sepa contributing to a single market for payments in the european union (and beyond...)

SEPA Contributing to a Single Market for Payments

in the European Union (and beyond...)

Bank of Russia - 11 December 2012

Etienne GoosseSecretary General European Payments Council

2

Bank of Russia - 11 December 2012•SEPA Background•European Payments Council•SEPA Council•Regulatory Framework•What is a SEPA Scheme?•Key features of SEPA Schemes •Change Management Process•Scheme Management •SEPA Credit Transfer Scheme•SEPA Direct Debit Core Scheme

Agenda

3

Bank of Russia - 11 December 2012•SEPA Direct Debit B2B Scheme•Specific features of the SDD

Schemes•Migration•Clearing and Settlement •SEPA for Cards•SEPA Mobile Payments•Single Euro Cash Area•Next Steps•Ten Years After...

Agenda

4

SEPA Background

SEPA

5

SEPA Background•Single Euro Payments

Area•32 Countries - EU &

Norway, Iceland, Liechtenstein (EEA), Switzerland, Monaco

•87.5 billion electronic payment transactions (not all in euro)SEPA

6

SEPA Background

2001

•Regulation 2560/2001

2002

•Vision for SEPA formulated

•EPC launched the same year

2003

•Scheme development commencement

7

SEPA Background

2008

•SEPA Credit Transfer Scheme launched

2009

•Regulation 924/2009•PSD Effective (adopted 2007)•SEPA Direct Debit Schemes launched

2012

•Regulation 260/2012 (“SEPA Regulation”)

8

SEPA Background

2013

•Reform of SEPA governance•Other key regulatory initiatives by EC

2014

•End-date for migration in Euro area

2016

•End-date for migration outside of Euro area

9

SEPA Background

Political Drivers: European Council (ECOFIN)

European Commission European Central Bank European Parliament

10

SEPA Background

SEPA vision set out by EU Council in Lisbon

agenda (March 2000)

11

SEPA Background

Aimed to make Europe more competitive and

innovative

12

SEPA Background

Euro notes & coins introduced in 2002

13

SEPA Background

Fragmented landscape for non-cash payments

across EU

14

SEPA Background

Decision to develop SEPA Schemes in order to harmonise non-cash

payments

15

European Payments Council

EPC

16

European Payments Council•Decision-making and

coordination body of the European banking industry in relation to payments

•Aims to promote and support SEPA

•Develops SEPA payment schemes in close dialogue with the user community

EPC

17

European Payments Council•Not for profit organisation

& does not supply technology, goods or services

•Not within scope: development of payment products & product related featuresEPC

18


74 members - banks, banking associations

and payment institutions

19


Over 360 professionals from 32 countries engaged in EPC

20


Coordination by EPC Secretariat -15 people

21


-M CHANNEL WORKING GROUP

(MC WG)

STANDARDS SUPPORT GROUP

(SSG)

LEGAL SUPPORTGROUP(LSG)

INFORMATION SECURITY SUPPORT GROUP ( ISSG)

CASH WORKINGGROUP

CASH WG)

CARDS WORKING GROUP

(CARDS WG)

SEPA PAYMENT SCHEMES WORKING

GROUP (SPS WG)

**PLENARY SCHEME MANAGEMENTCOMMITTEE**

CUSTOMERSTAKEHOLDER

FORUM*

PROGRAMMEMANAGEMENT

FORUM (PMF)

NOMINATIONAND

GOVERNANCECOMMITTEE

AUDITCOMMITTEE

COORDINATIONCOMMITTEE***

CA SUPERVISORY BOARD ( CASB)

CARDSSTAKEHOLDER

GROUP*

SECRETARIAT

CLEARING &SETTLEMENT

FFFFF

* Alignment with other stakeholders** Decision-making bodies

*** Strategy and process body

22


European Central Bank observer in Plenary, Working & Support

Groups

23


EPC is not responsible for the overall

management of the SEPA process...

24


But at European Authorities’ request, EPC has developed Schemes

& Frameworks...

25


With the consistent involvement of stakeholders through forums and public consultations open to end-

users and value chain participants

26

SEPA Background

SEPA Council

27

SEPA Council

Established by the European Commission

and the ECB in June 2010

28

SEPA Council

The SEPA Council brings together representatives (10)

of both the demand and supply sides of the payments market including the EPC, with EC and

ECB as co-chairs

29

SEPA Council

Aims to promote the realisation of an integrated euro retail payments

market by ensuring proper stakeholder involvement at a high

level and by fostering consensus on the next steps towards the full

realisation of SEPA

30

SEPA Council•To promote the realisation of

the SEPA vision and provide a strategic direction for EU retail payments in euro.

