This blog describes next steps agreed by the Euro Retail Payments Board (), chaired by the European Central Bank (ECB), at the second meeting held on 1 December 2014 with regard to the following topics: Credit Transfer () and Direct Debit (SDD) post-migration issues; pan-European electronic mandate solutions and instant payments in euro. At the 1 December 2014 meeting, the members also agreed on the update of the work plan, including setting up a new working group focusing on person-to-person mobile payments as well as a new working group on mobile and card-based contactless proximity payments.
Sources cited in this blog and documentation related to the topics mentioned above published by the ECB following the second meeting of the are included in the ‘related links’ below.
Recap: the mandate and composition of the
The European Payments Council (), (which is not part of the European Union (EU) institutional framework), has frequently pointed out that the Single Euro Payments Area () is an EU integration initiative pursued by the EU institutions. These are the European Commission, the European Parliament, the Council of the EU representing EU governments and the ECB. The European Commission and the ECB, respectively, have established several dedicated bodies to facilitate the dialogue on the process with market participants representing various stakeholder groups. (To obtain an overview of the institutional landscape, i.e. the actors involved in the process at the European level and their interaction, visit the infographic ‘ at a Glance’.)
On 19 December 2013 the ECB announced the launch of the , which helps foster “the development of an integrated, innovative and competitive market for retail payments in euro in the EU”. The ’s work consists mainly of identifying strategic issues and work priorities (including business practices, requirements and standards) and ensuring they are addressed. Seven representatives from the demand side (e.g. consumers, retailers and corporations) and seven from the supply side (banks and payment and e-money institutions) sit on the Board. They are joined by five representatives from the euro area national central banks and one representative from the non-euro area EU national central banks (all on a rotating basis). The is chaired by the ECB. The European Commission is invited to join as an observer. The is a member of the .
The interaction between the and other stakeholders including the : developing harmonised (non-competitive) solutions in a multi-stakeholder environment
When the governments and institutions first launched the process in the late 1990s, they pursued the further integration of the market for electronic euro payments with a clear division of labour in mind: while the authorities focused on creating the legal and regulatory conditions facilitating the transition of millions of payment service users and thousands of providers to harmonised payment schemes, they requested the banking industry to contribute the expertise and resources required to develop payment schemes for electronic euro credit transfers and direct debits. This approach reflected practices established in the pre- era at domestic level where national banking communities were primarily responsible for managing local payment schemes.
In response to these expectations, the European banking sector created the in 2002. In close dialogue with the stakeholder community, the developed, among other things, the and SDD Schemes. The carries out the scheme management function subject to legal and regulatory conditions defined by the EU authorities. (For detailed information, refer to the Newsletter article entitled ‘Evolution and Oversight of the and SDD Schemes: the Role of the European Commission and of the European Central Bank’.)
Fast forward to the present, the main change with regard to the development of harmonised solutions outside the competitive environment is this: today, the authorities expect that related efforts are the result of multi-stakeholder endeavours involving, essentially, representatives of all impacted parties on the demand, supply and regulatory sides. The dialogue on the process taking place within a dedicated multi-stakeholder body such as the , chaired by the ECB, facilitates this approach.
The looks forward to the continued dialogue with all stakeholders on the most appropriate next steps to ensure an efficient and secure landscape that responds to market needs.
working group on and SDD post-migration issues
To ensure that any implementation and functioning issues which might prevent the payment schemes from delivering their full potential going forward are addressed, the set up a working group on post-migration issues relating to the and SDD Schemes in May 2014. It was co-chaired by the and the European Association of Corporate Treasurers (EACT) / BusinessEurope.
As outlined in the statement published following the 1 December 2014 meeting, on the basis of a report of the working group, the members agreed on the following main recommendations:
- Harmonise further the XML message formats in the customer-to-bank and bank-to-customer domain of and SDD transactions in order to improve the efficiency benefits for payment service users.
- Increase awareness among payers and payees that payers have the freedom to use non-domestic payment accounts, irrespective of the location of the payee and as stipulated by European law (Article 9 of Regulation (EU) No 260/2012).
