The Regulation should set one end date for migration to all Union-wide schemes
The European Payments Council ( ) advocates setting one end date at European Union ( ) level for migration to harmonised credit transfer and direct debit schemes to spare bank customers, such as businesses and public administrations, the duplication of implementation efforts and required resources which would result from two separate end dates. The therefore welcomes that the Economic and Monetary Affairs Committee (ECON) of the European Parliament also proposes to set one end date. The urges the legislator to adopt the Single Euro Payments ( ) Regulation as soon as possible in order to finally provide planning security for all market participants.
The Regulation should refrain from making mandatory additional features for the checking of direct debit payments
The once again draws attention to the fact that lawmakers intend to abolish the direct debit model, which is preferred by the vast majority of European citizens who make direct debit payments today. The proposal for a Regulation currently foresees a host of compulsory direct debit mandate1 checks, which must be offered by the payer's payment service provider ( ).
The recently conducted a survey to identify the current mandate checking obligations in national direct debit schemes. Its survey findings (see 'related links' below) confirm existing European Central Bank (ECB) data highlighting that almost 75 percent of consumers making direct debit payments today do not request such checks. The average number of direct debit payments carried out per consumer each year is 68 in countries with a direct debit model not supporting compulsory mandate checks. In countries with more complex direct debit scheme models, the average is reduced to around 23. The low acceptance of direct debits in countries, which today rely on complex mandate checking features, implies that introducing such mandatory features into the Core Direct Debit ( ) Scheme will not affect demand for direct debit in these countries. The findings are also in line with bank customer experiences whereby millions of direct debits are securely and correctly collected in Europe every day - without legally enforced mandate checks.
Making those features mandatory may prove detrimental to the actual needs of the majority of direct debit users who prefer this payment method because of its convenience. These payers and payees might regard the direct debit model, modified by the legislator, as too cumbersome. As a result, the market will either retain or revert to other - less efficient - payment instruments in the long run. To avoid this scenario, the right balance between efficiency and perceived security concerns must be found.
If it becomes obligatory for to offer compulsory mandate checks, almost 4,000 and their clearing and settlement mechanisms that have already invested in payment architecture upgrades to participate in the Scheme, will have to re-invest to make further adaptations. These costs would have to be borne by all European consumers, including the majority of direct debit payers, who have never asked for obligatory mandate checks to be performed by their . Consequently, direct debits will become more costly - directly or indirectly - for all consumers. This will counteract the objective of the European Parliament, the European Commission and the ECB, that should trigger a downward spiral in the pricing of payment services.
Additionally, the clarifies that the compulsory mandate checks, which the legislator is currently contemplating were introduced as optional features into the Scheme in response to earlier requests of the European Commission and the ECB. This approach allows to offer these options in response to market demand. As such, the invites lawmakers to respect user preferences as reflected in the Scheme and to refrain from agreeing compulsory direct debit mandate checks.
Should these mandatory checking obligations be included in the Regulation, direct debit schemes such as the Business to Business Direct Debit Scheme, exclusively focused on payers which are businesses authorised by the Payment Service Directive (PSD), to waive their refund right as defined in the PSD, should be excluded from such obligations. It should therefore be left to these professional contracting parties to agree on these checks.
Interchange fees for direct debit transactions: at a minimum, a sunset clause regarding the phasing out of transaction-based multilateral interchange fees should be included in the Regulation
It is the 's opinion that Articles and Recitals related to interchange fees for direct debits should be removed from the forthcoming Regulation. Should the legislator however, endorse the ban on transaction-based multilateral interchange fees as set out in Article 6 of the European Commission proposal for the Regulation introduced in December 2010, a sunset clause as detailed in the draft ECON report of March 2011 should be included. This would allow to adapt to the new market environment over a longer period of time, in particular in light of the substantial investments required for the migration.
The concept of a centralised database to identify a Business Identifier Code corresponding to an International Bank Account Number requires further analysis
The ECON suggests that participating in a direct debit scheme should establish and regularly update a centralised database designed to allow third parties to identify the unique Business Identifier Code (BIC) corresponding to a given International Bank Account Number (IBAN). The considers that a cost benefit analysis should be carried out prior to taking this initiative forward. It is the 's view that it would be inappropriate to charge the payments industry with related costs.
Should such a database be established, it would have to be maintained by a European third party able to ensure the necessary security of the stored data, for example the ECB. could only make the required data available but would however, not be in a position to develop and manage such a database.
Should the legislator endorse this concept, then the scope of such a database should be limited to the minimum set of information required to allow the deduction of the BIC from the IBAN, without requiring a complete list of matching sets of BIC and IBAN.
The process of amending the 'technical requirements' through delegated acts must be specified
Should the legislator decide to confer the power upon the European Commission to amend the technical requirements applicable to euro credit transfer and direct debit schemes set out in the annex to the forthcoming Regulation through delegated acts, it is necessary that any suggestions for changes be evaluated based on an accepted cost-benefit analysis methodology. Extensive market consultation should enable broad consensus amongst stakeholders to be reached. Both the demand and supply sides must be able to rely on sufficient lead times to implement changes to the technical requirements. For details on the subject, refer to the article 'Brave New World: the European Commission Becomes the Scheme Manager' (see 'related articles in this issue' below).
Recitals addressing governance should be removed from the Regulation
A clear distinction needs to be made between the governance of and the governance of the . The is a private initiative of the payment industry: the therefore, does not see how such a private arrangement can be referred to in a legislative document.
The has developed the Credit Transfer ( ) and Schemes in close dialogue with customer representatives, as, since the late 1990s, the European authorities have requested that industry deliver the harmonised payment schemes required to realise . The evolution of the schemes is subject to an open and inclusive change management process set out prominently on the Website. For details on the subject, refer to the article ' Scheme Rulebooks: Next Edition Available in November 2011!' (see 'related articles in this issue' below). Changes to the schemes reflect feedback received from the entire stakeholder community during annual public consultations and are discussed in the Customer Stakeholders Forum of the , where all associations of user groups are invited.
The Schemes developed by the serve as master agreements, which are only binding to delivering and Scheme based services. The schemes are based on global technical standards developed by the International Organization for Standards (ISO). The ISO process also ensures proper stakeholder representation. Last but not least, the 's governance structure and the principles governing scheme development have been under close scrutiny of the authorities since the inception of the . The ECB acts as an observer in all working and support groups and in the Plenary.
The publishes in full all feedback received from any public consultation on the evolution of the Schemes. Some suggestions for changes to the schemes repeatedly brought forth by specific interest groups may fail to find broad support on both the demand and supply sides of the entire European payment market. As a result, the cannot incorporate such requests into the payment schemes. It is the 's opinion that it is inappropriate to describe a process designed to identify majority views as 'ignoring user requests'.
Recitals included in the draft Regulation, which indicate that there would be a need to review the 's governance, misrepresent the and do not belong in a legislative text, and therefore should be removed.
Gerard Hartsink is the Chair of the .
Related articles in this issue:
Related articles in previous issues:
Direct Debit: Killing it Softly. Reflections on the likely demise of one of the most popular payment instruments in Europe ( Newsletter, Issue 11, July 2011)
The SEPA Regulation - A Progress Report. First reactions by European Parliament and Council of the European Union introduce important improvements to European Commission´s proposal for a SEPA Regulation ( Newsletter, Issue 10, April 2011)
1The mandate is the authorisation underlying a direct debit payment.
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