European Union Regulation sets deadline for migration to the Single Euro Payments Area
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 (). 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 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).
Get ready for by 1.2.2014. Act now!
The Regulation affects not only payment service providers (), but also payment service users () such as corporates, small and medium sized enterprises, public administrations and government agencies. It is strongly recommended that analyse the impact of the Regulation on their operational models now. The experience of early movers on the demand side handling major payment volumes indicates that migration to Schemes and technical standards is beneficial, but requires careful planning. The relevant actions and resources should be identified immediately.
The European Payments Council () makes available comprehensive information to help market participants manage the transition. These sources are included with the 'related links' at the end of this article (refer to the ' Migration Tool Kit').
How to create awareness - best practice
To ensure readiness of all stakeholder groups by 1 February 2014, it is crucial to raise awareness on the need to adapt systems and operations in line with the Regulation. Appropriate communication measures targeting, in particular, such as corporates, small and medium-sized enterprises (SMEs), as well as public administrations and government agencies, must be implemented at national level and tailored to the specific information needs of stakeholders operating in these markets. In addition, it is very important to make this information available in local languages to ensure it reaches its audiences. Effective communication however, is subject to accurately identifying the information needs of target audiences. The approach adopted in Belgium to coordinate migration at national level is one example of best practice established in this area.
In September 2012, the Belgian Steering Committee on the Future Means of Payment (the Steering Committee) published the fourth progress report towards in Belgium. Chaired by the National Bank of Belgium (NBB), the Steering Committee brings together all stakeholders impacted by the process: public administrations and government agencies, businesses, consumer associations and banks. Belgium continues to be among the best in class as regards migration to at country level: in July 2012, the share of SCTs in Belgium reached more than 58 percent of total credit transfers; the share of SDDs exceeded 15 percent.
The Belgian migration model is based on the following principles: (1) engagement of and leadership by public authorities; (2) coordination among all impacted stakeholders cooperating in the Steering Committee; (3) timely action based on a step-by-step national implementation plan initially rolled out in 2008; (4) multi-targeted communication creating awareness and educating the general public on the new payment schemes and technical standards to ensure a positive reception.
Following successful migration to the Schemes and standards by the 'big billers', or creditors and debtors handling major payment volumes, the focus is now on supporting SMEs to make the transition. To accurately identify the information needs of this particular stakeholder group, at the end of 2011, the NBB together with Isabel, the main provider of e-banking services based in Belgium, carried out a survey among 231 SMEs to find out just how prepared they were to start using and SDD. 42 percent of the companies surveyed stated that they were ready to introduce , and 30 percent of the respondents had concluded the planning stage with regard to migration. Only 14 percent of the Belgian SMEs surveyed at the end of 2011 were aware of SDD. The companies that were aware of SDD at that time were also aware that both an Scheme and an SDD Business to Business (B2B) Scheme are available. Not surprisingly, at the end of 2011 only four percent of Belgian SMEs had started the process of migrating to and three percent had entered the planning stage. These figures were slightly higher with regard to the Scheme: at the time, five percent of the companies surveyed had started migration to and four percent had entered the planning stage.
The survey confirmed the determination of the Steering Committee to focus its efforts to support the transition of SMEs. Taking into consideration that this requirement was identified more than two years prior to 1 February 2014, which is the point in time when market participants in the euro area must comply with the core provisions of the Regulation, the expectation is that migration to and SDD by smaller Belgian businesses will be completed in due time. To learn more about the progress towards in Belgium, readers are invited to refer to the article 'Belgium: A Success Story' (see 'related articles in this issue' below).
As previously reported, 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."
In this edition of the Newsletter, Javier Santamaría, Chairman of the , comments in the article 'Time is of the Essence: Get Ready for . Act Now!' (see 'related articles in this issue' below): "The Regulation affects not only , but also such as corporates, small and medium sized enterprises, public administrations and government agencies. (...) Early movers on the demand side who report on their migration experience in the Newsletter confirm that implementation of the harmonised payment schemes and technical standards is beneficial, but requires careful planning. On 29 February 2012, the launched a five part blog series which highlights the lessons learnt by handling major payment volumes who have already successfully concluded migration to and SDD. In February 2012, these pioneers - who started migration planning as early as 2007 or 2008 - unanimously recommended that organisations, which have yet to adapt systems and operations to the schemes and technical standards, become active immediately. At the time of publication of the October 2012 edition of the Newsletter, this is no longer a recommendation but an imperative: any organisation which has not yet initiated the migration process must act now; there is no time to procrastinate further."
