1. Single Euro Payments Area and the Payment Services Directive
Single Euro Payments Area and the Payment Services Directive Michael van Doeveren
2nd Conference of the Macedonian Financial sector on Payments and Securities settlement Systems Ohrid June 2009
De Nederlandsche Bank

2. Agenda What, why and how about SEPA? SEPA-products
Payment Services Directive
Impact of SEPA
Migration
Closing remarks

3. In 16 countries the Euro........ € € € € € € € € € € € € € € € €
Euro area € € € € € € € € € € € € € € € €

4. .....but completely different standards, products and rules for retail
payments… € € € € € € € € € € € € € € € €

5. and the goal of the European Union is to achieve
an integrated European payments market EU € € € € € €
Euro and non-euro member states, the € € € € € € € € €

6. 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

7. Why SEPA? European Politics Economics Banks
Improvement European economy: Lisbon agenda
Economics
Internal market: volume and competition
Banks
To prevent ‘further regulation’ after Regulation 2560/2001
Especially Cross-border banks can profit from new market circumstances

8. How to realise SEPA?
Self-regulation: European Payment Council of banks develops standards and products
Payment Services Directive: legal harmonisation

9. 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

10. Payment chain clearing debit credit payment instruction payment
information
bank
bank
clearing
payment
information
debit
payment
instruction
credit
buyer
seller
good/service

11. BIC BIC: Bank Identifier Code Issuing agent (on behalf of ISO): SWIFT2 A X X X
Bank code
Country
code (ISO)
Location
code
Branch code
BIC8
BIC11
BIC: standardised construction

12. IBAN IBAN : International Bank Account Number
Administrator of Register of national IBANs (on behalf of ISO): SWIFT
Country
code (ISO)
Check
digit
Bank identifier
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

13. IBAN examples IBAN Examples Finland FI21 1234 5600 0007 85
France FR M lengte 27
Germany DE
Ireland IE29 AIBK
Luxembourg LU
Netherlands NL91 ABNA lengte 18
Norway NO
Poland PL lengte 28
United Kingdom GB29 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

14. 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 UNIFI standards (XML-language)
140 characters of remittance information are delivered to the beneficiary
Unstructured or restructured remittance information as agreed between partners

15. SEPA Direct Debit (coming from 1 November 2009 on)
SEPA Direct Debit: Standard for bank to bank Direct Debits in euro
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

16. Competition on cards in SEPA

17. Point-of-sale card payment system

18. 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 implementation shift for all cards by end 2010

19. 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

20. 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

21. 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’

22. Need for Standardisation!

23. 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

24. What is EMV? EMV: Europay, MasterCard, VISA Worldwide standard for
Chip on cards
(readers) ATM & EFT POS terminals
Debit and credit cards
EMV afkorting van Europay, Mastercard, Visa
insert
Much safer than magstripe

25. Options for SEPA Compliancy
Select one (or more) of the international schemes to replace the current national schemes
Make national schemes SCF-compliant
Co-branding of national systems with international systems

26. Initiatives for additional European Card schemes
PayFair:merchant initiative
EAPS: cooperation of national schemes
Monnet: French and German banks
Transforming a three party payment scheme?
Other?

27. 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

28. Milestones Credit transfer and Direct debit
European Rulebooks are the basis for products of the banks
Framework for clearing and settlement
Credit transfers from 28 January 2008 on
Direct debit from end 2009 on
Cards
SEPA Cards Framework
After 2010 only SEPA-cards

29. Role public sector SEPA is a project banks: self-regulation via EPC
However…
European Commission
Payment Services Directives
Public users are the early adopters
Eurosystem: catalyst role
6th Progress report November 2008

30. 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

31. 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.

32. 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
Examples: money transfer offices, internet payment service providers
Is allowed to provide payment services not only in its home country but everywhere in the internal market
Rationale for payment institutions: increase competition 32

33. Payment institutions Proportional prudential supervision License
Capital requirements
Internal processes
Identify, measure and manage their risks
Sound governance
Integrity 33

34. Rights and obligations
Information requirements - single payment transactions Information to the payer prior after receipt
Transaction Identifier, payee
Amount of the payment
Charges payable
exchange rate used
Date of receipt order
Information needed Execution time
Charges
Reference exchange rate
Single payment transaction, for instance a money transfer:
1. Member States shall ensure that the following information and conditions are provided or made available to the payment service user:
(a) a specification of the information or unique identifier that has to be provided by the payment service user in order for a payment order to be properly executed;
(b) the maximum execution time for the payment service to be provided;
(c) all charges payable by the payment service user to his payment service provider and, where applicable, the breakdown of the amounts of any charges;
(d) where applicable, the actual or reference exchange rate to be applied to the payment transaction.
Information for the payer after receipt of the payment order
Immediately after receipt of the payment order, the payer's payment service provider shall provide or make available to the payer, in the same way as provided for in Article 36(1), the following information:
(a) a reference enabling the payer to identify the payment transaction and, where appropriate, information relating to the payee;
(b) the amount of the payment transaction in the currency used in the payment order;
(c) the amount of any charges for the payment transaction payable by the payer and, where applicable, a breakdown of the amounts of such charges;
(d) where applicable, the exchange rate used in the payment transaction by the payer's payment service provider or a reference thereto, when different from the rate provided in accordance with Article 37(1)(d), and the amount of the payment transaction after that currency conversion; and
(e) the date of receipt of the payment order.
Information to the payee
Reference, payer
Amount
Charges
Exchange rate
Credit value date 34