- Increase the availability of up-to-date information on valid bank identifiers used in international bank account numbers (IBANs) and corresponding business identifier codes (BICs); this will facilitate the use of the IBAN as the unique identifier also for cross-border transactions as of 1 February 2016, as required by European law (Article 9 of Regulation (EU) No 260/2012).
- Investigate further alternative ways to meet the demand for extended remittance information to be used by payment service users in the and SDD Schemes.
The also endorsed a set of more technical recommendations related to migration and the functioning of the and SDD Schemes and outlined ways forward on these. The full set of recommendations made by the on and SDD post-migration issues, (including the addressees of the recommendations), is detailed in Annex 1 included in the statement published following its 1 December 2014 meeting.
working group on pan-European electronic mandate solutions
In May 2014, the established the working group on pan-European electronic mandate solutions, which was co-chaired by the and E-commerce Europe. The working group had been mandated to put forward high level recommendations to address legal, technical or any other issues which prevent pan-European electronic mandate solutions from emerging and being used. As a first step, the working group gathered and analysed information from market participants, (payment service providers and users, on both the creditor and the debtor side), for their considerations on using or not using electronic mandates for SDD both in the national and cross-border context.
On the basis of a report prepared by the working group, the members agreed at the 1 December 2014 meeting on the following main recommendations, which relate to the issuance, acceptance and maintenance of electronic mandates for SDD at the pan-European level.
- The choice of which electronic mandate solution to use should be free (subject to article 54 of the Payment Services Directive – PSD) and there is no need for a full harmonisation of electronic mandate solutions in .
- Creditors (billers) should handle electronic mandates in such a way that debtors (payers) have the freedom to use non-domestic payment accounts, as stipulated by European law (Article 9 of Regulation (EU) No 260/2012).
- While preserving the choice for debtors and creditors about the way in which they give and accept electronic mandates, there is a clear incentive for creditors to move generally towards solutions with proper debtor authentication, i.e. with a lower risk of refund claims related to unauthorised transactions.
- It should be clear to all stakeholders that the burden of proof lies with the creditor in the event that an unauthorised direct debit collection is claimed by the debtor after the initial eight-week ‘no-questions-asked’ refund period for the Scheme has elapsed. In this regard, it is important that debtor banks (which have the final say in judging such claims) have a good and harmonised understanding of whether weak or strong customer authentication was used when the mandate was given.
- Electronic mandate solutions providers are urged to be open to interoperability requests by other solution providers and, if feasible, make use of the technical description provided in Annex VII of the SDD Scheme Rulebooks.
The full set of recommendations made by the on pan-European electronic mandates for SDD, (including the addressees of the recommendations), is detailed in Annex 2 included in the statement published following its 1 December 2014 meeting.
Instant payments in euro
The members of the agreed that ‘instant payments’ are defined as electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation). This is irrespective of the underlying payment instrument used (credit transfer, direct debit or payment card) and of the underlying arrangements for clearing (whether bilateral interbank clearing or clearing via infrastructures) and settlement (e.g. with guarantees or in real time) that make this possible.
In a competitive market, providers should not adopt a ‘silo’ approach offering closed-loop non-interoperable instant payment solutions. Instead a ‘layered’ approach should be taken by developing solutions for end-users to make payments with increased speed, leveraging on the current payment instruments (first layer) and the underlying clearing and settlement infrastructures (second and third layers). Such solutions should take advantage where possible of the harmonisation and integration already achieved with the project, preventing the emergence of a fragmented European market for instant payments in euro. The members of the understand that offerings of, for example, person-to-person mobile payments in euro may depend significantly on the availability of instant clearing services.
Therefore, taking into account emerging national solutions and to prevent market fragmentation, the members of the agreed on:
- The need for at least one pan-European instant payment solution for euro open to any payment service provider in the EU.
- Inviting the supply side of the industry, (in close cooperation with the demand side and with the active involvement of the as a potential scheme developer), to make an assessment of the issues related to pan-European instant payment solutions in euro to be presented at the meeting in June 2015.