•To monitor and support the SEPA migration process.

•To ensure accountability and transparency of the SEPA process through the involvement of all actors concerned.

Objectives

31

SEPA Regulation

Regulatory Framework

32

Regulatory Framework•Laid the foundations of SEPA.•The Regulation states that

banks are not permitted to impose different charges for domestic and cross-border credit transfers, card payments or ATM withdrawals within the EU.

•Turning point in the financial integration policy of the European legislator.

•Triggered EU banks to create EPC

Regulation 2560/2001

33

Regulatory Framework•Replaces Regulation

2560/2001•The price parity requirements

are extended to direct debits.•Sets clear rules for transaction-

based multilateral interchange fees until November 2012.

•As from November 2010, banks in the euro area offering direct debits in euro to debtors are mandated to become reachable for cross-border direct debit collections.

Regulation 924/2009

34

Regulatory Framework•Establishes a comprehensive

set of rules applicable to all electronic payment services in the EU and for all EU currencies (not just euro)

•Adopted in November 2007 and was to become effective by 1 November 2009

•Harmonises rights and obligations of Payment Services Providers and Users

•Introduces a new category of authorised Payment Service Provider - Payment Institutions

Payment Services

Directive (PSD)

35

Regulatory Framework•Mandatory information

requirements and payment execution timelines (D+1)

•The PSD is of particular relevance with respect to the roll-out of SEPA Direct Debit services due to the fact that the PSD introduces common rules for the authorisation and the revocation of debits

Payment Services

Directive (PSD)

36

Regulatory Framework•‘Regulation establishing

technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009’

•Published in March 2012

Regulation 260/2012

(SEPA Regulation)

37

Regulatory Framework•Defines 1 February 2014

as the deadline in the euro area for compliance with the core provisions of this Regulation

•Existing national euro credit transfer and direct debit schemes will be replaced by SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD)

•31 October 2016 as deadline for Non-euro countries

Regulation 260/2012

(SEPA Regulation)

38

Regulatory Framework•Sets out the rights of

consumers with regards to direct debit collections (they may request PSPs to limit collections to a certain amount and / or frequency and establish “black” or “white” lists of creditors )

Regulation 260/2012

(SEPA Regulation)

39

Regulatory Framework•Ban of multilateral direct

debit interchange fees except for R-transactions under strictly defined conditions

•PSPs will no longer be able to request PSUs to provide the BIC when initiating a payment transaction

Regulation 260/2012

(SEPA Regulation)

40

Regulatory Framework•ISO 20022 / XML

mandatory for bundled transactions for corporates

•ISO 20022 mandatory in the interbank space however, the usage of conversion services by corporates is allowed

Regulation 260/2012

(SEPA Regulation)

41

Regulatory Framework•The majority of market

participants recognised the value of setting a deadline for migration to harmonised SEPA payment schemes through EU Regulation

•The EPC shares the view that an end-date for phasing out legacy euro payment schemes for credit transfers and direct debits ensures planning security and avoidance of a lengthy transition for all market participants

Regulation 260/2012

(SEPA Regulation)

42

SEPA Payment Scheme

What is a SEPA payment scheme?

43

SEPA Payment Scheme

A SEPA Scheme defines a set of rules and standards for

adhering payment service providers to successfully execute SEPA payment

transactions

44

SEPA Payment Scheme •SEPA Credit Transfer

(SCT)•SEPA Direct Debit

Core (SDD Core)• SEPA Direct Debit

Business to Business Scheme (SDD B2B)

SEPA Payment Schemes

(currently 3 Schemes)

45

SEPA Payment Scheme

Each Scheme has a specific Rulebook and

accompanying Implementation

Guidelines

46

SEPA Payment Scheme

Reflective of evolving market needs

47

Scheme Adherents – November 2012•4560 Banks

SCT

•3899 Banks

SDD Core

•3420 Banks

SDD B2B

48

SEPA Payment Scheme

Key features of SEPA Schemes

49

Key features - account currency

The accounts involved in SEPA payments may be

denominated in euro or in any other currency

50

Key features - transfer of funds

The transfer of fundsbetween the payer’s bank and the beneficiary’s bank always

takes place in euro without any currency conversion during the

transfer

51

Key Features - ISO 20022•Replaces national

standards to ensure harmonisation across SEPA and consistency with global standards

