European Union Regulation sets deadline for migration to Credit Transfer and Direct Debit
On 30 March 2012, the 'Regulation () 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 European Union () (see 'related link' below). This legislative act is commonly referenced as the Single Euro Payments Area () Regulation. 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 Credit Transfer () and Direct Debit (SDD).
Percentage of banks in offering Credit Transfer services
The European Payments Council () launched the Scheme in January 2008. As of July 2012, 4,573 payment service providers () in 32 countries offer services. Today, the delivering services represent more than 95 percent of payment volumes in Europe. The Participant Register, which lists scheme participants, is publicly available at http://epc.cbnet.info/content/adherence_database.
Percentage of transactions compared to the total volume of credit transfers generated by customers
According to the indicators compiled by the European Central Bank (ECB), the share of transactions as a percentage of the total volume of credit transfers generated by bank customers, amounts to 28.2 percent as of May 2012. The ECB Indicators can be viewed at http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html.
A figure of 100 percent would indicate that only Single European Payments Area () services are used and have fully replaced non- instruments. The Indicators are based on aggregated data provided by clearing and settlement infrastructures in the euro area processing transactions. This data avoids double counting by excluding, for example, transactions sent via links between infrastructures. The data also excludes 'on-us' transactions (SCTs between accounts at the same bank) as well as transactions cleared between banks bilaterally or via correspondent banking. The ECB Indicators also show market uptake by country.
Percentage of banks in offering SDD services
The launched the Scheme and the SDD Business to Business (B2B) Scheme on 2 November 2009. As of July 2012, 3,926 , representing more than 80 percent of payments volume, have signed up to the Scheme. Of those, 3,447 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.
Since 1 November 2010, all in the euro area reachable for national direct debits must be reachable for cross-border direct debits; e.g. the Scheme, as mandated by Regulation (EC) No 924/2009 (Article 8).
Percentage of SDD transactions compared to the total volume generated by customers
According to the SDD indicators compiled by the ECB, as of May 2012 the share of transactions, as a percentage of the total volume of direct debits generated by bank customers, amounts to 0.5 percent. The ECB SDD Indicators can be viewed at http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html.
The figures are based on aggregated data from several clearing and settlement infrastructures / systems located in the euro area. As such, SDD transactions which are cleared bilaterally or processed within the same institution are excluded from this indicator.
for cards: tracking EMV roll-out
As reported in previous issues of the Newsletter, good progress is being made in the realisation of a for cards. The 's Cards Framework (SCF) outlines high level principles and rules that when implemented by the card industry, will deliver a consistent user experience to both cardholders and merchants when making or accepting euro payments or cash withdrawals. The SCF recognises the EMV standard for -wide acceptance of card payments. EMV is an industry standard to implement chip and personal identification number (PIN) security for card transactions to combat fraud. An important indicator on the progress in this area is the number of cards, points of sales (POS) and automated teller machines (ATMs) in the market that use chip and PIN for the authorisation of a card payment. More specifically, the percentage of EMV-compliant cards, POS and ATMs in is monitored.
Migration to chip and PIN in is essentially complete. At the end of 2011 (estimates), 87.2 percent of cards, 94.2 percent of POS and 96.7 percent of ATMs in were EMV-compliant. The progress of EMV roll-out, based on these findings and other relevant data on the subject, are reflected by the ECB Card Indicators at http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html.
On 25 July 2012, the ECB published its first report on card fraud (see 'related links' below). The report, which was compiled by the Eurosystem, i.e. the ECB and the seventeen national central banks of the euro area, analyses fraud developments related to card payments in from 2007 to 2010. The ECB press release of 25 July 2012 (see 'related links' below) highlights the main findings of the report: "Card fraud has been on a declining trend since 2007, and that technological advances have been key to increasing the security of transactions (...) The total level of fraud amounted to €1.26 billion in 2010, a 12.1% decrease since 2009. Fraud in relative terms, i.e. the share of fraud in the overall value of all transactions, fell from 0.045% in 2007 to 0.040% in 2010, after peaking at 0.050% in 2009. Between 2007 and 2010 the overall amount of fraud increased by 0.7%, but the value of transactions grew by 5.1% to around €3 trillion per year. Overall, 1.2% of cards issued within were used fraudulently (12 cards out of every thousand). The report looks at fraud across different kinds of card (debit and credit) and card usage. In 2010 half of the value of fraud resulted from card-not-present (CNP) payments - i.e. payments via mail, telephone or the internet - while a third resulted from point-of-sale (POS) terminals and a sixth from automated teller machines (ATMs)."
