De Nederlandsche Bank Eurosysteem Current status of of the Single Euro Payments Area Michael van...

De Nederlandsche Bank Eurosysteem

Current status of of the Single Euro Payments Area Michael van Doeveren

4th Conference on Payments and Securities Settlements Ohrid, Republic of Macedonia 21 June 2011

De Nederlandsche Bank


Johannes Vermeer – The Milkmaid 1658


Agenda

Backround of SEPA SEPA-products Impact of SEPA Current status of migration Concluding remarks


End of 2009 NL EU 17 EU 27

Inhabitants (mio) 16.5 329.1 500.4

GDP (Eur bio) 571.98 8,963.01 11,790.8

Inst. offering payment services

319 6,547 8,700

Payment accounts (mio) 24.0 372.6 630.9

Transactions (bio) 5.0 57.9 82.1

POS terminals (ths) 340 6,428 8,555

ATM’s (ths) 8.5 322.1 433.7

Cards (mio) 30 478 726

European Payment Market

Bron: ECB, Eurostat

EU


Payment Trends in the EU

Source ECB

Number of transactions per type of payment intrument (billions)

0

2

4

6

8

10

12

14

16

18

20

22

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

debit and credit cards

credit transfers

direct debits

cheques

E-money purchases


The euro is the common currency of 17 countries today, but retail paymentsare still organised nationally

€

€

€

€

€

€

€

€

€

€ €

€ €

€

€ €

€


SEPA means an uniform payments market

EU

€

€

€

€

€

€

€

€

€

€ €

€

€

€

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€


What is SEPA?

Political vision:The euro area will be an internal ´domestic´ market for retail payments generate scale economies and promoting competition

Concretely:European payment instruments for both cross-border and domestic payments in euro: credit transfers, direct debit and cards


Why SEPA?

European PoliticsImprovement EMU and European economy: logic step after the euro introduction

EconomicsInternal market: volume, competition and innovations

Banks To prevent ‘further regulation’ after Regulation 2560/2001 and 924/2009

Especially Cross-border banks can profit from new market circumstances


How to realise SEPA?

Self-regulation: European Payment Council of banks develops standards and products

Payment Services Directive: legal harmonisation

SEPA Regulation


buyer seller

good/service

debit paymentinstruction

bank bank

paymentinstruction

debit credit

creditpaymentinformation

paymentinformation

Payment chain

clearing


BIC

• BIC: Bank Identifier Code• Issuing agent (on behalf of ISO): SWIFT

Bank code Countrycode (ISO)

Locationcode

Branch code

BIC: standardised construction

BIC8BIC11

I N XG B N L 2 A X X


IBAN

• IBAN : International Bank Account Number• Administrator of Register of national IBANs (on behalf of ISO): SWIFT

Countrycode (ISO)

Bank identifierCheck digit

Domestic accountNumber

• Remarks:

- The Bank Identifier in an IBAN is country specific

- The length of the bank identifier varies from country to country

- Each country has its own Basic Bank Account Number system

• Summary:

- Country code and check-digits : uniform

- Bankidentifier and BBAN : country specific


IBAN examples

IBAN Examples

Finland FI21 1234 5600 0007 85France FR14 2004 1010 0505 0001 3M02 606 length

27Germany DE89 3704 0044 0532 0130 00Ireland IE29 AIBK 9311 5212 3456 78Luxembourg LU28 0019 4006 4475 0000Netherlands NL91 ABNA 0417 1643 00 length

18Norway NO93 8601 1117 947Poland PL61 1090 1014 0000 0712 1981 2874 length

28United Kingdom GB29 NWBK 6016 1331 9268 19(composition: country code check digits Bankidentifier branchindentifier BBAN)Source: www.swift.com 20080811 IBAN Registry• Remarks:

• IBAN and BIC contain both bank identifiers, but they could differ

• IBAN and BIC contains both a country code, but they could differ


SEPA Credit Transfer (in use since 2008)

SEPA Credit Transfer: Standard for bank to bank credit transfers in euro (mass payments)

Payments are made for the full original amountIBAN and BIC are obligedISO 20022 UNIFI standards (XML-language)140 characters of remittance information are

delivered to the beneficiary Unstructured or restructured remittance

information as agreed between partners


SEPA Direct Debit(introduced in 2009)

SEPA Direct Debit: Standard for bank to bank Direct Debits in euro (B2C and B2B)

Payments are made for the full original amountIBAN and BIC are obligedISO 20022 UNIFI standards (XML-language)One-off or recurrentA mandate is signed by the debtor (e-mandate)Pre-notification (mostly 14 calender days in advance)Refunds (PSD: 8 weeks) and returns


SEPA Regulation

End dates: 1 February 2013 (2016 non-euro countries) national credit transfers 1 February 2014 (2017 non-euro countries) national direct debits 1 August 2015 niche products SCT and 1 August 2016 niche products

SDD

• Conversion facilities IBAN for consumers and XML services for firms until 1 August 2016

Technical requirements: consumer demands w.r.t. the SDD, white listing, black listing, maximum size and frequency

No MIF SDD after 2016-2018

European Commission published the draft SEPA-Regulation on 16 December 2010


Point-of-sale card payment system


SEPA Cards FrameworkPolicy scope (1)

Seperation of scheme governance from underlying processing

Open non-discriminatory scheme membershipSingle, pan-European licenseOpen and transparant pricing policiesEMV-implementation: Chip and PIN


SEPA Cards FrameworkPolicy scope (2)