ISO 20022

52

Key Features - ISO 20022

“ISO 20022 is a standard to develop

standards”

53


ISO 20022 is not only a suite of message standards but a procedure proposed by ISO

to develop message standards for all domains of

the financial industry

54


The most innovative characteristic of ISO 20022 is

its modeling methodology which decouples the business

rules from the physical message formats

55


The models evolve with the business, while the formats evolve with the

technology to benefit from the latest innovations. This results in the

highest possible degree of automation, ease of implementation,

openness and cost-efficiency

56


Syntax is a physical representation of the logical

message - ISO 20022 uses XML as the primary syntax and has

specified how to convert a message model to XML

57


ISO 20022 dictionary includes re-usable

business components, message components

and message definitions

58


The SEPA data formats based on ISO 20022

message standards are binding between banks and

were recommended for business customers

59


For more informationWWW.ISO20022.ORG

60

Key Features - IBAN & BIC

IBAN (International Bank Account Number - ISO 13616)

and BIC (Business Identifier Code - ISO 9362) are the only permissible account and bank

identifiers for SEPA transactions

61


Whereas until now they have been used only for

cross-border payments in most countries, with SEPA

this applies to domestic payments as well

62


The debtor (SDD) or the beneficiary (SCT) has to provide the IBAN and BIC of the account

that should be debited or credited to the other party as

per the “SEPA Regulation”

63

SEPA Payment Scheme

Change Management

Process

64

Change Management Cycle

Open to change suggestions from ANY stakeholder e.g. banks, end-users or EPC itself

65

Change Management Process•Annual maintenance cycle

- new release becomes effective and mandatory one year after publication on the EPC Website

•Allows market participants sufficient time to adapt their systems with the SEPA Regulation and the updated versions of the Rulebooks

Change Management

Cycle

66


67


Next release will be published in November

2014 with effective date of November 2015 in order to

create stability around migration

68


The EPC may consider after 2014 less

frequent cycles as the Schemes “mature”

69

SEPA Payment Scheme

Scheme Management

70

Scheme Management

Scheme adherence

Scheme compliance

Scheme development and evolution

71

Scheme Management•Each scheme participant

signs a formal adherence agreement with the EPC which binds the participant to respect the scheme rules described in the rulebook

•SMC reviews applications

Scheme adherence

72

Scheme Management

•SMC also deals with conciliation, complaints and appeals between scheme participants

Scheme Compliance

73

Scheme Management•Managed in the yearly

change management cycle (see above slides)

•Responsibility of the SEPA Payment Schemes Working Group (SPS WG) and the EPC Plenary with stakeholder involvement (public consultation, Customer Stakeholder Forum)

Scheme development and evolution

74

Scheme Management Committee•Scheme adherence and

compliance processes handled by an independent body – the Scheme Management Committee (SMC)

•12 Members including an independent Chair and 2 additional independent members

•Separate appeals panel composed of 3 SMC Members not involved in complaint handling and conciliation procedure

SMC

75

SEPA Payment Scheme

SEPA Credit Transfer (SCT)

Scheme

76

SCT Scheme

The SCT Scheme enables payment service providers

to offer a basic credit transfer service throughout

SEPA for single or bulk payments

77

SCT Scheme

The scheme’s standards facilitate payment

initiation, processing and reconciliation based on

straight-through-processing (STP)

78

SCT Scheme

The scope is limited to payments in euro

within the 32 SEPA countries

79

SCT Scheme

The payment service providers executing the

credit transfer must formally participate in

the SCT Scheme

80

SCT Scheme

The amount of funds transferred is limited to € 999,999,999.99

per SCT

81

SCT Specific Features•With the launch of the

SCT, EU banks are the first in the world to deploy the global ISO 20022 message standards (SEPA data formats) for mass (euro) payment transactions.

SEPA data format

82

SCT Specific Features

•The IBAN and BIC (Business Identifier Code) are the only permissible account and bank identifiers for SEPA transactions.

IBAN and BIC

83


As from 1 January 2012, the payer’s bank is obliged to credit the account of the payee’s bank with the amount

of the credit transfer within one banking business day following the

point in time of acceptance in accordance with the provisions of

the PSD

84

SCT Scheme

PSPs may respond competitively to

commercial customer needs by offering shorter

execution times

85

SCT Specific Features•An additional originator’s

(payer’s) identification code may be included in the information accompanying the payment instruction - the payee can easily reconcile the incoming payment with the information given in the invoice or supporting document to which the payment corresponds.