The ECB press release further states: "Improvements in the security of cards and the underlying payment infrastructure are the main reason that fraud at ATMs and POS terminals was lower in 2010 than in 2007. The most important enhancement was the wider adoption of EMV, a chip-based standard. This offers stronger security features than conventional magnetic stripes both for the physical card (since, unlike the stripes, the chip cannot easily be duplicated) and for the technological infrastructure behind the transaction. The adoption of these safety features is recommended by the ECB and forms part of the migration. (...) In concluding, the report says that, while on a declining trend, card fraud is an international organized activity that demands cooperative prevention measures and international standards, in particular with regard to the security of internet transactions, as well as that of cross-border transactions. It outlines the importance of more cooperation among the card payment schemes in order to identify points of compromise quickly. "
In July 2012, gtnews published the article entitled 'Cash Management, Operational Risk and Working Capital: Most Important Areas for Treasury' (see 'related links' below) which reports on the findings of the gtnews 2012 'The Expanding Role of Treasurers Survey'. The survey identified, among other things, which areas corporate treasurers think are of greatest importance to their organisation in 2012. According to the survey, " solutions and treasury outsourcing are viewed as the least important areas this year."
The representatives of corporates, public administrations and government agencies, who reported on their successfully completed migration projects in this newsletter, unanimously recommended that organisations which still have to achieve compliance by 1 February 2014, as mandated with the Regulation, become active immediately. For further information, refer to these sources offered by the (see 'related links' below):
- Video ' for Billers': this film highlights aspects relevant for businesses and public entities transitioning to . Both the extended and short versions with subtitles in the languages are available.
- Blog Series (Parts 1 - V): 'Get Ready for by February 2014. Early Movers on the Customer Side Share Lessons Learnt'.
- Newsletter: case studies highlighting successful migration projects of bank customers.
On the subject occasionally debated in the payments media, which is whether the euro debt crisis would have an impact on the process, the gtnews survey finds: "Interestingly, even today treasurers do not believe that eurozone breakup contingency planning is of great importance to their organisation, with only 17% believing that it is 'very important' and 16% thinking it 'important'. It is, nonetheless, more than the 9% who thought it was an important or very important issue 12 months ago."
The following information reflects findings previously reported in the Newsletter (no updated data was published since this information was first reported in the Newsletter):
- The gtnews Payments Survey 2011, asked its corporate readers to rank instruments among regularly used methods to make and receive payments. Just over a third of respondents said they regularly made payments via , while 14 percent used SDD. The results are almost identical for corporates receiving payments via instruments. Almost 20 percent of corporate respondents already invested in compliance and more than 40 percent said that investment plans were already in the making, whether that is within a three-month timeline or just 'at some point'. The 2011 Payments Survey results also show that some corporates are still hesitant to invest in services. When asked if their organisation planned to make that investment in the future, 20 percent of those corporates operating in Western Europe stated they had no plans. These findings however, reflect a step forward in terms of uptake compared to the Payments Survey 2010, when almost 50 percent of corporates said that they were not planning a investment.
