Making SEPA a Reality

www.europeanpaymentscouncil.org Pres EPC080/06 Making SEPA a Reality Charles Bryant EPC Secretary General Financial Services Consumer Group, 5 December 2006, Brussels

What is SEPA? The EPC s Roadmap 2004 2010 document states: The Single Euro Payments Area (SEPA) will be the area where citizens, companies and other economic actors will be able to make and receive payments in euros, within Europe, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of their location. Today, SEPA includes the EU25 member states (soon to be 27), Iceland, Norway, Liechtenstein and Switzerland. Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 2

Scope of the PSD and of SEPA COMMISSION OF THE EUROPEAN COMMUNITIES PSD Compliance EUR Domestic payment instruments and infrastructure (EUR) Domestic payment instruments and infrastructure (non euro-currencies) SEPA payment instruments and infrastructure (EUR) SEPA payment instruments and infrastructure (EUR) EU12 EU13 (+2) EU25 (+2) Voluntary Adoption of PSD Provisions Non EUR Domestic payment instruments and infrastructure (non euro-currencies) SEPA payment instruments and infrastructure (EUR) EEA + CH Source: EBA Association SEPA Compliance Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 3

Who is involved? Champions of SEPA European Commission (EC) European Central Bank (ECB) and Eurosystem European Payments Council (EPC) representing the European Payments Industry Commitment and support from all involved in the payments process is esssential to make SEPA a reality Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 4

What is the EPC? The European Payments Council (EPC) EPC is the decision making and co-ordination body of the European banking industry for payments Its declared purpose is to support and promote the creation of a harmonised, open and interoperable European payments market through self-regulation It was established in June 2002 and adopted its current governance structure in mid 2004 EPC consists of 67 Members, composed of banks and banking associations For more on SEPA and the EPC, visit the EPC Website & read Making SEPA a Reality www.europeanpaymentscouncil.eu Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 5

The Commitment of EPC as declared at Plenary in March 2005 We, the EPC, are committed to building the Single Euro Payments Area (SEPA) and have already delivered SEPA payment solutions which are in growing use by European citizens and corporates. We have approved and are delivering a Roadmap for the full realisation of SEPA. We will deliver the two new Pan-Euro Payment Schemes for electronic credit transfer and for direct debits. We will also design a Cards Framework to define a single market for cards. The scheme rulebooks and the cards framework definition will be delivered by end 2005, and the services will be operational by January 2008. We know from feedback from our community in the eurozone that by the beginning of 2008 the vast majority of banks will offer these new Pan-Euro services to their customers. We are also convinced that a critical mass of transactions will naturally migrate to these payment instruments by 2010 such that SEPA will be irreversible through the operation of market forces and network effects. SEPA will be delivered by the banking industry in close conjunction with all stakeholder communities (consumers, SMEs, merchants, corporates and government bodies) and supportive public authorities. The community of European banks is strongly committed to this ambitious programme of action, based on self-regulation and a full recognition of the role of market forces and competition. We have created the necessary conditions for success through commitment and consensus on the part of EPC and all its banking communities. Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 6

What will be the impact of SEPA? Impact on the payments market: Implementation of new common business rules & technical standards Core credit transfers, direct debits and card payments will migrate to interoperable formats and processes Gradual phase out of national market features and practices Impact on the economy and society: Enhanced competition in the provision of payment services More efficiency in payments is expected to deliver tangible benefits Systemic strengthening of the euro currency Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 7

SEPA components A Scheme is a set of rules, practices and standards agreed between providers of payments services SEPA Credit Transfer (SCT) Scheme SEPA Direct Debit (SDD) Scheme The strategy adopted for payment schemes includes: replacement of current schemes (25+ today) separation of Scheme from Clearing & Settlement Mechanism (CSM) Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 8

SEPA components SEPA Cards Framework (SCF): a policy framework under which actors may adapt to create SEPA for cards A strategy of adaptation of current schemes has been adopted Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 9

What has been delivered so far? For the two new Schemes: SEPA Credit Transfer Scheme Rulebook SEPA Direct Debit Scheme Rulebook Supporting documents: SEPA Data Model UNIFI (ISO 20022) XML Standards Implementation Guidelines PE-ACH/CSM Framework For Cards: SEPA Cards Framework an EPC policy document Standards Process for Cards a process for cards standardisation and an initial workplan Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 10

Positioning SEPA Payment Schemes CLIENT CHOICE COMPETITIVE Core and Value Added Services COOPERATIVE Client 1 Client 2 End to End Standards and Data-Elements PRODUCT & SERVICE LAYER SCHEME LAYER EPC Scheme Management Business Rules & Practices Bank 1 SEPA Credit transfers Rulebook SEPA Direct debits Rulebook Bank 2 Standards EPC COOPERATIVE Principles for SEPA Scheme-compliant Clearing & Settlement Mechanisms INFRASTRUCTURE LAYER BANKS CHOICE PARTLY COMPETITIVE PARTLY COOPERATIVE PE-ACH SEPA-Scheme Compliant ACH Bilateral/ Multilateral/ Decentralised Intragroup Pure Bilateral BANKS + CSM CHOICE COMPETITIVE PROCESSORS NETWORKS Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 11

When will SEPA happen? From 2008 : SEPA payment instruments will operate alongside existing national processes End 2010: full migration, purely national solutions will no longer exist Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 12

What are the SEPA benefits? (1) Consumers reach all accounts SEPA-wide from one home country account more widely accepted payments cards will displace cash, improving safety and security Merchants accept payment cards from all SEPA countries simplified back office processes Smaller businesses faster settlement and simplified processing will improve cash flow and reduce costs receive or make euro-payments within SEPA on the same basis Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 13

What are the SEPA benefits (2) Large merchants and corporates standard platform results in major savings one single file in a common format to receive and send payments Government and public administrations improved services to citizens at home and abroad Banks develop innovative products enter new markets and develop new relationships Payment sector suppliers develop low cost new technology products and services Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 14

Actions needed from banks EPC and the European banking industry are committed to SEPA. Operational readiness is needed by January 2008: be SEPA Scheme compliant and SCF compliant process SEPA payments according to SEPA rulebooks/framework offer customers at least one SEPA Scheme-compliant C-2-Bank channel for each SEPA product adapt internal and external systems and interfaces conduct tests according to SEPA Testing Framework with national participants and CSMs Pres EPC European Payments Council Pres EPC080/06 Financial Services Consumer Group, 5 December 2006, Brussels Page 15