•In case of returns, the payer could automatically reconcile a returned payment with an invoice he needs to pay.

Originator Identification

86


In the event of an SCT payment being returned to the payer, the payer’s service provider supplies

the necessary information allowing the payer to make the precise link

between the original credit transfer and the return

87

SCT Benefits•The transferred

amount is the original amount of the credit transfer, except for Recalls where the Beneficiary Bank may charge a fee from the Originator Bank

Transfer amount

88

SCT Benefits•140 characters of

remittance information are delivered without alteration or omission from the payer to the payee. These 140 characters can be unstructured (free text) or structured, as agreed between business partners.

Remittance information

89

SCT Benefits•The accounts of all

financial institutions operating in SEPA can be reached safely, quickly and easily regardless of their location; there will be no difference between credit transfers executed at a national level and those executed across borders (in 32 countries)

Reachability

90

SCT Benefits

•Due to the agreed timeframe for delivering an SCT, certainty is provided about the availability of money in the payee’s account

Certainty

91

SCT Benefits•Identification of any

account in SEPA using the International Bank Account Number (IBAN) enables the storage of trusted information in a standardised format

Standardised identification

92

SCT Benefits

•Rejects and returns can be automated, because they are handled in a uniform and predictable mannerStraight-

through-processing

(STP)

93

SCT Benefits

•Single payments and bulk payments are supported, for example one debit to the payer’s account with multiple credits to different payees

Flexibility

94

SCT Four-corner Model

Originator Beneficiary

OriginatorBank

BeneficiaryBank

SchemeRules

CSMs

1

adhereto

2

Provision of goods and servicesand/or

requirement to move money

3

Provision of payment under terms and conditions

agreed with Originator Bank

4

Provision of payment under terms and conditions

agreed with Beneficiary Bank

1

adhereto

5

Using5

Using

95

SCT Operational FlowOriginator Originator Bank

Clearing & Settlement

Beneficiary Bank Beneficiary

Returns

Rejects

Rejects

Complete & forward CT instruction

Debit originator

Settle, make CT available

Credit originator account

Check instruction

Credit beneficiary

account

Check, clear and prepare for settlement

Credit originator account

Rejects

Check & verify CT instruction

Returns

Returns

96

SEPA Payment Scheme

SEPA Direct Debit (SDD)

Core Scheme

97

SDD Core Scheme

The SDD Core Scheme – like any other direct debit scheme – is

based on the concept: “I request money from someone else, with their prior approval,

and credit it to myself”

98

SDD Core Scheme

The payer and the biller must each hold an

account with payment service providers (PSPs)

located in SEPA

99

Key features

The SDD Core Scheme allows a biller to collect

funds from a payer’s account provided that a signed

mandate has been granted by the payer to the biller

100

SDD Core Scheme

The payment service providers executing the direct debit transaction

must formally participate in the SDD Scheme

101

SDD Core Scheme

The SDD Scheme may be used for single (one-off) or recurrentdirect debit collections with

amounts limited to € 999,999,999.99 per collection

102

SDD Core Scheme

The Scheme grantspayers a “no-questions-asked”

refund right duringthe eight weeks following the debiting of a payer’s account

103

SDD Core Scheme

In the event of unauthorised direct debit

collections, the payer’s right to a refund extends to 13

months as stipulated in the PSD

104

SDD Core Scheme

The payer’s bank must receive the request for a first direct

debit collection or for a one-off direct debit collection

the latest five business days prior to the due date.

105

SDD Core Scheme

For subsequent direct debit collections, the payer’s bankmust receive such a request at the latest two businessdays prior to the due date

106

SDD Core Four-corner Model

107

SDD Core Operational FlowTimeline Creditor Creditor Bank CSM Debtor Bank Debtor

Notcoveredby the

Scheme

D-14CD**or as agreed

betweenCreditor &

Debtor

D-14CD**

Reception of pre-notification

Send pre-notification and

collection

Earliest reception of any

Collection

Signed Mandate

Legend:Black Data flowsRed Financial flows

CB Creditor BankDB Debtor Bank

CSM Clearing and Settlement Mechanism* TD Counted in Inter-Bank Business Days (Target days)** CD Counted in Calendar days***BD Counted in Customer Banking Business days