A common approach to fraud and reportingStandardised processes and procedures for

card acceptance and certificationConvergence of scheme rules for common

non-competitive aspectsReferences the Payment Services DirectiveCommon, consistent experience for all

cardholders at POS and ATMMerchant choice of card type acceptedInteroperability and all merchant SEPA card

acceptance


SEPA for CardsVision of the Eurosystem (1) The Consumer can choose between different

debit card brands The Merchant can choose which debit cards

brands he or she accept The cards market is competitive, reliable and

efficient, as well as for card holders, merchants as for processing

More aspiration is needed in the SEPA for cards: need for an additional European debit card scheme

Further card standardisation is vital


SEPA for CardsVision of the Eurosystem (2)

All technical and legal barriers are eliminated Interchange fees should not be misused to

generate excess revenues for the banking system, at the costs of merchants and cardholders

Preference for no MIF-model: see for example the MasterCard and VISA cases

Ideal situation: ‘Any card at any terminal’


Standardisation SEPA for Cards

Card to terminal (EMV)

Terminal-to-acquirer (EPAS, ERIDANE)

Acquirer-to-issuer (ISO 8583 and ISO 20022)

Certification of cards and payment terminals


What is EMV?

• Worldwide standard for • Chip on cards• (readers) ATM & EFT POS

terminals • Debit and credit cards

• Much safer than magstripe

• EMV: Europay, MasterCard, VISA

insert


Payment Services Directive

PSD provides harmonisation of: Market access: besides credit institutions and

electronic money institutions also payment institutions

Rights and obligationsImplementation in national legislation

1november 2009: done by most countries


Impact of SEPA

ConsumersUse IBAN and BIC Use of cards in the whole SEPA area

Firms (private and public)Easier cash-management and administrationStandard formats (ISO 20022 XML)Use of IBAN and BICCentralisation of accounts and direct debits

RetailersMore choise: terminal, acceptance of brands, acquiring

BanksChange of markets, new products, new systems


Benefits of SEPA

Efficiency, level playing field and transparency lead to cost benefits for society in the long run

Reduction costs for average user of payment services in Europe

Comfort/User-friendliness

Innovation


Migration to SEPA

Aim: a smooth migration to SEPATo organise nationallyMarket drivenSpeed can differ between countriesStakeholder involvement and communication are

important tools for successClear end dates


Use of SEPA Credit Transfer

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%

16,00%

2009I

2009II

2009III

2009IV

2010I

2010II

2010III

2010IV

Eurogebied

Nederland


National Forum for SEPA-migration

Programme office

National Forum for SEPA-

migration (NFS)

Stakeholders represented in national migration through umbrella organisationsProgramme connected to migration activities of umbrella organisations

Technicalcommittee

Executive council

IntermediariesSoftware suppliers

UsersSuppliers


Aim of the SEPA Migration Monitor

Insight into the status of SEPA migration ofcorporates, public authorities and software suppliers

1. Awareness of the meaning and implications of SEPA

2. Stage of preparations

3. Actual use of SEPA payment instruments

4. Development of software packages


Large corporates, public authorities and most municipalities and software suppliers know what SEPA means.

In contrast, over 80% of SMEs don’t know what SEPA means (no change compared to the previous measurement).

Over 40% of mid-sized businesses (a new category) don’t know what SEPA means.

Do you know what is meant by the integration of the European retail payments market?

0%

10%20%

30%

40%

50%60%

70%

80%90%

100%

SMEs (n=502) Mid-sizedbusinesses

(n=100)

Large corporates(n=21)

Municipalities(n=134)

Public bodies(n=11)

Softwaresuppliers (n=47)

Yes

Yes, but not exactly

No

Results third SEPA MonitorSEPA awareness


• Large corporates are most advanced: almost 30% can already use the SCT.

• Over 25% of public bodies can also use the SCT already; almost two-thirds are investigating or making preparations; 9% have not done anything yet.

• A few municipalites can use the SCT already, 10% are making preparations and 42% are investigating what needs to be done.

• 86% of SMEs and 60% of mid-sized businesses have done little or nothing. On the other hand, 20% of mid-sized businesses can already use the SCT.

Results: SCT

Migration phase SCT

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


(n=100)

Largecorporates

(n=21)


Public bodies(n=11)

Can make/receive payments Active preparations

Investigating what needs to be done Done little or nothing


• Public bodies are all investigating or making preparations: clear progress compared to the previous measurement

• 5% of large corporates can already use the SDD, over 75% are investingating or making preparations: also progress compared to the previous measurement.

• 55% of municipalities have done little or nothing; 39% are investigating what needs to be done.

• 98% of SMEs and 80% of mid-sized businesses have done little or nothing.

Migration phase SDD

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


(n=54)

Largecorporates

(n=21)


Public bodies(n=5)

Can make/receive payments Active preparationsInvestigating what needs to be done Done little or nothing

Results: SDD


Status Migration: EMV Cards

Status 1 October 2010 (Source: EPC)

0

10

20

30

40

50

60

70

80

90

100

AT BE FR LU IE DE SI CY MT FI PT SK NL ES IT GR


Status Migration: EMV ATM’s


0

10

20

30

40

50

60

70

80

90

100

FI FR IE NL PT SK ES GR LU AT DE BE SI IT CY MT


Status Migration: EMV POS Terminals


0

10

20

30

40

50

60

70

80

90

100

LU MT IE FR SK BE PT ES SI DE IT AT CY NL FI GR


Concluding Remarks

The success of SEPA depends on: SEPA for Cards means ‘Any card at any

terminal’. This requires time. Further European standardisation, which

is not easy An end date for national payment

instruments Interchange fees and payment fees Well organised stakeholder involvement

and consultation Innovation at a European level: e-SEPA,

contactless payments, mobile payments etc.

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