Limited number of change requests demonstrates that Schemes are fit for purpose
The Credit Transfer () and Direct Debit () Schemes evolve based on an open change management process set out in the Scheme Management Internal Rules (see 'related links' below), which provide all stakeholders with the opportunity to participate; i.e. to introduce suggestions for changes to the schemes. The European Payments Council () is required to evaluate the feasibility of such suggestions based on a catalogue of fixed criteria also set out in the Scheme Management Internal Rules. Any proposed changes to the schemes are subject to a three-month public consultation. Proposed changes to the schemes that find broad acceptance in the entire user community are taken forward. Change requests that lack such broad support are not - regardless whether such a change is proposed by a payment service provider () or a customer representative. As a result of this annual change cycle, the and Schemes incorporate numerous features introduced by end users.
The limited number of requests for additional elements to be introduced into the updated versions of the rulebooks again demonstrates the maturity of the and Schemes and highlights that they are fit for purpose. The publishes the new versions of the rulebooks and accompanying implementation guidelines (see 'related links' below) in November 2011:
- The Rulebook version 6.0.
- The Core Rulebook version 6.0.
- The Business to Business (B2B) Rulebook version 4.0.
The rulebook versions published in November 2011 take effect in November 2012
To ensure planning security for all market participants, publication of new rulebook versions follows a predictable release management cycle (see ' / Rulebook Release Management and Scheme Development'). In accordance with industry best practice, and their suppliers have a one-year lead time to address rulebook updates prior to such updates taking effect. The releases updated versions of the rulebooks annually in November of each year. The updated versions of the rulebooks will then take effect in the third week of November of the following year, to allow for alignment with SWIFT message releases.
The Rulebook version 6.0, the Core Rulebook version 6.0 and the B2B Rulebook version 4.0 will take effect on 17 November 2012.
New elements introduced into the Rulebook
The Rulebook version 6.0 includes a new optional element which allows the payer's bank1 to include additional information on the reason for a recall in fraud cases. This new element contributes to improving risk management, fraud prevention and prevention of criminal activities, given that the payee's bank has to take different actions subject to the type of fraud.
New elements introduced into the Rulebooks
Based on the standard time cycle of the Core Scheme, the payer's2 bank must receive the request for a first direct debit collection or for a one-off direct debit collection at least five business days prior to the due date. The Core Rulebook version 6.0 includes the possibility to use a shorter time cycle for the presentation of both first and recurrent direct debit payments by allowing the biller's bank to send the payments to the payer's bank at least one inter-bank business3 day prior to the due date4. This option caters for the needs of certain businesses which require a shorter time cycle for direct debit payments than the standard cycle. The option allows for time critical business transactions, e.g. security related transactions and insurance collections for example. It should be noted that all must continue to support the standard time cycle of the Core Scheme, irrespective of any agreements to use the new optional time cycle. For more information, refer to the article ' for Billers: the Core Scheme Timelines' (see 'related articles in this issue' below).
Both the Core Rulebook version 6.0 and B2B Rulebook version 4.0 include an extended timeline for the reversal procedure. A reversal takes place when a payee concludes that a collection should not have been processed, i.e. that the payer was debited in error, and the payee has to reimburse the payer with the full amount of the erroneous collection. The extended timeline will give payees more time to initiate a reversal in case errors are detected.
The Implementation Guidelines have been updated to make the creditor identifier case and space insensitive. Billers collecting payments under the Schemes are obliged to obtain a creditor identifier which relates to a legal entity, or an association that is not a legal entity, or a person assuming the role of the biller. The creditor identifier, in connection with the mandate reference5, allows the payer and the payer's bank to verify each payment and to process or reject the direct debit according to the payer's instructions. This update simplifies the processing of refunds and complaints. For more information, refer also to the article ' Direct Debit for Billers: the Creditor Identifier (Go Get It!)' (see 'related articles in previous issues' below).
The B2B Rulebook version 4.0 includes a new reject and return code. This new code specifies that the collection is rejected or returned because the payer's account is a consumer account. Services and products based on the B2B Scheme are only available to businesses; the payer must not be a private individual (consumer).
