www'europeanpaymentscouncil'org

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www.europeanpaymentscouncil.org
Roadmap for the Single Euro Payments
Area Progress and Challenges
Gerard Hartsink European Payments Council Chair
BAFT European Advisory Council Oxford, 11 January
2006
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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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Governing Council ECB (Eurosystem) Third
progress report, Dec. 2004

• A SEPA for the citizens is recommended to be
  achieved in January 2008 by offering citizens and
  commercial enterprises the chance to use
  pan-European instruments also for national
  payments
• End game for Euro area (EU12)
• Credit transfer optional for euro area from 2008
  at the latest
• Pri-euro optional for euro area from 2008 at the
  latest
• Direct debit optional for euro area from 2008 at
  the latest
• Cards issued in euro area accepted in any ATM or
  POS in euro area well in advance of 2010
• End game national migrations in EU 12 end 2010

BAFT European Advisory Council

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A new legal framework for payments in the
internal market (EU25), Dec. 2004
COMMISSION OF THE EUROPEAN COMMUNITIES

• The EU needs to create a single market for
  payments in which everybody will be able to make
  any payment as easily, safely, efficiently and
  inexpensively as within national borders, so that
  there are no obstacles to the free exchange of
  goods and services in the internal market.
• Particular benefits of the proposed directives
  are
• 1. Enhanced competition between national payment
  markets by opening up markets to all appropriate
  providers and ensuring a level playing field. The
  Directive allows better control of money
  remittance activities while at the same time
  encouraging innovation.
• 2. Increased market transparency for both
  providers and users through a simplified and
  fully harmonised set of rules on information
  requirements, replacing divergent national
  rules.
• Standardised rights and obligations for
  providers and users of payment services in the
  EU, with a strong emphasis on a high level
  consumer protection.
• End game national migrations in EU 12 end 2010

BAFT European Advisory Council

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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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Roadmap primary deliverables EPC Declaration
17th March 2005
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.
BAFT European Advisory Council

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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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Positioning SEPA Payment Schemes
PRODUCT SERVICE LAYER
COMPETITIVE
Client 1
Client 2
BANKS CHOICE
Core and Value Added Services
End to End Standards and Data-Elements
SCHEME LAYER
COOPERATIVE
Bank 2
Bank 1
Scheme Management Business Rules
Practices Standards
SEPA Credit transfers Rulebook
EPC
SEPA Direct debits Rulebook
INFRASTRUCTURE LAYER
Principles for SEPA compliant Clearing
Settlement Mechanisms (PE-ACH Model)
EPC
COOPERATIVE
SEPA Compliant ACH
Bilateral/ Multilateral
Intra- group
PE-ACH
BANKS CHOICE
PARTLY COMPETITIVE PARTLY COOPERATIVE
BANKS CSM CHOICE
PROCESSORS
NETWORKS
COMPETITIVE
BAFT European Advisory Council

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SEPA Direct Debit Credit Transfer Consultation

• The Rulebooks for the two Schemes were approved
  by the EPC Plenary in September 2005 for
  consultation among national banking communities
  and their stakeholders
• The process of national consultation was
  concluded on 11 Nov 2005
• The feedback of the EACT (European Association of
  Corporate Treasurers) was received on December 1,
  2005
• The two rulebooks are planned to be approved in
  the EPC Plenary on March 8, 2006

BAFT European Advisory Council

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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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SEPA Cards Framework

• Key deliverable
• No creation of new card scheme
• Provides a single framework for the payment
  function of cards for banks, card schemes and
  operators to become SEPA compliant
• Approved by the EPC Plenary on 21st September
  2005 (subject to legal review)
• Planned to be published in Q1, 2006

BAFT European Advisory Council

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SCF Objectives

• The SCF spells out high level principles
  and rules which when implemented by banks,
  schemes, and other stakeholders, will enable
  European customers to use general purpose cards
  to make payments and cash withdrawals in euro
  throughout the SEPA area with the same ease and
  convenience than they do in their home country.
  There should be no differences whether they use
  their card(s) in their home country or somewhere
  else within SEPA.

