Single European Payments Area Belgian Financial Forum, 30th May 2006

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Antoon Termote Senior General Manager Group Payments, KBC Group

SEPA-components : Credit transfers and direct debits

30th May 2006 Belgian Financial Forum 2

Political objective of the European Commission March 2000 (Lisbon Summit)

Make Europe the most dynamic and competitive economy by 2010.

This means:• Strengthening the Internal market by removing obstacles

to trade in goods and services• Developing efficient, cheap and secure payment system

and instruments• Setting up a New Legal Framework for all payments in the

Internal Market

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SEPA-Timeline for action

2010

2009

2008

2007

2006 2005 2004 2003 2002

EURO

EC Reg. 2560

EC Reg 2560 cap increase 50.000 €

SEPA for citizens

SEPA for infrastructure

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SEPA structure

SEPA will be built on three pillars supported by the NLF that

creates the legal base

NEW LEGAL FRAMEWORK

SEPA

DIRECT DEBIT

SCHEME

SEPA

CREDIT TRANSF

SCHEME

SEPA

CARDS

FRAME-WORK

IBAN/BIC Infrastructure

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SEPA applicability

EFTA

EU 25

Eurozone

Present situation

• National schemes and standards• Usage and habits divergent from

country to country • Different laws

SEPA

• 1 Product standard• 1 ? Infrastructure • 29 countries

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The SEPA framework is standardizing the bank-to-bank payment process.

Originator‘sBankOriginator

Beneficiary’sBank Beneficiary

PE-ACH

Phone Banking ? CODA ?

SEPA “products” including bank value-add

EPC rulebooks

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SEPA Credit Transfer

• Customer Account Number : IBAN - BIC• Form : new layout (after 35 years)• Execution Time : 2010 all transfers D+1• File layout• Cut-off time : now continuously ; SEPA depends on

operator• STP• Free message length• Structured message : to be defined

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SEPA Direct Debit

• Mandate : at beneficiary

• Mandate revocation : with beneficiary

• Payer complaint : up to 6 weeks

• File layout

• Cut-off time file remittance

• Value dating payer and payee

• Pan-European system

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IBAN & BIC

Belgium 539-0075470-34IBAN BE68 5390 0754 7034BIC BANKBEBB

• France 18206 00010 30569664001 17IBAN FR76 1820 6000 1030 5696 6400 117BIC BANKFRPP882

• The Netherlands 12.34.56.789IBAN NL97 BANK 0123 4567 89BIC BANLNL2A

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Credit Transfers in practice

Present situation

• Use of SRI1

• Value date IEP2 D+3

• Use of BBAN credit transfer form

1 Structured Remittance Information

2 Intra EEA EUR Payments

SEPA

No SRI available

Value date IEP from 2008 D+3from 2010 D+1

No SEPA credit transfer form available

Belgian application

Continued support of SRI on Belgian level

Value date IEP from 2008 D+3 from 2010 D+1

Belgian SEPA credit transfer form will be created

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Draft Belgian Credit Transfer Form

LOGO BANKDatum en handtekening(en)

Bij invulling met de hand, één HOOFDLETTER of cijfer in zwart (of blauw) per vakje

. . . . . . . .,..

EUR CENT

. .

Mededeling (in HOOFDLETTERS)

Naam en adres begunstigde

Naam en adres opdrachtgever

Rekening begunstigde (IBAN)

BIC begunstigde

Rekening opdrachtgever (IBAN)

Gewenste uitvoeringsdatum in de toekomst

OVERSCHRIJVINGSOPDRACHT

. . . . . . . .

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Direct debits in practice

Present situation

• National system

• Refusal order possible till D+4 days

• Administration mandates at debtors bank

SEPA

Pan-European orders will be possible

Refusal order possible till D+6 weeks

Administration mandates with creditor

Belgian application

National and cross- border orders in one system

Extension refusal period till D+6 weeks

Migration of administration to creditor

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Impact on Consumers

European dimension : – bank tariffs converge– consumer protection common– account number change to IBAN– bank accounts with same

payment instruction common standards – time-schedule & cut-off time common– Straight Through Processing common– cross-border direct debits new productBelgian dimension :– one-of direct debit new product– long period (6weeks) to refuse direct debit order

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Impact on SME & Corporates

European dimension : Idem Private customers +– interfaces with ERP– use of ISO standards– guaranteed remittance dates – optimize number of bankaccounts and bankrelations– steering of payment traffic depending on ‘European’ conditions

Belgian dimension :– administration direct debit with companies (creditor)– uncertainty on collection of direct debit orders (long refusal

period)

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Payments market in the Eurozone

• Depending on the country, current behaviour is very different.

• To what extent will SEPA influence the pattern of behaviour ?

• What will be the effect of standardization on competition ?

• What will be the effect on the processing of payment transactions ?

Source: World Payments Report

Use of payment instruments in the eurozonein % of total payments business

010203040506070

credit transfers direct debits cards cheques e-money

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Changes in Euroland

• The banks rose to the challenge …• … but neither is the Commission satisfied … (Consultative Paper on SEPA Incentives, 13 Feb 06)

• … nor is the European Central Bank !

(Towards a Single Euro Payments Area, 4th progress report, 17 Feb 06)

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Making the dream become a reality

• SEPA is a goal for the European Union, designed to make Europe the World’s leading economy by 2010

• All stakeholders are involved to realize SEPA (retail, wholesale, public authorities, government, national bank, banks, …)