Public sector readiness
The information included here reflects findings previously reported in the Newsletter; no updated data was published by the European Commission by the publication date of this edition (29 October 2012):
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 Members States in the euro area seem to be taking over the lead for the 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), the 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.
Percentage of banks in offering services
The launched the Scheme in January 2008. As of October 2012, 4,560 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.
The absolute number of adhering to the Scheme has decreased slightly compared to previous reports due to merger and acquisition (M&A) activity.
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 29.8 percent as of August 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 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 Direct Debit (B2B) Scheme on 2 November 2009. As of October 2012, 3,899 , representing more than 80 percent of payments volume have signed up to the Scheme. As of October 2012, 3,420 also adhere to 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 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.
Percentage of SDD transactions compared to the total volume generated by customers
According to the SDD indicators compiled by the ECB, as of August 2012 the share of transactions, as a percentage of the total volume of direct debits generated by bank customers, amounts to 1.9 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 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 and cross-border usage
As reported in previous issues of the Newsletter, good progress is being made in the realisation of 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 sale (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.
According to the ECB Indicators, EMV transactions in the euro area (as a percentage of total transactions at POS terminals) reached 82.1 percent in June 2012. The ECB Website states: "The Eurosystem has developed a card indicator for migration to EMV at transaction level. An 'EMV transaction' is understood to be a card payment transaction in which the following criteria are satisfied: an EMV-compliant card is used at an EMV-compliant terminal and EMV technology is used in the processing of the transaction. A necessary prerequisite for the EMV migration at transaction level is the EMV migration of cards and terminals. The indicator is calculated as the number of EMV transactions at POS terminals divided by the total number of transactions at POS terminals (irrespective of the country of issuance of the card). The indicator is affected slightly by transactions conducted using cards issued outside the area. If the card is issued in a country outside that have already been migrated to EMV then the figures are positively affected. On the other hand if the card is issued in a country outside where the EMV is not implemented then the indicator is negatively affected."
The ECB Indicators also identify cardholders' actual use of their cards when travelling abroad. The ECB Website states: "That use depends on three things: first, the technical capabilities of the card and the terminal; second, the merchant's acceptance of the card in question; and third, the extent to which people do indeed have a uniform 'customer experience' across the area. This indicator is calculated as the number of POS transactions conducted using cards issued outside the country divided by the total number of POS transactions. The indicator is affected slightly (in a positive aspect) by transactions conducted using cards issued outside the area. Data are collected from the same card-acquiring processors that report on EMV transactions as a percentage of transactions at POS terminals. They report biannually, but the results take the form of monthly figures. It was expected that relatively low levels (1-2%) would be seen at the outset in January 2008, and that marginal growth would be observed in the years that followed. A move to a significantly higher level would indicate that had been successful in changing the card industry, the card acceptance practices of merchants and/or the payment behaviour of cardholders. Cross-border transactions accounted for around 3.5% of POS transactions in the euro area at the beginning of 2008. The indicator shows higher values during the period from July to September each year. This might be a result of summer holidays, as more people travel during the summer months. In June 2012, there were around 6% cross-border POS transactions."
Etienne Goosse is the Secretary General.
Related articles in this issue:
Time is of the Essence: Get Ready for SEPA. Act Now! Market participants in the euro area must achieve compliance with the core provisions of the European Union Regulation (EU) 260/2012 by 1 February 2014
TUI Travel PLC: "SEPA Direct Debit Scheme Is Another Step Forward Towards Treasury Efficiency". The TUI Travel Accommodation & Destinations (TUI Travel A&D) sector´s Finance Service Centre completed migration to SEPA Direct Debit Business to Business in February 2012
Related articles in previous issues:
The following Newsletter articles are also available with the ' Migration Tool Kit' (see 'related links' above):
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 ( Newsletter, Issue 15, July 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 ( Newsletter, Issue 15, July 2012)
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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