions amounts to 56.3 percent as of September 2013, while the share of SDD transactions has reached 6.8 percent.
ECB qualitative indicators assess progress by stakeholder groups at country level
In October 2013, the ECB published updated qualitative indicators to assess preparedness across the transaction chain in each country (see ‘related links’ below). The qualitative indicators take into account the specificities of the respective country with regard to migration progress by ‘big billers’, public administrations, small and medium-sized enterprises (SMEs) and . Non-euro area EU countries participate in this exercise on a voluntary basis only. The qualitative indicators are updated quarterly by the national central banks. The assessment is based on a ‘traffic light system’. The qualitative indicators published in October 2013 measure the level of preparedness by stakeholder groups at country level as of the third quarter of 2013. These most recent qualitative indicators provide the following outlook with regard to readiness of euro area stakeholders by 1 February 2014:
- will be ready. In the majority of euro area countries, have already completed preparations.
- ‘Big billers’ in 16 out of 17 euro area countries will be ready. It currently appears that part of the corporate sector in Germany might not complete migration to SDD.
- Public administrations in 16 out of 17 euro area countries will be ready. It currently appears that some public administrations in Germany might not complete migration to SDD.
- SMEs in France, Germany and Spain are at risk of missing the 1 February 2014 deadline with regard to both and SDD. SMEs in Estonia might not complete migration to ; SMEs in Ireland and Luxembourg might not complete migration to SDD.
Figure 1: To facilitate a quick overview of the results for the euro area, the created this spreadsheet based on the qualitative indicators for the third quarter 2013 published by the ECB. Click on table to enlarge image.
Further efforts are required to ensure readiness, in particular, of all SMEs in the euro area by 1 February 2014
The most recent qualitative indicators demonstrate that further and continued efforts are required to ensure readiness, in particular, of euro area SMEs by the 1 February 2014 deadline.
Also in October 2013, the Eurosystem1 / ECB published its second migration report (see ‘related links’ and ‘related articles in this issue’ below). With regard to migration by SMEs, the report states: “SMEs’ migration to schemes is, in theory, somewhat less demanding of a challenge in terms of in-house preparations and resources owing to the lower number of internal applications generally used. However, medium-sized companies that are not micro-enterprises and make use of bundled payments face very similar requirements to the big billers and the public administrations. SMEs are often referred to as the backbone of the European economy. Their relative importance is in contrast with their relatively low awareness of the migration challenges ahead. (...) Despite the fact that there is still much to be done with regard to the level of awareness and preparedness of SMEs, in the majority of countries, some progress with the preparations seems to have been made. However, on an absolute level, SMEs still remain the least prepared of the groups, as assessed by the Eurosystem.”
With its latest conclusions reached in May 2013 (see ‘related links’ below), the Council of the 2 called on all Member States “to significantly intensify communication measures primarily at national level to eliminate existing public awareness gaps.” These communication measures, the Council of the states, should especially target SMEs. The ECB’s second migration report echoes this request: “The relatively low level of awareness [of SMEs] further underlines the importance of the communication campaigns which intensified over the second and third quarters of 2013 and which will continue to be stepped up during the rest of the year in most countries. These increased efforts with regard to communication, both at the national and the European level, are a prerequisite for proper preparations by those that do not have payment-related issues at the forefront of their day-to-day decisions.” The concurs – and has frequently pointed out – that supporting SMEs to achieve compliance requires coordinated efforts by national public authorities, and trade associations representing businesses and banks.
Last but not least, the ECB’s second migration report finds that in “many cases, SMEs seem to lack adequate support from software providers. Solutions from large software providers seem to be too expensive and/or ill-suited to SMEs and many of the smaller software providers do not seem to have -compliant solutions. In this respect, budgetary and user-friendly solutions that bridge the gap between SMEs’ enterprise resource planning systems and requirements are of utmost importance. In some countries, this gap is covered by applications made available by the .”
Avoid the risks of non-compliance. The authorities have warned time and again: “After 1 February 2014 will not be allowed to process payment orders that do not comply with the legal requirements as laid down in applicable law.”
The Regulation effectively mandates migration to in the euro area by 1 February 2014. The EU legislator, (i.e. the European Parliament and the Council of the EU representing EU Member States), reached agreement on this deadline in December 2011. At that time, Michel Barnier, EU Commissioner for Internal Market and Services, commented: “The reasonable transition periods applied will allow customers and banks to get used to the adjustments in domestic payment transactions, provide legal certainty, avoid the cost of operating dual payments systems and bring forward the substantial future benefits of .” (See the European Commission press release of 20 December 2011 included in the ‘related links’ below.) Since then, the EU authorities driving the initiative have warned time and again that all market participants must ensure compliance with the Regulation or else risk that payments could be disrupted:
- In April 2013, Wiebe Ruttenberg of the ECB wrote in the Newsletter: “There is no Plan B: migration to and SDD is required by law, not only for , but also for big billers, SMEs, public administrations and consumers.” He pointed out: “ will be obliged to refuse further processing of payments that are not delivered to them in the right technical format after the 1 February 2014 deadline applicable in the euro area. Ignoring the risks of non-compliance, including the hope of a slow response on the part of the responsible authorities, would be a mistake.” (See ‘related articles in previous issues’ below.)
