Single Euro Payments AreaSEPA

Ann BörestamPayment Systems and Market Infrastructure

European Central BankDRF Conference, Basel, 25 April 2006

Overview

• SEPA general objectives • SEPA instruments• SEPA infrastructures and standards• Proposed directive on payment

services

General objectives

Ultimate SEPA objective:• A euro area in which all payments are

domestic • Within the SEPA, customers will be able to

make payments throughout the whole euro area as efficiently and safely as in the national context today

• If they so wish, using a single payment account and a single card

• The project aims to develop common instruments, standards, procedures and infrastructures in order to foster substantial economies of scale

General objectives

Specific issues concerning different payment instruments- Credit transfers- Direct debits- Cards

And some « common » horizontally- Infrastructure (ACHs)- Standardisation- Common regulatory aspects

The multidimensional aspect of the project and as a consequence its complexity

General objectives

General objectives

The timing: 01/01/06 01/01/07 01/01/08 01/01/09 01/01/10 31/12/10

Today Deadline 1 Deadline 2-Consolidation

Preparation Migration to be completed

-Some local instruments

to be phased out

SEPA instruments

available

SEPA instruments

in general use

The timing: 01/01/06 01/01/07 01/01/08 01/01/09 01/01/10 31/12/10

Today Deadline 1 Deadline 2-Consolidation

Preparation Migration to be completed

-Some local instruments

to be phased out

The timing: 01/01/06 01/01/07 01/01/08 01/01/09 01/01/10 31/12/10

Today Deadline 1 Deadline 2

SEPA instruments

The EPC has organised the SEPA project around three core payment instruments:Credit transfers RulebookDirect Debits RulebookCard payment SEPA Cards Framework

A lot of work has been done, but there are still some shortfalls of Rulebooks/Framework that needs to be addressed by the EPC

SEPA instruments

Credit transferEPC achievement:

A basic scheme, with a maximum 3 day execution timeImprovements required:• investigating the possibility for D+1 execution time• same day transaction standard to be defined by EPC• structured customer information e.g. remittance information

and a code for automatic reconciliation

Direct debitEPC achievement:

A basic direct debit scheme with mandate flow from debtor to creditor

Improvements required:• an alternative mandate flow from debtor to debtor bank• business-to-business option• ensure reachability of all debtor banks

SEPA instruments

CardsEPC achievement:

Adoption of SEPA cards framework (SCF)Improvements required:• interoperability of schemes (standards, common

business practices)• interchange fees (no longer differences based on

geographical ground• fraud prevention

SEPA instruments

SEPA infrastructures and standards

Standardisation:at the very core of the SEPA project

covers a wide range: from POS’s terminals to settlement infrastructure standards

standards are the prerequisite for ending national fragmentation, integrating markets, promoting interoperability and consolidation of infrastructures

SEPA infrastructures and standards

Infrastructure

consolidation needed but may take time (investment cycles)

interoperability

Conclusion

Certainly, major parts are well on track but should be careful not to loose momentum

Factors that could hinder progress:- Weakness of banks’ commitment- Low use / low interest by end-users (including public administrations)- Design of solutions that are below current national standards / Mini-SEPA- Non-coherent assessment procedure / self-assessments Communication strategy, assessment strategy, addressing shortfalls, profitable solutions etc

Proposed directive on payment services

The aim of the Commission is to create a Single Payment Market by eliminating barriers between member states for the provision of payment services, and by creating conditions for competition, integration and rationalisation of national payment systems.

•

Proposed directive on Payment services

Scope of the proposed directive• Both consumer and business payments

(Titles III and IV of the directive do not apply on payments exceeding EUR 50 000)

• At least one payment service provider must be located within the Community

• All currencies

Proposed directive on Payment servicesPayment institutions• Payment service providers which are not a credit

institution, an e-money institution or a post office giro institution

• Payment services, operational and ancillary services, accessing and operation of payment systems

• Should be licensed• Authorisation requirements could be waived under

certain circumstances (in that case no single license)

Proposed directive on payment services

Information requirements• Contractual conditions including changes • Obligations and liability• Execution times • Point in time of acceptance of a payment order• Charges or fees• Exchange rate• Redress and complaint procedures• Applicable law

Proposed directive on payment services

Rights and obligations• Authorisation of payment transactions• User liability max EUR 150 (except when

acting fraudulently or being gross negligent)• Acceptance of payment orders• Execution times D+1• Strict liability for non-execution or defective

execution

Thank you very much for your

attention