Migrating to SEPA; infrastructural change needs direction

Transcription

1 Migrating to SEPA; infrastructural change needs direction One end-date will limit costs and materialize SEPA benefits in the shortest possible scenario addendum to NVB considerations on EC Working Paper on SEPA Migration end-date

2 Lisbon agenda - driver for SEPA Integration of the euro payments market as a prerequisite to make the EU internal market the most competitive economy globally, by realizing to the benefit of businesses and consumers: improved cash flow reduced costs easier access to new markets increased competition in the payments market via: common standards faster settlement simplified processing 2

3 SEPA: transforming to 1 Euro payments infrastructure Present: 16 Euro-country standards Local unique identifier for the bankaccount (BBAN) Local customer bank interface standards Local product rules SEPA: 1 European ( uro) standard IBAN (+BIC) ISO EPC Rulebooks Migrating 16 Euro counties to SEPA involves: over 4500 banks are ready by end million businesses (est.) must start now 327 million inhabitants will follow businesses 3

4 SEPA payment chain: more than the bank-bank domain Customer domain Customer to Bank domain Bank Bank domain 1. Initiation 2. Send 3. Processing 4. Output 5. Reconciliation 6. Archive Migrating to common SEPA standards impacts not only the bank bank domain; the IBAN and other payment parameters, are key elements in administrations, invoices, reporting, mandates and other payment related communications in the overall C2B and B2B relationship. Implementing SEPA infrastructure requires incentives as the SEPA standards do not offer immediate advantages compared to the domestic standards for endusers and can not only be mandated in the customer-bank domain (2,3,4). 4

5 SEPA payment chain: more than the bank-bank domain Customer domain Customer to Bank domain Bank Bank domain 1. Inititiation 2. Send 3. Processing 4. Output 5. Reconciliation 6. Archive SCT mandate SDD SCT and SDD follow the same steps in the payment chain. For SCT the payment processing is started by the payer, for SDD by the payee, based on a mandate. 5

6 SEPA Migration: current status Legal framework in place with the implementation of the PSD in 2009 EPC Rulebooks and implementation guidelines are ready and operational; banks and processors ready by end 2010 Limited implementation by governments and big corporates; majority sits and waits due to lack of (direct) benefits and formal end date End date needed to materialize full migration to SEPA 6

7 Situation today: dual payment infrastructures operational Local payment instruments: standardized use through the whole payment chain EPC Rulebooks (scope bank-2-bank) available for core payment instruments (SCT, SDD) SEPA instruments operational in bank-2-bank domain; limited use by end users Extra costs for double infrastructures Local payment instruments SEPA payment instruments -costs -costs Bank s domain Customer Bank domain Customers domain 1. Inititiation 2. Send 3. Processing 4. Output 5. Reconciliation 6. Archive 7

8 Migrating to SEPA Credit Transfer (SCT) what is impacted? 1. initiation communicate change to SEPA payments use of IBAN (invoice) 2. send banking application payment order interface (file transfer / standards) 3. processing 4. output bank domain = SEPA payment reporting interface (file transfer / standards) 5. reconciliation 6. archive compare invoice with payment (IBAN + customer data) exception processing customer service customer data IBAN 8

9 Migrating to SEPA Direct Debit (SDD) what is impacted? 1. initiation 2. send 3. processing 4. output 5. reconciliation 6. archive communicate change to SEPA payments use of IBAN (invoice) new mandates (IBAN) banking application payment order interface (file transfer / standards) new processing procedures & timelines bank domain = SEPA payment reporting interface (file transfer / standards) payment initiation process compare invoice with payment (IBAN + customer data) exception processing customer service customer data IBAN mandate management 9

10 Migrating SCT / SDD what is shared? 1. initiation 2. send 3. processing 4. output 5. reconciliation 6. archive communicate change to SEPA payments use of IBAN (invoice) new mandates (IBAN) banking application payment order interface (file transfer / standards) new processing procedures & timelines bank domain = SEPA payment reporting interface (file transfer / standards) payment initiation process compare invoice with payment (IBAN + customer data) exception processing customer service customer data IBAN mandate management SDD impacts the same elements (IT-systems & procedures) in the payment chain as SCT (and more) Change to SEPA payments is based on the use of IBAN; payers and payees will change to the use of IBAN for SCT and SDD in one go When changes for SCT and SDD are not combined both payer and payee need to maintain two payment systems in parallel. 10

11 Interim summary Migrating to SEPA infrastructure impacts the whole payment chain; payer and payee must remain in sync as much as possible. An end-date is needed to overcome the hurdle that the short/medium term benefits are not convincing enough to individually spend the short term extra costs for change. Payment users will change to IBAN and with that to the use of SCT and SDD in one go. Payer and payee want to convert from local payment instrument to SEPA and vice versa as limited as possible. Migration to SEPA needs clear guidance based on the EPC Rulebook open standards. One end date will minimize the overall migration effort. 11

12 Effect end-date scenario on Lisbon agenda Do nothing Market will not move (substantially) to SEPA instruments, SEPA will not easily reach critical mass; benefits of SEPA will not materialize: Long, undetermined period of dual infrastructures operational Extra fixed and operational costs for banks and businesses for uncertain period Old infrastructures need to remain to service the laggards; early adaptors not rewarded Payers and payees not in sync; market communication unclear SEPA perspective 5 7 years: improved cash flow for businesses reduced costs easier access to new markets increased competition in the payments market X X X X 12

13 Effect end-date scenario on Lisbon agenda Set one end-date for SCT and SDD One end-date will align with the need for both payers and payees to combine the IT and procedure changes in the payment chain Market will have clarity that migrating to SEPA is inevitable: Period of dual infrastructure (SEPA next to local) is clear and limited Extra operational costs for banks and businesses can be forecasted Critical mass of SEPA users reached in clear and limited time frame Payers and payees more in sync; market communication clear SEPA perspective 5 7 years: improved cash flow for businesses? reduced costs V easier access to new markets V increased competition in the payments market - 13

14 Effect end-date scenario on Lisbon agenda Two end-dates for SCT and SDD Market will envisage two migration scenario s. Mass payments users which use both will focus on full migration in one go: The latest date will become the de facto end-date for all Period of dual infrastructure and double costs is longer and less clear than with one date Market communication more complex; what will be the message to the mass market (consumers)? SEPA perspective 5 7 years: improved cash flow? reduced costs - easier access to new markets - increased competition in the payments market - 14

15 Conclusions 1. One end-date needed to phase out local payment instruments and materialize the SEPA benefits in the most efficient (shortest) scenario: Matches the similar changes for SCT and SDD (end-2-end) Provides clarity to the market: Underlines that migrating to SEPA is inevitable Synchronizes payer and payee Supports SEPA goals with a clear message Must be in line with investment and IT-change cycles of 3-5 years EU Regulation to set the end-date should be based on the EPC standards as they provide clear processing standards and implementation guidelines for all payment service providers 15