1. De Nederlandsche Bank Eurosysteem SEPA and the Payments Services Directive Michael van Doeveren 3rd Conference of the Macedonian Financial sector on Payments and Securities settlement Systems Ohrid 28 June 2010 De Nederlandsche Bank

2. Eurosysteem Agenda SEPA-basics SEPA-products Payment Services Directive Migration Closing remarks

3. De Nederlandsche Bank Eurosysteem The euro is the common currency of 16 countries today, but retail payments are still organised nationally € € € € € € € € € €€ € € € € €

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

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

6. De Nederlandsche Bank Eurosysteem EPC Technical harmonisation Two kinds of agreements in EPC: 1. About interbank processing: Credit transfer rulebook Direct debit rulebook 2. Restructuring of the market: SEPA Cards-framework (SCF) Clearing & Settlement Framework Single Euro Cash Area

7. De Nederlandsche Bank Eurosysteem End of 2008 (numbers) NLEU 16EU 27 Inhabitants 16.5 mln322 mln499 mln Firms 240.00017 mln25 mln Banks 707,0009,000 Payment accounts 25 mln306 mln450 mln Transactions 4.8 bln54.8 bln78.1 bln POS terminals 316,0006.2 mln8.1 mln ATM’s 8,650315,000426,000 Cards 31 mln473 mln727 mln European Payment Market Bron: ECB, Eurostat EU

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

9. De Nederlandsche Bank Eurosysteem SEPA Migration is like a Cascade Banks, Payment Institutions, Card schemes and processors: offer: SEPA products New infrastructure Governments, firms and merchants: Realise migration Consumers: Adoption of new products like cards SEPA is of all of us!

10. 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

11. 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

12. De Nederlandsche Bank Eurosysteem IBAN examples IBAN Examples FinlandFI21 1234 5600 0007 85 FranceFR14 2004 1010 0505 0001 3M02 606 length 27 GermanyDE89 3704 0044 0532 0130 00 IrelandIE29 AIBK 9311 5212 3456 78 LuxembourgLU28 0019 4006 4475 0000 NetherlandsNL91 ABNA 0417 1643 00length 18 NorwayNO93 8601 1117 947 PolandPL61 1090 1014 0000 0712 1981 2874 length 28 United KingdomGB29 NWBK 6016 1331 9268 19 (composition : country code check digits Bankidentifier branchindentifier BBAN) Source: www.swift.com 20080811 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

13. De Nederlandsche Bank Eurosysteem SEPA Credit Transfer (in use since 28 January 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 20022 UNIFI standards (XML-language) 140 characters of remittance information are delivered to the beneficiary Unstructured or restructured remittance information as agreed between partners

14. De Nederlandsche Bank Eurosysteem SEPA Direct Debit (introduced on 2 November 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 20022 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

15. De Nederlandsche Bank Eurosysteem Impact of SEPA for Cards Consumers Use of cards in the whole SEPA area: any card at any terminal Retailers More choise: terminal, acceptance of brands, acquiring Banks and payment schemes Change of markets, new products, new systems

16. De Nederlandsche Bank Eurosysteem Legal harmonization: Payment Services Directive Content: Proportional supervisory regime for non- bank payment service providers Transparency requirements Rules about the relationship of the payment service provider and user

17. De Nederlandsche Bank Eurosysteem Scope: payment services 1. Services enabling cash to be placed on a payment account 2. Services enabling cash withdrawals from a payment account 3. Execution of payment transactions; direct debits, payment transactions through a payment card, credit transfers 4. Execution of payment transactions where the funds are covered by a credit line for a payment service user: 5. Issuing and/or acquiring of payment instruments. 6. Money remittance. 7. Execution of payment transactions where the consent of the payer to execute a payment transaction is given by means of any telecommunication, digital or IT device and the payment is made to the telecommunication, IT system or network operator, acting only as an intermediary between the payment service user and the supplier of the goods and services.

18. De Nederlandsche Bank Eurosysteem Payment Institution What is a payment institution? Non bank provider of payment services, and: End users Transferable balances: no cash Owns customer funds temporarily Pure intermediary Payments are a main activity

19. De Nederlandsche Bank Eurosysteem Payment institutions Proportional prudential supervision License Capital requirements Internal processes

20. De Nederlandsche Bank Eurosysteem Rights and obligations Information requirements - single payment transactions Information to the payer priorafter receipt Information needed Execution time Charges Reference exchange rate Transaction Identifier, payee Amount of the payment Charges payable exchange rate used Date of receipt order Reference, payer Amount Charges Exchange rate Credit value date Information to the payee

21. De Nederlandsche Bank Eurosysteem Rights and obligations Information requirements - Payments via framework contract prior after receipt Information for payee Payment service provider Supervisor Product features Charges Safeguard requirements Transaction identifier, payee Amount Charges Exchange rate used Debit value date Transaction identifier, payer Amount Charges Exchange rate used Credit value date

22. De Nederlandsche Bank Eurosysteem Rights and obligations Other obligations for the provider d + 1 No sending of unsolicited payment instruments User provides incorrect unique identifier: reasonable efforts to recover funds And more..

23. De Nederlandsche Bank Eurosysteem Rights and obligations Obligations for the user Act according to the contract Reasonable safety measures Direct notification of loss/theft And more..

24. De Nederlandsche Bank Eurosysteem PSD summing up 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

25. De Nederlandsche Bank Eurosysteem European law: other items Regulation 924/2009 (renewal of regulation 2560/2001) No price difference between domestic and cross border direct debits Adaptation of the electronic money directive Greater consistency with the PSD New prudential regime

26. De Nederlandsche Bank Eurosysteem Need for Standardisation!

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

28. 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

29. De Nederlandsche Bank Eurosysteem Status Migration: EMV Cards Status 1 January 2010 (Source: EPC)

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

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

32. De Nederlandsche Bank Eurosysteem SEPA Awareness Dutch end-users SEPA awareness SMEs fairly low SEPA awareness public sector and large companies very high Public sector and large companies well informed about SEPA consequences

33. De Nederlandsche Bank Eurosysteem Transition stage Dutch end-users 90% of SMEs have not made any SCT & SDD preparations yet ± 20% of large companies and public sector can accept and make SCTs ± 60% of large companies and public sector is busy with SDD preparations

34. 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)

35. De Nederlandsche Bank Eurosysteem Questions?