New working group on person-to-person mobile payments
At the 1 December 2014 meeting, the members agreed to set up a working group focusing on person-to-person mobile payments with the mandate to analyse the high-level requirements for the development of pan-European solutions.
The draft mandate for this working group outlines that a mobile device can be used in many ways to make a payment. One includes the use of the mobile to initiate and receive a payment from consumer to consumer. Person-to-person mobile payment solutions have developed in various countries inside and outside the euro area. Many of these solutions have the potential to be used in person-to-merchant payment situations as well. Currently there seem to be no initiatives in place to provide solutions in euro at a pan-European level. The purpose of the working group would be to develop the case for pan-European person-to-person mobile payments solutions in euro, (with the potential to further evolve into consumer to merchant solutions as well), and what the high-level requirements for these would be. This would include analysing national solutions and identifying any barriers that may prevent the development of pan-European solutions.
The working group on person-to-person mobile payments is to be co-chaired by the and BEUC, the European Consumer Organisation. It is expected to report back to the by the end of June 2015. (The draft mandate of this working group is set out in Annex 2 included in the ‘Update of the Work Plan of the Euro Retail Payments Board’.)
New working group on mobile and card-based contactless proximity payments
At the 1 December 2014 meeting, the members also agreed to set up a working group to address issues related to the muted take up of mobile and card-based contactless proximity payments. The draft mandate for this working group states that several innovative payment solutions rely on contactless technologies to initiate payments or transfer payment related data in proximity payment situations. They usually provide a more convenient user experience at the point of sale and a substantially faster check-out. Even though these types of payments are still at an early stage of development, there is already a trend towards setting standards that differ across schemes, devices and countries. The purpose of the working group would be to analyse existing solutions and standards (both national and international) and assess to what extent there are differences in standards and technical implementation preventing interoperability at pan-European level.
The working group on mobile and card-based contactless proximity payments in euro is to be co-chaired by the and Eurocommerce / European Retail Round Table (ERRT). It is expected to report back to the by the end of November 2015. (The draft mandate of this working group is set out in Annex 3 included in the ‘Update of the Work Plan of the Euro Retail Payments Board’.)
- European Central Bank Website: Governance (includes detailed information on the Euro Retail Payments Board (ERPB) and related documentation)
- European Central Bank Website: Statement of the Euro Retail Payments Board (ERPB) Following the Second Meeting of the ERPB Held on 1 December 2014
- European Central Bank Website: Update of the Work Plan of the Euro Retail Payments Board
- European Central Bank Website: Report of the ERPB Working Group on SCT-SDD Post-migration Issues
- European Central Bank Website: Report of the ERPB Working Group on Pan-European Electronic Mandates
- European Central Bank Website: Pan-European Instant Payments in Euro: Definition, Vision and Way Forward
- Euro Retail Payments Board (ERPB) Mandate
- Euro Retail Payments Board (ERPB) Composition
- Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro (the SEPA Regulation)
- EPC Website (25 November 2014): EPC Publishes Updated Versions of the SEPA Credit Transfer and SEPA Direct Debit Rulebooks to Take Effect in November 2015
- EPC Newsletter (October 2014): SCT and SDD Rulebooks: Modifications to the Rulebooks to Take Effect in November 2015 and November 2016, Respectively
- EPC Website: SCT / SDD Rulebook Release Management and Scheme Development
- EPC Website: EPC Publishes Guidance on Reason Codes for SEPA Direct Debit (SDD) R-transactions
- EPC Newsletter (July 2014): Evolution and Oversight of the SCT and SDD Schemes: the Role of the European Commission and of the European Central Bank
- EPC Newsletter (October 2014): European Payments Council 2.0: with SEPA Migration (Euro Area) Complete, the EPC Adapts its Structure to Further Enhance Governance and Stakeholder Involvement
- EPC Website: SEPA at a Glance – the Infographic (this infographic provides an overview of the actors involved in the SEPA process at the European level and their interaction)
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