Francisco Tur Hartmann, Retail payments...

Retail payments accessibility The European experience

Agent Banking: Expanding Access to Financial, Payment, and Remittance Services

Impact Evaluation

Brasilia, 13 March 2014

Francisco Tur Hartmann, Payments & Market Infrastructure European Central Bank

ECB-UNRESTRICTED

DRAFT

Rubric

www.ecb.europa.eu ©

Overview

Retail payments accessibility. The European experience 2

Retail payments accessibility. The European experience

1

2

3

SEPA state of play

EU legal framework for retail payments

Agent banking and SEPA

4 Retail Payments Governance in Europe

ECB-UNRESTRICTED DRAFT

5 Conclusions

Rubric

www.ecb.europa.eu © Retail payments accessibility. The European experience 3


1

2

3

4


SEPA state of play



Retail Payments Governance in Europe

5 Conclusions

Rubric


Definition of agent banking

• Agent banking is the business of delivering payment and remittance services through agent-based models

• It involves cooperation between banks and non-bank agents, where the former provide services through the latter (e.g. retailers, post offices, pharmacies)

• It aims to overcome obstacles (e.g. poor infrastructure, limited competition, insufficient coverage) impairing the delivery of efficient and affordable services through traditional bank channels


1. Agent banking and SEPA


Presenter

Presentation Notes

Agent banking allows the delivery of banking services in areas where banks would not have sufficient incentive or capacity to establish branches (especially in rural and poor areas, with a high percentage of unbanked or underbanked people).

Rubric


• SEPA comprises 34 countries: EU-28 + Iceland, Liechtenstein,

Monaco, Norway, San Marino, Switzerland • 522 million inhabitants (euro area 332 million), together making 86

billion payments (euro area: 60 billion) • Around 9,300 institutions offer payment services • All EU payments in euro are directly subject to SEPA provisions

5

The Single Euro Payments Area

ECB-UNRESTRICTED DRAFT 1. Agent banking and SEPA


Rubric

www.ecb.europa.eu © 6

• Consumers, companies, merchants − Can reach any account holder in SEPA easily & efficiently − Have legal certainty on terms and conditions of payments

• Companies operating cross-border − Can centralise their payment and liquidity management

• Banks, clearing & settlement infrastructures − Can offer their services SEPA-wide − Can reduce costs due to straight-through-processing

• Banks and non-bank service providers − Can develop innovative services based on agreed standards, e.g.

internet & mobile payments, e-invoicing

What benefits are expected of SEPA?




Rubric


• Shared objectives – safe, efficient, accessible, affordable retail payments

• Common enabling factors – safe and efficient clearing and settlement infrastructures – interoperability – adequate legal and regulatory framework – balance between private and public sector initiative – many players on the supply side of the market (banks and non-banks) – need for involvement of stakeholders from both the supply and the demand

side in the debate Agent banking and SEPA both contribute to financial inclusion, also leveraging technological advances

What do agent banking and SEPA have in common?




Presenter

Presentation Notes

Financial inclusion is intended as the delivery of financial services (offered by authorised providers) at affordable costs to unbanked and underbanked households. In a larger sense, the concept can be applied also to businesses, to the extent that they might as well be denied access to financial services.

Rubric



1

2

3

4


SEPA state of play





5 Conclusions

Rubric


Harmonised business rules

Legislation

Standardised infrastructure

Agreed set of instruments


Building blocks

2. SEPA state of play



Rubric


• SEPA credit transfer SCT – Provides customers with a single means of transferring funds, regardless of whether it’s

within a single country or cross-border

• SEPA direct debit SDD – Makes it possible, for the first time, to charge directly an account in one European

country for services provided by a company based in another

EU regulation 260/12 sets the 1 Feb 2014 as the end date for euro area countries to migrate their credit transfers and direct debits to SEPA (2016 for non euro countries)

• SEPA for cards

– Will enable consumers to use the same cards they use in their own country for purchases everywhere in Europe more conveniently. For merchants, accepting cards will become easier and more attractive

