De Nederlandsche Bank Eurosysteem Current status of of the Single Euro Payments Area Michael van Doeveren 4th Conference on Payments and Securities Settlements Ohrid, Republic of Macedonia 21 June 2011 De Nederlandsche Bank

Eurosysteem Johannes Vermeer – The Milkmaid 1658

De Nederlandsche Bank Eurosysteem Agenda Backround of SEPA SEPA-products Impact of SEPA Current status of migration Concluding remarks

De Nederlandsche Bank Eurosysteem End of 2009NLEU 17EU 27 Inhabitants (mio) GDP (Eur bio) , ,790.8 Inst. offering payment services 3196,5478,700 Payment accounts (mio) Transactions (bio) POS terminals (ths) 3406,4288,555 ATM’s (ths) Cards (mio) European Payment Market Bron: ECB, Eurostat EU

De Nederlandsche Bank Eurosysteem Payment Trends in the EU Source ECB Number of transactions per type of payment intrument (billions)

De Nederlandsche Bank Eurosysteem The euro is the common currency of 17 countries today, but retail payments are still organised nationally € € € € € € € € € €€ € € € € € €

De Nederlandsche Bank Eurosysteem SEPA means an uniform payments market EU € € € € € € € € € €€ € € € € € €

De Nederlandsche Bank Eurosysteem What is SEPA? Political vision: The euro area will be an internal ´domestic´ market for retail payments generate scale economies and promoting competition Concretely: European payment instruments for both cross-border and domestic payments in euro: credit transfers, direct debit and cards

De Nederlandsche Bank Eurosysteem Why SEPA? European Politics Improvement EMU and European economy: logic step after the euro introduction Economics Internal market: volume, competition and innovations Banks To prevent ‘further regulation’ after Regulation 2560/2001 and 924/2009 Especially Cross-border banks can profit from new market circumstances

De Nederlandsche Bank Eurosysteem How to realise SEPA? Self-regulation: European Payment Council of banks develops standards and products Payment Services Directive: legal harmonisation SEPA Regulation

De Nederlandsche Bank Eurosysteem buyer seller good/service debitpayment instruction bank payment instruction debitcredit payment information payment information Payment chain clearing

De Nederlandsche Bank Eurosysteem BIC BIC: Bank Identifier Code Issuing agent (on behalf of ISO): SWIFT Bank codeCountry code (ISO) Location code Branch code BIC: standardised construction BIC8 BIC11 INXGBNL2AXX

De Nederlandsche Bank Eurosysteem IBAN IBAN: International Bank Account Number Administrator of Register of national IBANs (on behalf of ISO): SWIFT Country code (ISO) Bank identifierCheck digit Domestic account Number Remarks: -The Bank Identifier in an IBAN is country specific -The length of the bank identifier varies from country to country -Each country has its own Basic Bank Account Number system Summary: -Country code and check-digits : uniform -Bankidentifier and BBAN: country specific

De Nederlandsche Bank Eurosysteem IBAN examples IBAN Examples FinlandFI FranceFR M length 27 GermanyDE IrelandIE29 AIBK LuxembourgLU NetherlandsNL91 ABNA length 18 NorwayNO PolandPL length 28 United KingdomGB29 NWBK (composition : country code check digits Bankidentifier branchindentifier BBAN) Source: IBAN Registry Remarks: IBAN and BIC contain both bank identifiers, but they could differ IBAN and BIC contains both a country code, but they could differ

De Nederlandsche Bank Eurosysteem SEPA Credit Transfer (in use since 2008) SEPA Credit Transfer: Standard for bank to bank credit transfers in euro (mass payments) Payments are made for the full original amount IBAN and BIC are obliged ISO UNIFI standards (XML-language) 140 characters of remittance information are delivered to the beneficiary Unstructured or restructured remittance information as agreed between partners

De Nederlandsche Bank Eurosysteem SEPA Direct Debit (introduced in 2009) SEPA Direct Debit: Standard for bank to bank Direct Debits in euro (B2C and B2B) Payments are made for the full original amount IBAN and BIC are obliged ISO UNIFI standards (XML-language) One-off or recurrent A mandate is signed by the debtor (e-mandate) Pre-notification (mostly 14 calender days in advance) Refunds (PSD: 8 weeks) and returns

De Nederlandsche Bank Eurosysteem SEPA Regulation End dates:  1 February 2013 (2016 non-euro countries) national credit transfers  1 February 2014 (2017 non-euro countries) national direct debits  1 August 2015 niche products SCT and 1 August 2016 niche products SDD Conversion facilities IBAN for consumers and XML services for firms until 1 August 2016 Technical requirements: consumer demands w.r.t. the SDD, white listing, black listing, maximum size and frequency No MIF SDD after European Commission published the draft SEPA-Regulation on 16 December 2010

De Nederlandsche Bank Eurosysteem Point-of-sale card payment system

De Nederlandsche Bank Eurosysteem SEPA Cards Framework Policy scope (1) Seperation of scheme governance from underlying processing Open non-discriminatory scheme membership Single, pan-European license Open and transparant pricing policies EMV-implementation: Chip and PIN