BAFT European Advisory Council

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Scheme functions of card value chain
BAFT European Advisory Council

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SCF commitments of banks

• 1. Banks in their roles as EPC members,
  issuers, acquirers, card scheme shareholders,
  card scheme members, members of standardisation
  bodies and owners or users of card processors
• 2. As issuers offer SCF compliant cards (with
  EMV) from 1. January 2008 onwards, phase out
  non-compliant cards by end 2010
• 3. As acquirers offer to merchants from 1.
  January 2008 onwards the option to acquire SCF
  compliant card transactions from one or more
  compliant schemes
• 4. As card scheme shareholders exercise their
  role to the full extent so that schemes comply
  with SCF dispositions

BAFT European Advisory Council

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Cash

• Complementary deliverable
• Cash is King!
• Single Euro Cash Area Framework
• Approved by the EPC Plenary December 2005 (for
  consultation)
• Framework is for approval in March 2006
• Next Steps
• Cooperation models of banks and merchants
  (win-win)

BAFT European Advisory Council

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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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SEPA value propositions for clients of banks
? Consumers ? Reachability of all bank accounts
in Eurozone with the same payment instruction
based on common standards ? Possibility of
card acceptance in all ATMs and POS terminals
(provided the merchant accepts the card brand
and standards) ? Merchants ? More acquiring
options by SEPA compliant acquirers (and
common standards for acquiring) ? Common
approach in the war on cash to reduce costs
of cash ? Corporates and SMEs ? Reachability of
all bank accounts in the Eurozone with the
same payment instruction (direct debit and
credit transfer) ? Guaranteed remittance
data for Euro payments ? Use of open
inter-operable standards

BAFT European Advisory Council

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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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Cooperation model with SEPA stakeholders (1)

• At European level, the Chair of the EPC, together
  with the ECSAs, will
• represent the EPC and communicate notably with
• the European Central Bank,
• the European Commission, the European Parliament
  and other
• European Union institutions,
• various EU lobby groups
• At national level, the EPC will communicate
  through national associations with
• National Central Banks
• National authorities and National Parliaments,
• National lobby groups

Article 5 EPC Charter
BAFT European Advisory Council

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Cooperation model with SEPA stakeholders (2)

• SEPA can only be realised if all European and
  national stakeholders (public authorities, banks
  and other stakeholders) are committed for the
  same agenda and deliverables
• European stakeholders - Treasurers EACT
• - Retailers Eurocommerce
• - SMEs UEAPME
• - Consumers BEUC
• Dialogue - What do you expect from SEPA?
• - What is your commitment to SEPA?
• - What is your preferred cooperation model? -
  What are your top 10 issues?
• Deliverables - Feedback of European stakeholders

BAFT European Advisory Council

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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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Other principles of the approved EPC Charter

• Major players of the payments industry with a
  fair representation of the smaller players
  (represented by banks or associations)
• Proper representation of banks of 12 Euro
  countries (with 305 million inhabitants) and 13
  3 non-euro countries (with 138 10 million
  inhabitants)

BAFT European Advisory Council

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EPC Eurozone members (EU12)
BAFT European Advisory Council

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EPC non-Eurozone members (EU133) partly active
in the Eurozone
MT
LT
EE
DK
PL
SI
SK
UK
CZ
CY
HU
LV
SE
CH
IS
NO
Multi-Country Banks
Mono Country Banks
National Associations
European Associations
BAFT European Advisory Council

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EPC structure for retail payments
EPC Plenary
Secretary
NGC
Audit
EPC Co-ordination Committee
WG Electronic Credit Transfers
WG Cards
WG Cash
WG Electronic Direct Debit Payments
OIT Standards Support Group
Legal Support Group
ROC Roll Out Committee
Decision Making Body Process Decision
Making Body
BAFT European Advisory Council

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Agenda

• ECB and EC expectations
• Key deliverables of the EPC Roadmap
• SEPA Credit Transfers and Direct Debits
• SEPA Cards Framework and Cash Framework
• SEPA Value propositions for clients of banks
• Cooperation model with other stakeholders
• EPC governance framework
• Conclusions

BAFT European Advisory Council

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Conclusions

• The European Commission and Governing Council of
  the ECB expect deliverables with concrete
  deadlines and milestones
• The EPC was able to create commitment for a
  vision, for an EPC Roadmap and for the first
  deliverables for the Euro(pean) payment industry
• SEPA can only be realised if all stakeholders
  (public authorities, corporates, banks,
  consumers) are committed to implement the SEPA
  deliverables
• A reinforcement of the SEPA programme management
  at European and national level is needed to be
  able to deliver in time for January 2008

BAFT European Advisory Council

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