the change-over to sepa michiel van doeveren

The Change-over to SEPA

Michiel van Doeveren

Sixth Macedonian Financial Sector Conference on Payments and Securities Settlement Systems

Ohrid, 1-3 July 2013

• Background of Single Euro Payments Area (SEPA)• SEPA products• SEPA Migration• National Forum on SEPA migration SEPA

communication• Concluding remarks

Agenda

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What is SEPA?

One single market for retail payments in euro in 33 countries

Why SEPA?

• Logic completion Internal Market

• To enforce European economy

• Mandatory by European Regulation

• End date: 1st February 2014

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• Political vision: One internal “domestic” market for euro retail payments,

generating economies of scale and promoting competition

• Aim: Consumers and businesses will be able to make and receive

payments in euro within Europe under the same basic conditions, rights and obligations, regardless of their location

• Concretely:European payment instruments for both cross-border and

domestic payments in euro: credit transfers, direct debit and cards. This also means the end of all domestic payment instruments.

SEPA, what is it?

• The euro is the common currency of 17 countries today

• But retail paymentsare still organised nationally

SEPA: before…

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• A uniform Euro Payments Market• With common

standards for bank account numbers, credit transfers, direct debits, and more…

… and after

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SEPA, how?

• Self-regulation by European banks in European Payments Council:

Common rules and standards for euro payments in Europe

• Legal harmonisation of all European legislation:

Payment Services Directive for euro and non-euro payments End date(s) for national payment instruments

• Account number becomes International Bank Account Numbers (IBAN)

• SCT becomes standard for credit transfers• SDD becomes standard for direct debits• XML becomes technical standard

(ISO 20022)

Clear but with a major impact

What specifically will change?

Pros and cons Internal (euro) market for retail payments

In the long run• More choice processors and providers payment services • Scale effects in processing • Increased competition and innovation • Decreasing costs of payments

In the short run • More efficient cross border paying and collecting • Cross border collecting by direct debit • Centralisation of accounts

But........• Nothing ventured, nothing gained • Cross border euro payments < 2% of total payments • Migration mainly domestic process• Difference in current levels of efficiency

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ECB: SCT indicator Q1 2013

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National SCT indicators

There is no breakthrough in a majority of countries

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National SDD indicators

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Traffic lights: SCT

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

Banks

Big billers

PA

SMEs

‘’Traffic Lights’’ SCT

SEPA migration has been successfully completed by all representatives

SEPA migration is in progress

SEPA migration has not started yet

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Traffic lights: SDD

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

Banks

Big billers N.A. N.A.

PA N.A. N.A. N.A. N.A. N.A. N.A. N.A.

SMEs N.A. N.A.

‘’Traffic Lights’’ SDD

SEPA migration has been successfully completed by all representatives

SEPA migration is in progress

SEPA migration has not started yet

BanksBig billersPASMEs

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Status SEPA Migration Belgium



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Germany


Status SEPA Migration Germany


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Spain


Status SEPA Migration Spain


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The Netherlands


Status SEPA Migration The Netherlands

• IBAN : International Bank Account Number• Administrator of national IBAN registers (ISO): SWIFT

IBAN

Countrycode (ISO)

Bank identifierCheck digit

Domestic accountnumber

• Notes:- The bank identifier is country-specific

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

- Each country has its own Basic Bank Account Number system

- The Netherlands has an 18-digit IBAN

• EPC Interbank standard for credit transfers in euro 2008

• Main characteristics:• Payments are made for full original amount• IBAN and BIC• ISO 20022 UNIFI standards • 140 characters of remittance information are delivered to

beneficiary • Unstructured or restructured remittance information as

agreed between partners

• End dates:• 1 February 2014 (31 October 2016 for non-euro countries)

SEPA Credit Transfer

• EPC Interbank standard for direct debits in euro - introduced in 2009

• Main characteristics:• Payments are made for full original amount• IBAN and BIC• ISO 20022 UNIFI standards • One-off or recurrent• A mandate is signed by debtor (option: e-mandate)• Pre-notification (14 calendar days in advance)• Refunds (PSD: 56 days) and returns

• End dates:• 1 February 2014 (31-10-2016 for non-euro countries)• No domestic MIF after 1 February 2017

SEPA Direct Debit

Information flows and choice of channel

• Basis: business-to-consumer relationship with business as initiator

• Business delivers payment instructions to bank and receives reports back

• Customer’s choice of channel driven by various considerations:

• Timing: carefully determine when instructions are executed and fast account reporting;

• Functionality: payment products and formats (from back office) as desired;

• Completeness: correct reference information in instructions (end-to-end) and reports (for automated reconciliation);

• Secure: payment files cannot be manipulated.

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Clearing & Settlement

Channels

• Banks offer their customers various channels for exchanging payment instructions and account information

• Choice of channel depends in part on type of customer (retail, wholesale), products used and volumes

• Main channels1. Paper2. Internet banking3. Client application4. Bulk channel

1. Paper

Features

• Forms (based on BBAN) for initiation

• Account statements for reporting

• Only for very low volumes

• High cost per transaction

• Generation and processing by customer not computerised

Impact of SEPA

• Adjust forms to IBAN

• Report must include mandatory information (rule books), including IBAN, reference, (original) initiator

Examples

• Supported by most banks, used by customers with little computerisation or non-standard instructions (e.g. urgent payments)

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2. Internet banking

Features

• Automation by banks

• Manual input of payments or upload

• Reporting on screen or downloaded

• Limited volumes (100-1,000 tx/day)