108


D-5TD*

D-2TD*

D = due dateor

D+1TD*(If due date is not an Inter-

Bank Business

Day)

Latest reception of subsequent

CollectionTiming outside

SchemeTiming outside

Scheme

Debit

debit the Debtor

credit CB debit the DBcredit Creditor

Timing outside Scheme

***or D+1 BD if D is a local

bank holiday

Latest reception of first / one-off

CollectionTiming outside

SchemeTiming outside

Scheme

Settlement




109


D+5TD*

Debit date+

6 weeks**at the latest

Debit date+

8 weeks**at the latest

+2TD*credit the Debtor

credit the DBdebit CBdebit Creditor


Timing outsideScheme Latest

returns

Latestrefund request


Timing outsideScheme

Latestrefund

Latestsettlement of

returns

Latestsettlement of

refunds





110

SDD B2B Scheme

111

SDD B2B Scheme

The SDD B2B Scheme enables business customers

in the role of payers to make payments by direct debit.

112

SDD B2B Scheme •Services and products

based on the SDD B2B Scheme are only available to businesses; the payer may not be a private individual (consumer)

Main differences with SDD

Core Scheme

113

SDD B2B Scheme •In the SDD B2B Scheme

the payer (a business) is not entitled to obtain a refund of an authorised transaction

•The SDD B2B Scheme requires the payer’s bank to ensure that the collection is authorised by checking the collection against mandate information


Core Scheme

114

SDD B2B Scheme •The payer’s bank and the

payer are required to agree on the verification to be performed for each SEPA B2B direct debit collection

•The B2B Scheme offers a significantly shorter timeline (D-1) for presenting direct debits and a reduced return period


Core Scheme

115

SDD B2B Scheme •The SDD B2B Scheme includes

the option to provide signatures of several persons with a SEPA mandate issued electronically

•Extends the timeline allowed for the payer’s bank to verify the authenticity of such a mandate

•This option caters for corporates’ need for multiple signatures for authorising payments


Core Scheme

116

SDD B2B Scheme

The SDD B2B Scheme fully supports the intra-

European supply chain management of companies onthe financial side and facilitates

trade across the internalmarket

117

SDD B2B Four-corner Model

118

SDD B2B Operational FlowTimeline Creditor Creditor Bank CSM Debtor Bank Debtor

Notcoveredby the

Scheme

D-14CD**or as agreed

betweenCreditor &

Debtor

Reception of pre-notification

Send pre-notification and

collectionPT-04.02

Signed MandatePT-01.02

Agree on checking

obligationsPT-01.04



CSM Clearing and Settlement Mechanism* TD Counted in Inter-Bank Business Days (Target days)** CD Counted in calendar days

***LBD Counted in local banking days

119

SDD B2B Operational FlowTimeline Creditor Creditor Bank CSM Debtor Bank Debtor

D-14CD**

D-1TD*

Latest reception Timing outside Timing outside

Latest reception of any

CollectionPT-04.07



Earliest reception of any

CollectionPT-04.07





120

SDD B2B Operational Flow





Timeline Creditor Creditor Bank CSM Debtor Bank Debtor

D = due dateor

D+1TD*(If due date is not a banking business day)

D+2TD*

credit the Debtor

Latest reception Timing outside Timing outside

Debit PT-04.09

debit the Debtor

credit CB debit the DBcredit Creditor


***or D+1 BD if D is a local

bank holiday



Timing outsideScheme Latest

returns PT-04.10

credit the DBdebit CBdebit Creditor Latest

Settlement

Latestsettlement of

returns

Latest

121

Reachability for SDD

As mandated by the “SEPA Regulation”, every bank in the

euro area reachable for national direct debit must be reachable for

cross-border direct debit (consumer payments)

122

SDD Benefits•Ability to determine the

exact date of collection•Payment completion

within a pre-determined time cycle resulting in reliable cash flow

•Straightforward reconciliation of payments received

SDD Core and B2B Benefits

123

SDD Benefits•Ability to automate

exception handling (refunds, returns, rejects)

•Simple and secure means of paying bills or receiving payment throughout 32 SEPA countries


124

SDD Benefits

•Easy reconciliation of debits on account statements

•Payers avoid dealing with the consequences of late payments


125

Specific SDD Features

Specific features of the SEPA Direct Debit

Schemes

126

SDD Specific Features•A mandate is signed by the

payer to authorise the biller to collect a payment and to instruct the payer’s bank to pay those collections