Some suggestions for changes to the Scheme Rulebooks are not taken forward. Does this mean that the 'ignores' user requests? No, it does not.
As previously reported, the process of scheme development can be compared to designing a car model: the basic model must meet key market requirements. At the same time, the model must be flexible enough to include options to add extras on demand. This concept provides maximum choice to customers while avoiding that a majority of customers has to buy features they do not need. The payment schemes, developed by the in close dialogue with the entire payment user community, are based on this concept. In other words, the schemes include mandatory elements to be observed by all as well as optional elements allowing to offer specific features in response to market demand.
Each annual scheme change management cycle demonstrates that the requirements of bank customers, with regard to the payment schemes, differ widely across and within the various customer segments. Payment service users are not only divided into payers and payees (whose payment needs are different). Bank customers encompass a wide range of interest groups including consumers, public administrations, corporates and small and medium-sized enterprises (SMEs). Corporates and SMEs may be active domestically, regionally or globally. In a multi-country environment such as , even within a specific customer segment, there exist very different schools of thought as to which specific features should be included in a payment scheme or not. As a matter of fact, expectations with regard to payments among and within these various customer segments often are contrary or even mutually exclusive. As a result, it is virtually impossible to translate the expectations of each and every single interest group into mandatory elements of the or Schemes.
The requirements of payment service users differ widely within and across various customer segments in the 32 countries
Not surprisingly, the receives very different suggestions for changes to the and Rulebooks from specific interest groups representing a particular customer segment and / or customers of a particular community.
To illustrate the point: subject to local practice, consumers living in one country prefer a direct debit model which relies on assumptions not readily shared by consumers living in another country. In consequence, consumers in a few countries expect that their bank validate whether the consumer authorised a direct debit collection prior to debiting the consumer's account. Data provided by the European Central Bank (ECB) as well as every public consultation and recent market research carried out by the however, shows that almost 75 percent of consumers making direct debit payments in the European Union today do not request such compulsory mandate checks. For details on the subject, refer to the Blog 'Talking about Direct Debit: The Invites European Lawmakers to Consider Results of Survey on Direct Debit Models Existing in Today' (see 'related links' below). In line with the expectations of the majority of payment service users, the Core Scheme therefore enables to offer mandate checks and other mandate management features on an optional basis in response to customer demand.
Corporate practices with regard to the timelines governing the Core Scheme are another example of highly distinct expectations within the same customer segment: corporates in one country are used to an extended timeline for the execution of a direct debit collection; corporates in another country however demand that a direct debit can be initiated and collected on a same-day basis. The Core Scheme must strike a balance between these mutually exclusive expectations articulated around the same feature. The scheme therefore mandates that the biller (and, in consequence, the biller's bank) must respect the following timelines: the payer's bank must receive the request for a first direct debit collection, or for a one-off direct debit collection, at least five business days prior to the due date. For subsequent direct debit collections, the payer's bank must receive such a request at least two business days prior to the due date. The updated Core Scheme Rulebook version 6.0, which will take effect in November 2012, however includes the option to use a shorter time cycle for the presentation of both first and recurrent direct debit payments as outlined above.
The scheme change management process established by the identifies the requirements of the broad majority of the entire payment community
The scheme change management process established by the is designed to identify the majority views within the entire payment market (demand and supply) as to which features should be included in the schemes either as mandatory or optional elements - and which features should not be included at all.
It is well known that specific interest groups introduce the same set of suggestions for changes to the schemes each year, albeit these change requests consistently fail to find broad support within the entire European payment market. This is evidenced within the consultation reports (see 'related links' below) which detail in full all feedback received during the annual public consultation on the evolution of the Schemes. As a result, the , which is bound to respect the majority views, cannot incorporate such requests into the scheme rulebooks.