E-payments, m-payments and innovative payment solutions in general are expected to build on the existing SEPA instruments

10

SEPA Payment Instruments


2. SEPA state of play ECB-UNRESTRICTED DRAFT

Presenter

Presentation Notes

The SEPA end-date regulation will ensure: Same rules and standards for retail credit transfers and direct debits in euro, for instance use of IBAN and ISO20022 XML Pan-European reachability of payment service providers Free choice of payment locations for payment service users Consumer protection measures for direct debits Multilateral interchange fees eliminated for direct debits in euro Principle of equal charges across the euro area

Rubric


• International Bank Account Number (IBAN) • Business Identifier Code (BIC, to be phased out) • ISO20022 XML • EMV chip on all payment cards • Functional and security standards for cards and terminals

11

SEPA Payment Instruments



2. SEPA state of play ECB-UNRESTRICTED DRAFT

Rubric


ECB-UNRESTRICTED

Infrastructures in the euro area (excluding card and cheque clearing systems) PMJ

IPCC&IRECC

EURO SIPS

SICOI (SIBS) SNCE

(Iberpay) Dias

SEPA IKP

STEP.AT RPS

CEC

CORE (STET)

Equens

STEP2

ICBPI BI-COMP

SIA BI-COMP

JCC

ESTA


DRAFT 2. SEPA state of play

Rubric


How is SEPA affecting infrastructures? • SEPA is pushing for changes in the organisation of clearing and

settlement of retail payments in Europe • Infrastructures represent an enabling factor for the realisation of

SEPA • Two main models: EACHA and STEP2 • Increasing integration is expected, but it may take time:

– market-driven process – heterogeneous starting points in different countries – number of retail payment infrastructures expected to decrease as some reach

the end of their investment cycle, provided that owners/participants might find equivalent/better solutions in the market

– migration to SEPA instruments

• The Eurosystem as a catalyst in retail payment infrastructures development promotes integration and interoperability

ECB-UNRESTRICTED



Presenter

Presentation Notes

Heterogeneous starting points in different countries: Governance: scheme participants/national communities want to retain decision-making power/influence Processing of national payment instruments not migrating to SEPA will remain until 2014/2016 Availability of additional optional services, offering of value-added services Different clearing models and cycles Different settlement models and cycles Different risk mitigation measures

Rubric


ECB-UNRESTRICTED

Two main models have developed on the market: 1. interoperability framework for SEPA-compliant payments

processing by EACHA (European Automated Clearing House Association, 25 members)

– technical framework to facilitate the interoperability of infrastructures, particularly as regards message formats, message flows, routing provisions, network and connectivity provisions and the mechanism for the settlement of inter-ACH transactions

2. clearing and settlement of SEPA payments in STEP2 – retail payment infrastructures connected to STEP2 as “technical facilitators” to

allow their participants to send and receive payments from STEP2 – they need a direct participant (bank or central bank) in STEP2 to act as a

settlement agent

Both models should be able to deliver an efficient and competitive underlying infrastructure for retail payments



Presenter

Presentation Notes

In both models, settlement takes place in TARGET2

Rubric


Guidance to the market since 2008 (last update in 2013)

1. Processing of payments (according to Regulation (EC) No. 260/2012; compliance with EPC SEPA schemes, implementation guidelines);

2. Interoperability among infrastructures (establishing links for the exchange of SEPA payments);

3. Reachability (ability to send and receive payments to and from all SEPA scheme participants in the euro area);

4. Choice for SEPA scheme participants (transparency of services and pricing)

ECB-UNRESTRICTED



Eurosystem reference criteria for SEPA compliance of retail payment infrastructures

Presenter

Presentation Notes

Revised criteria were approved on 15 August 2013 by the Governing Council and are published on the ECB website http://www.ecb.europa.eu/paym/sepa/elements/compliance/html/index.en.html#infrastructures Access to payment systems is granted based risk considerations

Rubric



1

2

3

4


SEPA state of play




ECB-UNRESTRICTED DRAFT DRAFT

5 Conclusions

Presenter

Presentation Notes

Key objectives: Integration and competition Choice and transparency Pan-European price convergence Security & Trust Innovation