•Payers are entitled to instruct their banks not to accept any SEPA direct debit collections on their accounts

•The mandate can be issued in paper form or electronically

Mandate

127

SDD Specific Features•The mandate expires 36

months after the last initiated collection

•The signed mandate must be stored by the biller as long as the mandate is valid but at least for 14 months after the last collection

Mandate

128

SDD Specific Features•The payer completes and

signs the mandate and then provides it to the biller

•The biller is responsible for dematerialising and storing the mandate (payer’s bank plays no role in this process)

Creditor Mandate

Flow(CMF)

129

SDD Specific Features

The SDD Schemes include the possibility

to create mandates through the use of electronic channels

130


The e-mandate brings further advantages to payers: the payer

avoids the inconvenience of printing, signing and mailing a

paper form by using a fully electronic process

131


The e-mandate facility is based on secure, widely used online banking services of the payer’s bank and is an optional service that can be offered by payment

service providers

132

SDD Specific Features•The SDD 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.

Due Date

133

SDD Specific Features•The biller must send a so

called pre-notification, an invoice for example, to the payer at least 14 calendar days before collecting the payment, unless a different time line has been agreed between the payer and the biller.

Pre-notification

134

SDD Specific Features•The pre-notification

includes the due date and the amount of the collection

•The pre-notification may be sent only once even for recurrent direct debit collections if the due dates and the amounts of future collections are stated

Pre-notification

135

SDD Specific Features•Each biller in SEPA will be

identified with a creditor identifier

•This identifier, in connection with the mandate reference, allows the payer and the payer’s bank to verify each SEPA direct debit and to process or reject the direct debit according to the payer’s instructions

Creditor Identifier

136

SEPA Migration

Migration

137

SCT ECB Indicator

October 2012 - 30.2%

138

SDD ECB Indicator

October 2012 - 1.9%

139

SEPA Migration

6th Survey on Public Administrations’

preparedness and migration to SCT &

SDD (October 2012)

140

SEPA Migration - PAs

SCT rate increase from 24.9% to 34.8%(vs 28.2% overall)

Evolution from June 2011 to May 2012

141


Luxembourg 100%Finland 100%Belgium 95.3%

142


Cyprus 0.73%, Estonia 0.13%, Slovakia 0.47% Netherlands 1.51%

143


SDD migration remains low but also limited

use by PAs

144

Migration key dates

1 February 2014 SEPA migration deadline for SEPA credit transfer and SEPA direct debit within the

euro area; no BIC (business identifier code) to be required

for national payments

145

Migration key dates

1 February 2016 No BIC to be required for cross-

border payments; “niche” products

migration completed

146

Migration key dates

31 October 2016 SEPA credit transfer and SEPA direct debit

deadline for non-euro area countries

147

Migration key dates

1 February 2017 National transaction MIFs

(multilateral interchange fees) to be eliminated for

direct debits

148

SEPA Migration Challenges

13 months and 20 days to go in the euro area!

149

SEPA Migration •70% of credit transfers to be migrated to SCT•98% of direct debit to be migrated to SDD•R-transaction rates higher for cross-border SDD•Some inconsistency in implementations by national communities

Challenges

150

SEPA Migration •“The time to act is now!”•Successful corporate migrations required 6-15 months•SCT vs SDD•Big (pan-EU) Corporates / Public Administrations vs SMEs•Derogations adopted at national level•Conversion services

Challenges

151

SEPA Migration •“bottle-neck” towards the end of the migration•Sanctions? •Shutting down of legacy infrastructures? •Potential disruptions? •Reputational issues?•Capacity issues (support, testing, conversion)?

Challenges

152

SEPA Migration Challenges

Need to avoid any disruption to payment and (economic) flows!

153

SEPA Migration•Migration will be fully

completed within the interbank sphere by 1 February 2014 in the euro area

•National communities and public authorities are responsible for user migration and compliance

•The SEPA Council should play an overarching role in monitoring and ensuring successful completion of the migration

Roles and responsibilities

154

SEPA Migration•No further change to the

Rulebooks will be introduced before the end of the migration unless exceptional circumstances arise

•The EPC should continue to focus on providing clarification of Rulebooks and Implementation Guidelines

EPC focus on

migration

155

SEPA Migration•EPC has developed a

SEPA migration quarterly dashboard for regular monitoring and analysing of statistics provided by different communities