The understands that in the eyes of these specific interest groups it may be frustrating that the broad majority of the payment community continuously rejects their proposals. In the view of the it is inappropriate however to describe a process designed to identify majority views as 'ignoring user requests' - a claim frequently, if erroneously, made by some interest groups. For details on the subject, refer also to the article ' Governance: Setting the Record Straight' (see 'related articles in this issue' below).
The has established an open and inclusive scheme change management process. It is hoped that the European Commission, which will assume the responsibility of scheme management in the future, will also adhere to best practice in this regard.
It is a standard exercise to bridge different payment practices and customer expectations throughout the painstaking process of forging agreement on the countless technical and procedural details that make up a European payment scheme. European integration - in this case, developing harmonised payment schemes - is only possible if all parties engaged in the process are willing to aim for a solution that caters to the majority of payment service users. The scheme change management process represents best political and industry practice established to achieve this objective.
It is hoped that the European Commission, which in future will take on the responsibility of scheme management based on the new and extensive powers granted to the Commission with the forthcoming Regulation, will adhere to the principles governing scheme development established by the . For details on this subject, refer to the article 'Brave New World: the European Commission Becomes the Scheme Manager' (see 'related articles in this issue' below).
Javier Santamaría is the Chair of the Payment Schemes Working Group.
Related articles in this issue:
Related articles in previous issues:
The Good, the Bad, the Ugly and a Knight in Shining Armour? European Commission requests unprecedented powers to determine payment functionalities ( Newsletter, Issue 9, January 2011)
What is Your View? EPC invites stakeholders to participate in consultations on the SEPA Scheme Rulebooks and the SEPA Cards Standardisation Volume - Book of Requirements ( Newsletter, Issue 11, July 2011)
SEPA Scheme Change Management - Public consultation starts in May 2011 ( Newsletter, Issue 10, April 2011)
SEPA Scheme Change Management 2011 - Call to Stakeholders. Suggestions for changes to SCT and SDD must reach the EPC by end February 2011 ( Newsletter, Issue 9, January 2011)
SEPA Schemes: Next Generation. EPC publishes new versions of the SCT and SDD Rulebooks on 1 November 2010 ( Newsletter, Issue 8, October 2010)
SEPA Scheme Rulebooks: next Release. Public consultation ends in August 2010 ( Newsletter, Issue 7, July 2010)
SEPA Scheme Change Management 2010: Public Consultation. All stakeholders are invited to participate in the evolution of the SEPA Schemes ( Newsletter, Issue 6, April 2010)
SEPA Scheme Change Management Cycle 2010. Suggestions for changes must reach the EPC by end February 2010 ( Newsletter, Issue 5, January 2010)
New SEPA Scheme Rulebooks out now. EPC publishes new versions of the SCT and SDD Rulebooks on 1 November 2009 ( Newsletter, Issue 4, October 2009)
Rock the Vote. Public consultation on SEPA scheme development is going on now ( Newsletter, Issue 3, July 2009)
The Preview. Rulebook Release Management 2009 ( Newsletter, Issue 2, April 2011)
SEPA Schemes: EPC approves Release Schedule. Predictable release cycle ensures planning security ( Newsletter, Issue 1, January 2009)
1The technical terms used in the Credit Transfer Rulebook refer to the payer as 'originator' and to the payee as 'beneficiary'. The term bank is used in a non-discriminatory fashion and does not exclude payment service providers which are not banks.
2The technical terms used in the Direct Debit Scheme Rulebooks refer to the payer as 'debtor' and to the biller as 'creditor'.
3The 'Trans-European Automated Real-time Gross Settlement Express Transfer System' (TARGET) calendar is used to identify inter-bank business days. This calendar is published by the European Central Bank. Settlement of funds, resulting form direct debit payments, always takes place on an inter-bank business day.
4The Direct Debit Schemes allow payers and billers to anticipate the precise date (due date), when their account will be debited or credited, respectively. The due date is assigned by the biller and should be agreed with the payer in the contract underlying a direct debit collection (a newsletter subscription, for example).
5The mandate is the authorisation underlying a direct debit collection. Each mandate must include a 'unique mandate reference'.
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