The view: set an end date for phasing out legacy euro payment instruments
"Confront the difficult while it is still easy; accomplish the great task by a series of small acts" advised Lao-tzu some 2500 or so years ago and encouraged his contemporaries to let "things come and go"1. Ancient Chinese wisdom, naturally, could always be taken into consideration when contemplating complex conundrums. One such conondrum is setting an end date for the phasing out of legacy euro payment systems to be replaced by instruments, in particular in the 16 euro countries. At this point, the majority of concerned parties shares the view that one or several end dates need to be defined if momentum is to be maintained and creating clarity for all stakeholders is to be ensured.
The recognises that making public the fact that there will be an end date is actually more important now than selecting the actual end date.
The European Central Bank (ECB) observes that "corporations and public administrations (...) still take a cautious approach"2 towards implementation. To break that circle of "wait and see", states the ECB, a migration end date is needed from which point onwards only the European payment instruments will exist.
The European Parliament supports this position and recently called on the European Commission to set a "clear, appropriate and binding end date, which date should not be later than 31 December 2012, for migrating to products"3.
The European Commission believes that an end date would send a strong signal to all stakeholders that migration is an irreversible process and would provide certainty so that stakeholders could adopt a strategy and plan necessary investments in the next few years4.
The devil is in the detail: issues to be clarified
"Less and less do you need to force things, until finally you arrive at non-action. When nothing is done, nothing is left undone", observes Lao-tzu. However, assuming that customers and their banks have not yet reached the advanced stages of enlightenment, it is generally agreed that a process is required to specify how an end date is to be agreed. To determine the appropriate course of action, the European Commission has initiated a fact-finding exercise to allow for a "solid analysis on the impact for the stakeholders concerned of setting such an end date or not setting one or several end dates". A related discussion paper was recently introduced at the EU Forum of National Coordination Committees. The has issued specific recommendations as regards the subject-matter of an end date for migration.
Timing of an end date: one end date or several end dates?
In the view of the Plenary there should be one migration end date for both Credit Transfer and Direct Debit at European level. An individual community of the 16 euro countries may set an earlier end date for either or both schemes if it so wishes. In setting a date, consideration should be given to the normal investment cycle of 3 to 5 years. Whenever a current non-euro zone country joins the euro zone, it should be free to determine its own migration end date, but by the latest, 5 years after the adoption of the euro.
The end date: what does it actually mean?
The defines end date as the latest date after which services for sending and receiving euro payments based on current domestic or SDD equivalent/corresponding schemes are no longer available to customers for sending and receiving euro credit transfer payments within . This also applies to "on-us" euro payments (where the originator bank and beneficiary bank is the same bank).
Scope of migration: is there a need to ensure continued availability of legacy niche products?
The believes that potentially some particular legacy instruments may remain available after the migration end date, provided that in any community the total traffic volume supported by these residual instruments is less than 10% of the community total. In a next step, the will identify any such niche instruments in place on community level that may not be susceptible to migrate to a scheme.
How to set an end date: self-regulation or regulation?
The European Commission points out that the agreement on an end date could be left to the market but recognises that self regulation may prove difficult given the existence of diverging views among customers on the urgency of implementation. It moreover raises the issue of the enforceability of one or several end-date(s). Regulation in form of legislation either at national or at European level could therefore be necessary.
The is of the opinion that mandating the end date requires regulation due to competition reasons expressed by competition authorities in some countries. Such a regulation should oblige payment service users to use scheme-based payment services rather than euro payment services based on the current national schemes, thereby not leaving migration responsibility only to the banking sector. In absence of such a regulation, it would be essential that the and the national banking communities agree on a common procedure on setting an end date. It would also be necessary that the act of setting any migration end date is approved by the European and the appropriate national competition authorities. Communication of the end date will be paramount; if the date is set by regulation, the lead in this area falls on the European Commission and European Central Bank.
Fact-finding exercise of European Commission on end date(s): the timeline
The Commission has proposed the following timeline as regards its ongoing exercise to determine whether one or several migration end dates should be set:
- First, there should be an informal consultation of payment service providers and end users to collect some basic information and data on the impact of an end-date or its absence. The Commission has already started the process of gathering this information.
- Second, the results of this informal consultation would be collated in a DG Internal Market and Services' document which would be used to launch debate through a formal public consultation. It is envisaged that the consultative paper would be issued in the second quarter of this year.
- Third, after analysis of the results and provided favourable, the Commission would seek to build political consensus and endorsement on the modalities and the timing of setting an end-date. This stage would take place during the third quarter of the year.
- Fourth, if necessary, a legislative proposal could then be prepared in order to render the agreed end-date(s) legally binding. This final stage would take place around the end of the year.
"If you realise that all things change, there is nothing you will try to hold on to", remarks Lao-tzu. The welcomes the fact that the stakeholders are now entering a dialogue on migration in their National Committees. This dialogue is obviously unavoidable. Adjustments by all parties concerned are required if one domestic euro payments market is indeed to be achieved.
1 Tao Te Ching. A new English version by Stephen Mitchell. HarperCollins Publisher Inc. New York. 1988.
2 The Quest for the Holy Grail? - European Financial Integration: Achievements and Hurdles. Speech by Getrude Tumpel-Gugerell, Member of the Executive Board of the ECB. Workshop on "Securing the Future Critical Financial ICT-Infrastructure (CFI)" organized by Parsifal. Frankfurt, 16 March 2009.
3 European Parliament. Resolution on the implementation of the Single Euro Payments Area (). 12 March 2009
4 European Commission Internal Market and Services DG. Second Meeting of the EU Forum of National Committees. Discussion Paper on possible End-Date(s) for Migration. 23 March 2009.
Gerard Hartsink is the Chair of the .
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