•Actions taken where appropriate in order to facilitate the migration

EPC focus on

migration

156

Infrastructure

Clearing and Settlement

157

Clearing and Settlement•SEPA Schemes should be

separated from the infrastructures (Clearing and Settlement Mechanisms) through which they are operated

•CSMs to self-assess for “SEPA compliance”

•SEPA reachability by CSMs on their own or through “links”

Key principles

158

Clearing and Settlement•Infrastructure should be an

area where market forces operate based on the decisions of Scheme Participants, although, of course, Scheme Participants will cooperate at the level of individual infrastructure projects

•Free choice and ability to switch CSMs for payment service providers

Key principles

159

EPC work in area of Cards

SEPA for Cards

160

EPC work in Cards payments•The ECB objective: The

Single Euro Payments Area (SEPA) for cards enables European cardholders and merchants to use general purpose cards to make and receive payments and withdraw euro cash throughout SEPA, with the same ease and convenience as in their home country.

SEPA for Cards

161

EPC work in Cards payments•The SEPA 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.

•The SEPA Cards Standardisation Volume details the related requirements a.o. in terms of functionalities, security standards and certification.

SEPA for Cards

162

SEPA Cards Standardisation (pyramid approach from SEPA cards high level standards to concrete solutions) structured via

EPC: SCF : Principles and rules

CSG: Volume BoR : Requirements for Standards

Standards Bodies : International Standards & Technical Specifications

Specification Providers : Technical Implementation Specifications

Vendors : Implementation Application Solutions

EPC standardisation rationale

1) Consistency between SCF principles, Volume requirements, Technical Specifications

2) SEPA Standards consistent with International Standards Bodies, Tech Specifications

3) Common standards on Interoperability and Security on end-to-end transaction

4) Competitive degrees of freedom on Application solutions, Volume BoR compliant

EPC standardisation based on self-regulation EPC standardisation based on market self-regulation

Banks Retail Vendors Processors Schemes

CompetitiveSolutions

SectorsRequests

CommonStandards

5 Sectors Sharing & Agreeing

163

Cards Stakeholders Group

164

SEPA Cards Standardisation Volume

Jan

uar

y

Feb

ruar

y

Mar

ch

Ap

ril

May

Jun

e

July

Au

gu

st

Sep

tem

ber

Oct

ob

er

No

vem

ber

Dec

emb

er

Gathering phase42 meetings

Oct

ob

er

No

vem

ber

Dec

emb

er2012 2013

Publicconsultation

Dispositions& new draft

Approval&

publication

The Volume v7.0 will be split in different Books:o Book 1: Generalo Book 2: Functional requirementso Book 3: Data Elementso Book 4: Securityo Book 5: Compliance via certification and labellingo Book 6: Implementation guidelines (including migration)o Innovative technologies

Potential amendments of the Volume regardless of timingo Green Paper conclusions & PSD reviewo E-Identity, other next Regulationso Eurosystem/EBA Authority Security

recommendations (SecuRe Pay)

Card Standards Self-Regulation: Overview

EPC Requirements + International Security Standard Bodies

EPC SecurityRequirements EPC SEPA Cards Standardisation Volume (notably Book 4)

Domain AUTHENTICATION CARD - PAYER

TERMINALE-SERVER

DATA BASES

ACCEPTOR TO

ACQUIRER

ACQUIRER-

(PSP PAYEE)

ACQUIRERTO

ISSUER

ISSUER-

(PSP PAYER)

OTHERSPROPRIETARY

Detailed ApplicationSpecification

Standard Bodies (*) & Initiatives on cards domains

Physical cards:

EMV

+

CAS

Ecom & remote:

CVx2

Virtual Cards

...

Mobile:

EPCMobileContact-

less PaymentS

C.

PCIPTS

+

CAS/OSEC

PCIDSS

PCI

DSS

ISO20022:EPAS

PCI DSS

ISO20022:ATICA

(Card Messages)&

Berlin Group (SDD Messages for card

processing)

PCI DSS

3DSecure

WalletsPayPal

Telcos

Internet players

+ (to be)others …

Security & Functional

Security Only165

166

EPC work in Cards payments•The Cards Stakeholders Group

(CSG) is an industry-wide dialogue platform around SEPA for cards with the participation of representatives from banks and payment institutions, retailers, vendors, processors and card schemes.