Rubric


Legal provisions in place

3. EU legal framework for retail payments




• Regulation 2560/2001 on cross-border payments in euro (replacing Regulation 924/2009) – Eliminates the differences in charges for cross-border and national payments in euro – Applies to payments in euro, in all EU Member States – Principle: charges for payment transactions in euro have to be the same whether the

payment is a national or cross-border payment

• Payment Services Directive 2007/64 (under review) – Harmonised terms and conditions – Harmonised transparency and information requirements – New category of service providers: payment institutions

• Regulation 260/2012 establishing EU-wide requirements for credit transfers and direct debits in euro – Sets end dates for migrating credit transfers and direct debits in euro – Amendment proposal for euro area countries: transition phase ending on 1 August 2014

Presenter

Presentation Notes

Regulation 2560/2001 on cross-border payments in euro applied to credit transfers and cash withdrawals. The cross-border payments covered were those in euro up to EUR 50 000 within the Community. Following EU legislation extended the scope to cover direct debits (reg. 924/09) and removed the ceiling (reg. 260/12).

Rubric


• Payment Services Directive 2 (PSD2) – Acknowledgement of Payment Account Access Services – Incorporating “one leg” transactions – Covering all currencies

• Regulation on Interchange Fees for Cards – 0.2 % for debit cards, 0.3 % for credit cards – Abolishment of scheme rules that are preventing cross-border issuing

and acquiring

• Directive on Payment Accounts – transparency and comparability of payment account fees, payment

account switching and access to a basic payment account

3. EU legal framework for retail payments




Legal provisions in the pipeline

Presenter

Presentation Notes

Main drivers: advances in technology and changes in users’ behaviour, competition cases, financial inclusion Proposal for PSD2: efficiency, non-banks (debate on access to payment accounts), consumer protection Proposal for IF regulation: competition and downward pressure on prices for the benefit of users PAD: basic account no matter the residence or income of the holder, financial inclusion as a concern for developed countries as well The ECB published its opinion on PAD in November 2013 and its opinions on PSD2 and IF regulation in February 2014

Rubric



1

2

3

4


SEPA state of play





5 Conclusions


Rubric


Possible governance approaches:

20

4. Retail Payments Governance in Europe

Regulatory approach? Self-regulatory

approach?

Or a mix of both approaches?





Rubric


To understand where we go, we need to see where we come from:

Roots of the SEPA project: Regulation 2560/2001 (same charges for national and cross-border payments and cash withdrawals) ⇒ strong call to the banking industry ⇒ White Paper of the three European Banking Associations declaring their commitment to work for a single euro payments area ⇒ set-up of the European Payments Council (EPC).

From a situation where banks were pursuing their objectives in isolation to a situation of interbank cooperation in certain areas: an environment of self-regulatory governance with the EPC as the driver of the SEPA project for several years but…

21

ECB-UNRESTRICTED DRAFT 4. Retail Payments Governance in Europe




Rubric



…retail payments are vital for participating in the economic and social life: beyond the EPC (representing the supply side of the market), the demand side of the market should be actively involved. • How: the SEPA Council Set-up in March 2010. Aim: an integrated euro retail payments market through the involvement of all parties and through consensus on the steps to be taken. Co-chaired by ECB and European Commission. Novelty element: its composition, i.e. payment service providers together with retailers, corporates, consumers, SMEs and public administrations & 4 Eurosystem NCBs on a rotating basis.

22





Rubric



• EPC produced the SCT and SDD rulebooks.

• Yet, at the moment of migration the self-regulatory approach reached its limits: demand and supply side could not migrate quickly enough on their own ⇒ SEPA migration end-date regulation with the work of the market as basis.

• The SEPA Council’s mandate required ECB and European

Commission to evaluate the efficiency and functioning of the SEPA Council by the end of 2012 & concerns of stakeholders on the current set-up of SEPA governance… 23





Rubric


…the Euro Retail Payments Board was created in December 2013 to replace the SEPA Council. Why?