De Nederlandsche Bank Eurosysteem SEPA Cards Framework Policy scope (2) A common approach to fraud and reporting Standardised processes and procedures for card acceptance and certification Convergence of scheme rules for common non-competitive aspects References the Payment Services Directive Common, consistent experience for all cardholders at POS and ATM Merchant choice of card type accepted Interoperability and all merchant SEPA card acceptance

De Nederlandsche Bank Eurosysteem SEPA for Cards Vision of the Eurosystem (1) The Consumer can choose between different debit card brands The Merchant can choose which debit cards brands he or she accept The cards market is competitive, reliable and efficient, as well as for card holders, merchants as for processing More aspiration is needed in the SEPA for cards: need for an additional European debit card scheme Further card standardisation is vital

De Nederlandsche Bank Eurosysteem SEPA for Cards Vision of the Eurosystem (2) All technical and legal barriers are eliminated Interchange fees should not be misused to generate excess revenues for the banking system, at the costs of merchants and cardholders Preference for no MIF-model: see for example the MasterCard and VISA cases Ideal situation: ‘Any card at any terminal’

De Nederlandsche Bank Eurosysteem Standardisation SEPA for Cards Card to terminal (EMV) Terminal-to-acquirer (EPAS, ERIDANE) Acquirer-to-issuer (ISO 8583 and ISO 20022) Certification of cards and payment terminals

De Nederlandsche Bank Eurosysteem What is EMV? Worldwide standard for Chip on cards (readers) ATM & EFT POS terminals Debit and credit cards Much safer than magstripe EMV: Europay, MasterCard, VISA insert

De Nederlandsche Bank Eurosysteem Payment Services Directive PSD provides harmonisation of: Market access: besides credit institutions and electronic money institutions also payment institutions Rights and obligations Implementation in national legislation 1november 2009: done by most countries

De Nederlandsche Bank Eurosysteem Impact of SEPA Consumers Use IBAN and BIC Use of cards in the whole SEPA area Firms (private and public) Easier cash-management and administration Standard formats (ISO XML) Use of IBAN and BIC Centralisation of accounts and direct debits Retailers More choise: terminal, acceptance of brands, acquiring Banks Change of markets, new products, new systems

De Nederlandsche Bank Eurosysteem Benefits of SEPA Efficiency, level playing field and transparency lead to cost benefits for society in the long run Reduction costs for average user of payment services in Europe Comfort/User-friendliness Innovation

De Nederlandsche Bank Eurosysteem Migration to SEPA Aim: a smooth migration to SEPA To organise nationally Market driven Speed can differ between countries Stakeholder involvement and communication are important tools for success Clear end dates

De Nederlandsche Bank Eurosysteem Use of SEPA Credit Transfer

De Nederlandsche Bank Eurosysteem National Forum for SEPA-migration Programme office National Forum for SEPA- migration (NFS) Stakeholders represented in national migration through umbrella organisations Programme connected to migration activities of umbrella organisations Technical committee Executive council IntermediariesSoftware suppliers UsersSuppliers

De Nederlandsche Bank Eurosysteem Aim of the SEPA Migration Monitor Insight into the status of SEPA migration of corporates, public authorities and software suppliers 1. Awareness of the meaning and implications of SEPA 2. Stage of preparations 3. Actual use of SEPA payment instruments 4. Development of software packages

De Nederlandsche Bank Eurosysteem Large corporates, public authorities and most municipalities and software suppliers know what SEPA means. In contrast, over 80% of SMEs don’t know what SEPA means (no change compared to the previous measurement). Over 40% of mid-sized businesses (a new category) don’t know what SEPA means. Results third SEPA Monitor SEPA awareness

De Nederlandsche Bank Eurosysteem Large corporates are most advanced: almost 30% can already use the SCT. Over 25% of public bodies can also use the SCT already; almost two- thirds are investigating or making preparations; 9% have not done anything yet. A few municipalites can use the SCT already, 10% are making preparations and 42% are investigating what needs to be done. 86% of SMEs and 60% of mid-sized businesses have done little or nothing. On the other hand, 20% of mid-sized businesses can already use the SCT. Results: SCT

De Nederlandsche Bank Eurosysteem Public bodies are all investigating or making preparations: clear progress compared to the previous measurement 5% of large corporates can already use the SDD, over 75% are investingating or making preparations: also progress compared to the previous measurement. 55% of municipalities have done little or nothing; 39% are investigating what needs to be done. 98% of SMEs and 80% of mid-sized businesses have done little or nothing. Results: SDD

De Nederlandsche Bank Eurosysteem Status Migration: EMV Cards Status 1 October 2010 (Source: EPC)

De Nederlandsche Bank Eurosysteem Status Migration: EMV ATM’s Status 1 October 2010 (Source: EPC)

De Nederlandsche Bank Eurosysteem Status Migration: EMV POS Terminals Status 1 October 2010 (Source: EPC)

De Nederlandsche Bank Eurosysteem Concluding Remarks The success of SEPA depends on: SEPA for Cards means ‘Any card at any terminal’. This requires time. Further European standardisation, which is not easy An end date for national payment instruments Interchange fees and payment fees Well organised stakeholder involvement and consultation Innovation at a European level: e-SEPA, contactless payments, mobile payments etc.