•Card fraud prevention: Migration to EMV chip broadly completed•Transactions 82.1% (June 2012)•Cards 90.4% (Dec 2011)•POS 93.0% (Dec 2011)•ATMs 96.3% (Dec 2011)

SEPA for Cards

EMV Cards Q2 2010

167

EMV POS Q2 2010

168

EMV ATM Q2 2010

169

EMV progresses overview within SEPA

170

171

EPC work in Mobile payments

SEPA Mobile Payments

172

EPC work in Mobile Payments•EPC White Paper on Mobile

Payments presents an overview on the mobile ecosystem and the usage of the mobile channel for the initiation of SEPA payment instruments.

•EPC and the GSMA jointly published Mobile Contactless Payments Service Management Roles – Requirements and Specifications’ (the so-called TSM document)


173

EPC work in Mobile Payments•‘Mobile Contactless SEPA Card

Payments Interoperability Implementation “ detail the diverse service models and processes involved in the provisioning and the lifecycle management of a mobile contactless payment application residing in a mobile phone secure element (SE). It outlines the technical infrastructure as well as the essential security requirements

•EPC current focus on “descriptive work” only


174

EPC work in Cash payments

Single Euro Cash Area(SECA)

175

EPC work in Cash •SECA will support one major goal

of the SEPA initiative by encouraging consumers and merchants to migrate from cash to payment cards and other electronic payment instruments.

•EPC has developed recommendations with a view to creating a common euro-wide infrastructure for wholesale cash

•Average social cost of cash 0,5% of GDP in the EU (ECB September 2012)

SECA

176

EPC work in Cash•EPC cooperates with all

stakeholders in standardising ATM cash cassettes, cash cases and Intelligent Bank Note Neutralisation Systems with a view to harmonise processes and reduce costs of wholesale cash distribution.

SECA

177

Future developments

Next steps

178

Future developments•European Commission

and European Central Bank are working on a proposal for a new SEPA governance

•More details expected Q1 2013

•Implementation of the new structure starting in Q2 2013

SEPA Governance

179

EC / ECB

SEPA Council

Multi-stakeholder Group

Technical Group

Approve

Mandate

Mandate

Recommend / Report

Report / Propose

Standardisation bodies

Report / Propose

Mandate

Political level

Strategic level

Business level

Technical level

Stakeholders

Stakeholders

EPC

Stakeholders

Future developments

180

Future developments•EPC will adapt its role,

activities and governance structure based on the new SEPA governance structure

•Target date Q2/Q3 2013

EPC Governance

181

Future developments•EPC is working on a long-

term SEPA solution for ‘IBAN only’ payments as the SEPA Regulation will no longer allow PSPs to request PSUs to provide a BIC in order to execute a payment transaction as from February 2014 for national payments and as from February 2016 for cross border payments

IBAN/BIC

182

Future developments•EPC is working on increasing the

remittance information character number

•An example of a possible solution has already been received from the Finnish community and this will serve as a basis for the development of an EPC solution in this domain

•New solution likely to be based on additional remittance information not to be included in the SCT/SDD messages but instead in a new ISO 20022 stand-alone non-payment message or in another repository

Longer remittance information

183

Future developments•Quick Response Code

requirements document has been produced by the EPC which describes how PSPs can utilise this technology in order to capture data for electronic initiation of a SEPA Credit Transfer (SCT)

QR Code

184

Future developments•EPC faces increasing

number of requests for the use of the EPC Rulebooks and Implementation Guidelines outside of SEPA and for non-euro within SEPA

•Standard, royalty-free licence agreement to be signed with EPC

SEPA outside of SEPA

185

Lessons learned

Ten years after...

186

10 years after...•SEPA

governance: public policy project - should be led and monitored by public authorities

Lessons learned

187

10 years after...•Early and full

involvement of all stakeholders (corporates, SMEs, consumers etc.) given the central and pervasive role of payments in the overall economy and for all its actors

Lessons learned

188

10 years after...

•Critical role of public administrations as early adopters and drivers for change

Lessons learned

189

10 years after...•Deeper, upfront

harmonisation of implementation guidelines, if possible, in order to avoid “multiple flavours” and perpetuating market fragmentation

Lessons learned

190

10 years after...•Early mobilisation of

all stakeholders through regular communication programs based on clear messages including tangible benefits

Lessons learned

191

10 years after...•Pursuing market

integration through stakeholder cooperation, by means of a model ensuring constant competition law compliance

Lessons learned

192

10 years after...

•Regulation required in order to ensure full migration by all market participants by a set date

Lessons learned

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sepa contributing to a single market for payments in the european union (and beyond...)

Documents