- The ECB and the European Commission have also conducted surveys in the European corporate sector about practices in making and receiving payments, invoicing and migration to . The report titled 'European Business Test Panel (EBTP) Survey 2011. How do you pay? How would you like to pay?' (see 'related links' below), summarises the results of, and draws conclusions from, the fourth survey of this kind, which was conducted in early 2011. The report indicates that " migration in the corporate sector is proceeding well". 22 percent of respondents indicated that they use for more than half of their company's outgoing payments. Over 24 percent of participants responded that national credit transfers are not used any more. In comparison with this, direct debit payments are less in use. 70 percent of all respondents indicated they do not, or only infrequently, pay via national direct debits. 42 percent of responding companies however, have already made payments using SDD and 37 percent have already received payments via this new instrument.
Public sector readiness
The information included here reflects findings previously reported in the Newsletter (no updated data was published since this information was first reported in the Newsletter).
In November 2011, the European Commission Services published the fifth survey on public administrations' preparedness and migration to (see 'related links' below). This survey finds that public administrations' (PA) migration to has accelerated since the last survey, with the overall migration rate increasing from 14.5 percent in October 2010 to 24.9 percent in June 2011. The report also states:
- PA in many European Union (EU) Member States in the euro area seem to be taking over the lead for migration at national level, namely in Finland (90.9 percent), Belgium (77.4 percent), Slovenia (65 percent), Austria (60 percent), Germany (37.6 percent), France (21.1 percent) and Spain (16.5 percent) and are expected to make further progress or fully complete migration to in the coming months.
- Nevertheless, a number of euro area EU Member States are still lagging behind and their migration to is progressing at an extremely slow pace, with the rate often not exceeding one percent of total credit transfers volume, namely in Greece (0.01 percent), Estonia (0.10 percent), Ireland (0.2 percent), Slovakia (0.5 percent), Cyprus (0.8 percent), Netherlands (1.2 percent) and Italy (2.3 percent).
- PA migration to SDD stays close to 0 percent, with only a few using SDD (in particular in Belgium and Germany). It is however, important to stress that direct debits are generally not used by PA, or to a very limited extent.
For information supporting market particpants to achieve compliance by the deadline set in the Regulation, please refer to the sources below.
Etienne Goosse is the Secretary General.
Related articles in this issue:
Austrian Federal Ministry of Finance: 'We Were Determined to Lead SEPA Migration by Example'. This early mover in the public sector boasts an 87 percent SEPA Credit transfer migration rate in May 2012
Help is Here: Payments Regulatory Expert Group (PREG) Publishes Guidance Document on SEPA Regulation. Readers are also invited to share questions on the SEPA Regulation to be addressed in 'FAQ' being developed by the PREG
Related articles in previous issues:
The Time to Act is Now: Impact of the SEPA Regulation on Payment Service Users. The SEPA Regulation includes provisions relevant for both the demand and supply sides of the payments market ( Newsletter, Issue14, January 2012)
Early Movers Confirm: ISO 20022 Message Standards Generate Tangible Benefits. A guide for payment service users on the impact of provisions in the SEPA Regulation regarding the use of the ISO 20022 message standards ( Newsletter, Issue 14, January 2012)
Step Up to the Challenge: SWIFT White Paper Sets out Steps to Build a SEPA Migration Plan. A strategy to achieve SEPA compliance by 1 February 2014 ( Newsletter, Issue 14, January 2012)
SEPA Direct Debit for Billers: Exception Handling. EPC Newsletter series provides support for billers preparing migration to the SDD Schemes ( Newsletter, Issue 14, January 2012)
SEPA Direct Debit for Billers: the SDD Business To Business Scheme Timelines. EPC Newsletter series provides support for billers preparing migration to the SDD Schemes ( Newsletter, Issue 13, January 2012)
SEPA Direct Debit for Billers: the SDD Core Scheme Timelines. EPC Newsletter series provides support for billers preparing migration to the SDD Schemes ( Newsletter, Issue 12, October 2011)
SEPA Direct Debit for Billers: The SDD Mandate. EPC Newsletter series provides support for billers preparing migration to the SDD Schemes ( Newsletter, Issue 10, April 2011)
Facing Up to the IT Challenge. Choosing the right IT strategy for SEPA compliance ( Newsletter, Issue 8, October 2010)
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