Single Euro Payments Area SEPA Ann Börestam Payment Systems and Market Infrastructure European Central Bank DRF Conference, Basel, 25 April 2006

Overview SEPA general objectives SEPA instruments SEPA infrastructures and standards Proposed directive on payment services

General objectives Ultimate SEPA objective : A euro area in which all payments are domestic Within the SEPA, customers will be able to make payments throughout the whole euro area as efficiently and safely as in the national context today If they so wish, using a single payment account and a single card

The project aims to develop common instruments, standards, procedures and infrastructures in order to foster substantial economies of scale General objectives

Specific issues concerning different payment instruments - Credit transfers - Direct debits - Cards And some « common » horizontally - Infrastructure (ACHs) - Standardisation - Common regulatory aspects The multidimensional aspect of the project and as a consequence its complexity General objectives

The timing: 01/01/06 01/01/07 01/01/08 01/01/09 01/01/10 31/12/10 Today Deadline 1 Deadline 2 -Consolidation Preparation Migration to be completed - Some local instruments to be phased out SEPA instruments available SEPA instruments in general use The timing: 01/01/06 01/01/07 01/01/08 01/01/09 01/01/10 31/12/10 Today Deadline 1 Deadline 2 -Consolidation Preparation Migration to be completed - Some local instruments to be phased out The timing: 01/01/06 01/01/07 01/01/08 01/01/09 01/01/10 31/12/10 Today Deadline 1 Deadline 2

SEPA instruments The EPC has organised the SEPA project around three core payment instruments: Credit transfers  Rulebook Direct Debits  Rulebook Card payment  SEPA Cards Framework A lot of work has been done, but there are still some shortfalls of Rulebooks/Framework that needs to be addressed by the EPC

SEPA instruments Credit transfer EPC achievement: A basic scheme, with a maximum 3 day execution time Improvements required: investigating the possibility for D+1 execution time same day transaction standard to be defined by EPC structured customer information e.g. remittance information and a code for automatic reconciliation

Direct debit EPC achievement: A basic direct debit scheme with mandate flow from debtor to creditor Improvements required: an alternative mandate flow from debtor to debtor bank business-to-business option ensure reachability of all debtor banks SEPA instruments

Cards EPC achievement: Adoption of SEPA cards framework (SCF) Improvements required: interoperability of schemes (standards, common business practices) interchange fees (no longer differences based on geographical ground fraud prevention SEPA instruments

SEPA infrastructures and standards Standardisation: at the very core of the SEPA project covers a wide range: from POS’s terminals to settlement infrastructure standards standards are the prerequisite for ending national fragmentation, integrating markets, promoting interoperability and consolidation of infrastructures

SEPA infrastructures and standards Infrastructure consolidation needed but may take time (investment cycles) interoperability

Conclusion Certainly, major parts are well on track but should be careful not to loose momentum Factors that could hinder progress: - Weakness of banks’ commitment - Low use / low interest by end-users (including public administrations) - Design of solutions that are below current national standards / Mini-SEPA - Non-coherent assessment procedure / self-assessments  Communication strategy, assessment strategy, addressing shortfalls, profitable solutions etc

Proposed directive on payment services The aim of the Commission is to create a Single Payment Market by eliminating barriers between member states for the provision of payment services, and by creating conditions for competition, integration and rationalisation of national payment systems.

Proposed directive on Payment services Scope of the proposed directive Both consumer and business payments (Titles III and IV of the directive do not apply on payments exceeding EUR ) At least one payment service provider must be located within the Community All currencies

Proposed directive on Payment services Payment institutions Payment service providers which are not a credit institution, an e-money institution or a post office giro institution Payment services, operational and ancillary services, accessing and operation of payment systems Should be licensed Authorisation requirements could be waived under certain circumstances (in that case no single license)

Proposed directive on payment services Information requirements Contractual conditions including changes Obligations and liability Execution times Point in time of acceptance of a payment order Charges or fees Exchange rate Redress and complaint procedures Applicable law

Proposed directive on payment services Rights and obligations Authorisation of payment transactions User liability max EUR 150 (except when acting fraudulently or being gross negligent) Acceptance of payment orders Execution times D+1 Strict liability for non-execution or defective execution

Thank you very much for your attention