- In May 2013, the Council of the , representing Member States, underlined with its latest conclusions on that the provisions of the Regulation “have to be fully respected by all market participants” in the euro area. It also stressed that all payment orders not submitted in the format requested by the Regulation after 1 February 2014 “may not be processed by all in euro area member states, which otherwise would be sanctioned.”
- In September 2013, the Council, which is chaired by the ECB and the European Commission, addressed the progress of migration to payment schemes in the euro area. Established in 2010, the Council brings together representatives of both the demand and supply sides of the payments market (for more information, refer to the Council page of the ECB included in the ‘related links’ below). According to the statement adopted by Council members present at its 23 September 2013 meeting (see ‘related links’ below), it “was highlighted that the migration requirements set by law have to be fully respected without exception. While play a central and crucial role in migration to , end-users such as ‘big billers’, public administrations and in particular SMEs, have their own responsibility to ensure that they are able to send and receive payments in euro also from 1 February 2014 onwards.”
- In October 2013, the ECB reiterated: “Payment orders that do not comply with the legal requirements as laid down in the Migration End-date Regulation will not be allowed to be processed by after 1 February 2014.” Benoît Cœuré, member of the Executive Board of the ECB stressed: “Everybody has to be ready on 1 February 2014 or risk disruptions in their individual handling of payment orders.” He pointed out that this is also the position of the Council of the and the European Commission. Mr Cœuré added: “We have been emphasising the fact that both payments providers and users are responsible for being sufficiently prepared. And our message to them is still the same: don’t leave it to the last minute.” (See press release of the ECB of 24 October 2013 included in the ‘related links’ below.)
The fully supports the recommendation of both the ECB and the Council of the that should aim to complete migration at the earliest stage possible, taking into consideration that the availability of external resources offered by banks and other service providers – including testing facilities – will be stretched to the limit towards the end of the year.
The ECB’s second migration report states: “It seems that conversion services will be used on a large scale after the migration deadline, again, in particular by SMEs.”3 It further points out: “It is also important to realise that relying on conversion services requires thorough preparations and time on the part of those planning to make use of them. Therefore, in the event that conversion services are used for the purposes of migration, careful resource planning is still required.” This means: considering using such services must also take the necessary actions. Any organisation which anticipates being unable to align its operations and processes with the requirements established with the Regulation by 1 February 2014 and, therefore, wishes to make use of conversion services, would have to immediately coordinate the necessary steps with their banking and other partners.
To avoid the risks associated with failure to achieve compliance by 1 February 2014 in the euro area as mandated by EU law, late moving organisations must catch up now. At this point in time, the recommendation is to focus on achieving basic compliance, then seek to realise further efficiencies to be generated with the implementation of the harmonised payment schemes and technical standards. Banks and other service providers are standing ready to support during the transition. Relevant information is also made available with ‘The Migration Tool Kit’ (see ‘related links’ below). In addition, the offers best practice identified by early movers on the demand side who successfully completed migration to and SDD (see ‘related articles in previous issues’ below).
Etienne Goosse is the Secretary General.
Related articles in this issue:
SEPA Fact Check: The SEPA Benefits Projected by EU Governments, the European Parliament, the European Commission and the European Central Bank (1999 - 2013). SEPA is an EU integration initiative driven by EU governments and the EU institutions. Note: the European Payments Council is not part of the EU institutional framework
SEPA 2014 - the European Central Bank Reiterates: “Everybody Has to be Ready on 1 February 2014 or Risk Disruptions in Their Individual Handling of Payment Orders.” European Central Bank publishes second SEPA migration report and warns against risks of ‘Big Bang’ migration scenario
SEPA 2014: Clearing and Settlement Mechanisms are Ready to Turn up the Volume. Clearing and settlement mechanisms are prepared for the ramp-up towards the -only environment in the euro area by 1 February 2014
Related articles in previous issues:
SEPA Migration - Don’t Count on a Plan B. European Central Bank publishes first SEPA Migration Report and warns against risks of late migration ( Newsletter, Issue 18, April 2013)
If You Have Not Migrated to Yet - Get Ready and Get Inspired: Pioneers on the Demand Side Share Best Practice The deadline will not move from 1 February 2014 so act today to ensure your compliance ( Newsletter, Issue 18, April 2013)
1 The Eurosystem comprises the ECB and the national central banks of the EU Member States whose currency is the euro.
2 The Council of the is the institution where the Member States’ government representatives sit, i.e. the ministers of each Member State with responsibility for a given policy area: http://www.consilium.europa.eu/council.
3 The first ECB migration report published in March 2013 states: “In a post-migration environment (...) could still offer conversion services, provided that these services are, operationally, fully independent from all subsequent payment services offered by that .” The second ECB migration report states: “An indication of separation: should a) be operationally independent from the payment service offered by the ; b) be carried out before the point in time of receipt by the of a payment order; c) be information that should preferably pass the before being initiated as a payment; and d) be separately priced.”
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