- Feb 2014: key milestone. But work is not over!

- Migration: a solid base for further development and integration of retail payments in euro ⇒ start of a new phase in the European retail payments integration process.

- The need to address retail payment issues in their broadest sense at European level by means of a European dialogue between banks, other payment service providers and end-users of payment services goes beyond 1 February 2014! 24





Rubric


Euro Retail Payments Board

- Objective: contribute to the creation of an integrated, competitive, innovative and level-playing field market for euro retail payments in the EU. Wider mandate and clearer tasks in comparison to SEPA Council.

- Composition: high-level representatives of the demand and supply side of the European market for retail payment services in euro. Extended membership in comparison to SEPA Council in order to capture a wider scope of end-users and new types of payment service providers.

- Role of ECB and European Commission: ECB as chair – European Commission as observer.

25





Presenter

Presentation Notes

The Euro Retail Payments Board (ERPB), created in December 2013 by the Governing Council, aims to identify strategic issues and priorities (incl. business practices, requirements and standards) and �to ensure they are being addressed. Focus areas: SEPA for Cards and further card payments standardisation Innovative payment solutions, e.g. mobile payments, e-commerce Leverage European achievements + lessons learnt to global level Composition: 7 from supply side (credit, e-money, and payment institutions) 7 from demand side (consumers, retailers, corporates), 6 NCB Board members (5 + 1 non-euro area, all on rotating basis), ECB Chair and European Commission (DG MARKT) as observer

Rubric


Euro Retail Payments Board

- Powers: ERPB to act on its own initiative, but no formal powers to impose binding measures. Close involvement of the ECB (chair) and the European Commission (observer) to ensure that directions taken by the ERPB are not in conflict with the common European interest.

- Work delivery: the ERPB will be an output-driven body. For the execution of its mandate, the ERPB may establish working groups for a limited period of time for dealing with specific work priorities. This feature introduces a substantial difference with respect to the SEPA Council.

26





Rubric


Our guiding principles therefore remain:

- A European dialogue approach between banks, other payment service providers and end-users of payment services;

- An optimal mix between regulation and self-regulation.

27





Rubric



1

2

3

4


SEPA state of play





5 Conclusions


Rubric


5. Conclusions



• Same fees for cross-border as for national payments • 1 business day as maximum execution time for

electronic payments across Europe • A harmonised EU legal framework for retail payments • SEPA credit transfer can be used since early 2008,

SEPA direct debit since late 2009

+ Increased security of payment cards: migration from magnetic stripe to chip cards

+ Start of a social dialogue - between users and providers - on retail payments in euro to directly include the customers’ perspective

What difference has SEPA made so far for European citizens?


Presenter

Presentation Notes

Fees for cross-border credit transfers have dropped by around 90% between 2001 and 2011 �(EU Regulation 2560/2001 on cross-border payments and its successor Regulation 924/2009) Transaction time for credit transfers has decreased from average 3.3 days in 2001 to max. 1 day in 2012�(D+1 rule introduced by the Payment Services Directive in 2007) EMV migration of cards was broadly achieved by end-2011 in EU-27 (by market self-regulation)

Rubric


• The CPSS is carrying out analyses in the field of retail payments - also focusing on the role of non-banks - taking also into account the European experience

• Payments are becoming less local and more global… and the ECB aims to “ensure efficient and sound clearing and payment systems” within the EU and with other countries

SEPA TODAY GLOBAL BLUEPRINT FOR NON SEPA

5. Conclusions



SEPA for non-SEPA countries


Presenter

Presentation Notes

SEPA is becoming a reference also in other regions of the world Examples: The ISO 20022 standard, which is used for SEPA, is more and more being adopted for retail payments in other countries abroad. The International Payments Framework is trying to harmonise payments between e,g, Europe, the US, Brazil, Southern-Africa, Australia, and South-East Asia. The CPSS is doing work to get more consistent regulations and harmonised standards.

Francisco Tur Hartmann, Retail payments...

Documents

Transcript of Francisco Tur Hartmann, Retail payments...