• Limited integration possible with back office systems

Impact of SEPA

• Adjust screens (IBAN) and upload and download format (to XML)

• Bank decides migration date

• Bank can offer central migration support services

Examples

• Almost all banks have extensive websites

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File formats will change under SEPA

• Current situation: national formats for payment instructions and reporting

• Additional information in SEPA messages, does not fit current formats:• IBAN (SCT, SDD)• Creditor scheme identifier (SDD)• Mandate information (SDD)

• Therefore, change to ISO 20022 XML for SEPA products:• Payment instructions: mandatory via PAIN messages• Reporting: CAMT messages (not mandatory)

• Banks’ own reporting formats permitted provided they meet SEPA requirements

• EPC Cards Framework

• Ideal situation: ‘Any card at any terminal’• Schemes which are accepted throughout Europe• Open non-discriminatory card scheme membership• Uniform pan European processing for all schemes and processors

• Options for SEPA Compliancy • Make national schemes SCF-compliant • Replace national by international schemes• Co-branding

• Initiatives for additional European Card Scheme

• Safety• EMV-implementation: Chip and PIN code

SEPA for Cards

SEPA for cards: policy issues (Green Paper)

• Multilateral interchange fees (see following slides)• Transparency on fees• Co-branding• Central licensing, issuing or acquiring• European POS-terminal• Honour all cards rule• Blending• Chip-only cards• Mobile payments• Access to Bank Accounts (Dual Consent-approach)

How do Dutch consumers pay when abroad?

How do Dutch consumers make cross-border payments?

Cross-border payments by Dutch consumers: trends and attitudes

• Differences in the use of debit cards at home or abroad have declined

• Growing satisfaction with debit card use abroad• Debit cards are seen as safer and easier to use than cash• Acceptance levels do leave some room for further improvement• For cross-border payments, online banking is seen as the safest

option• For ease of use, credit cards score highest• PayPal is considered the cheapest and fastest means of payment• Satisfaction with the costs of cross-border payment through online

banking has increased in recent years

Organisation of the NFSNational Forum

on SEPA Migration (NFS)

Individualparties

Programme Agency

Stakeholders represented in national migration via umbrella organisationsProgramme linked to migration activities of umbrella organisations

Task Force SEPA Netherlands

High-level consultations

Software suppliers

Supporting partiesProviders UsersUmbrella

organisations

• All stakeholders involved• Information-exchange and binding appointments• Activities with respect of

• planning migration • communication • monitoring• Signaling and solving of social migration

problems• Three levels: Board, Technical and a Programme

Office

National Forum on SEPA-migration (NFS)

• Impact analysis SEPA Regulation (2011)• New National SEPA Migration Plan (2011)• Establishment of NFS (2011)• Projects and activities (2012-2014)

• Central communication campaign • Stimulating the development of SEPA-proof software• National governance • Exchange of experiences• Identifying and resolving migration issues and risks• Monitoring SEPA change-over

Activities NFS 2011-2014

Infrastructure ready for mass migration

Adjust infrastructure to European payment instrument requirements

Public information campaign

Communication by umbrella organisations, intermediaries, banks

1-10 1-3 1-7

Adjust applications

Support user migration

Software suppliers

Communication

Banks

Support user migration

Wholesale SCT users

Small-business SCT users

Consumers

Wholesale SCT users

Small-business SCT users

Early movers

Early movers

Increasing use of IBAN

Early movers

Early movers

Mass migration

Mass migration

Mass migration

Mass migration

Specifications for basic product range for business users

SDD meets Regulation’s consumer protection requirements

1 February: end date for migration to SCT and SDD

2012 2013 2014

SCT SDD

Possible use of n

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Possible use of n

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National Migration Plan

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• Full migration per 1-2-2014 remains the common goal

• The Netherlands will not make use of waiver possibilities

• Banks and software companies under pressure to be ready in time, preparations are in order; ultimately end of Q2 2013 the basic payments infrastructure will be ready for full mass migration.

• Major concern is congestion close to the end-date.

SEPA – General remarks

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 SEPA2. Stage of preparations3. Actual use of SEPA payment instruments4. Development of software packages

SEPA-preparations

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SEPA Communication campaign

• To improve knowledge on IBAN and products • Three stage rocket: - General public campaign

- Umbrella organisations with members

- Enterprises & organisations with clients• Timing: milestones

Public information campaign:

Iedereen krijgt een langer rekeningnummer.Uw bedrijf dus ook.Houd er rekening mee.

Everyone will have a longer account number. Including your business. Take it into account.

SEPA communication

Campaign website

Toolkit• Banner

• Factsheet/flyer

• Animation(s)

• Campaign logos

• SEPA checklist for firms

• Source texts

• Set of Q & A

• Helpdesk

• Radio and TV commercials

• Template impact analyse

More information via www.overopIBAN.nl & www.sepanl.nl

Information

http://www.sepanl.nl/

http://www.sepanl.nl/

The SEPA-migration is under way.The success of SEPA depends on•Timely implementation of the National Migration Plans with respect to the end date for national payment instruments (SEPA-Regulation)•Well organised stakeholder involvement and consultation•SEPA for Cards means ‘Any card at any terminal’ - this requires time•Further European standardisation, which is not easy•What is coming after 1 February 2014?

Concluding Remarks

• What are the advantages of SEPA for different market parties?

• What are possible barriers for the migration to SEPA for market parties?

• How could SEPA governance be organised on an European and national level?

• What could be the next wave of SEPA products after 1 February 2014?

• How could countries outside Europe profit from SEPA?

Discussion points

the change-over to sepa michiel van doeveren

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