35. 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
These information requirements will be applicable to the payments via your current account at a bank.
Member States shall ensure that the following information and conditions are provided to the payment service user:
1. on the payment service provider:
(a) the name of the payment service provider, the geographical address of its head office and, where applicable, the geographical address of its agent or branch established in the Member State where the payment service is offered, and any other address, including electronic mail address, relevant for communication with the payment service provider; and
(b) the particulars of the relevant supervisory authorities and of the register provided for in Article 13 or of any other relevant public register of authorisation of the payment service provider and the registration number, or equivalent means of identification in that register;
2. on use of the payment service:
(a) a description of the main characteristics of the payment service to be provided;
(b) a specification of the information or unique identifier that has to be provided by the payment service user in order for a payment order to be properly executed;
(c) the form of and procedure for giving consent to execute a payment transaction and withdrawal of such consent in accordance with Articles 54 and 66;
(d) a reference to the point in time of receipt of a payment order as defined in Article 64 and the cut-off time, if any, established by the payment service provider;
(e) the maximum execution time for the payment services to be provided; and
(f) whether there is a possibility to agree on spending limits for the use of the payment instrument in accordance with Article 55(1);
3. on charges, interest and exchange rates:
(a) all charges payable by the payment service user to the payment service provider and, where applicable, the breakdown of the amounts of any charges;
(b) where applicable, the interest and exchange rates to be applied or, if reference interest and exchange rates are to be used, the method of calculating the actual interest, and the relevant date and index or base for determining such reference interest or exchange rate; and
(c) if agreed, the immediate application of changes in reference interest or exchange rate and information requirements related to the changes in accordance with Article 44(2);
4. on communication:
(a) where applicable, the means of communication, including the technical requirements for the payment service user's equipment, agreed between the parties for the transmission of information or notifications under this Directive;
(b) the manner in and frequency with which information under this Directive is to be provided or made available;
(c) the language or languages in which the framework contract will be concluded and communication during this contractual relationship undertaken; and
(d) the payment service user's right to receive the contractual terms of the framework contract and information and conditions in accordance with Article 43;
5. on safeguards and corrective measures:
(a) where applicable, a description of steps that the payment service user is to take in order to keep safe a payment instrument and how to notify the payment service provider for the purposes of Article 56(1)(b);
(b) if agreed, the conditions under which the payment service provider reserves the right to block a payment instrument in accordance with Article 55;
(c) the liability of the payer in accordance with Article 61, including information on the relevant amount;
(d) how and within what period of time the payment service user is to notify the payment service provider of any unauthorised or incorrectly executed payment transaction in accordance with Article 58 as well as the payment service provider's liability for unauthorised payment transactions in accordance with Article 60;
(e) the liability of the payment service provider for the execution of payment transactions in accordance with Article 75; and
(f) the conditions for refund in accordance with Articles 62 and 63;
6. on changes in and termination of framework contract:
(a) if agreed, information that the payment service user will be deemed to have accepted changes in the conditions in accordance with Article 44, unless he notifies the payment service provider that he does not accept them before the date of their proposed date of entry into force;
(b) the duration of the contract; and
(c) the right of the payment service user to terminate the framework contract and any agreements relating to termination in accordance with Article 44(1) and Article 45;
7. on redress:
(a) any contractual clause on the law applicable to the framework contract and/or the competent courts; and
(b) the out-of-court complaint and redress procedures available to the payment service user in accordance with Articles 80 to 83.
Article 47
Information for the payer on individual payment transactions
1. After the amount of an individual payment transaction is debited from the payer's account or, where the payer does not use a payment account, after the receipt of the payment order, the payer's payment service provider shall provide the payer without undue delay in the same way as laid down in Article 41(1) with the following information:
(a) a reference enabling the payer to identify each payment transaction and, where appropriate, information relating to the payee;
(b) the amount of the payment transaction in the currency in which the payer's payment account is debited or in the currency used for the payment order;
(c) the amount of any charges for the payment transaction and, where applicable, a breakdown thereof, or the interest payable by the payer;
(d) where applicable, the exchange rate used in the payment transaction by the payer's payment service provider, and the amount of the payment transaction after that currency conversion; and
(e) the debit value date or the date of receipt of the payment order.
Information for the payee on individual payment transactions
1. After the execution of an individual payment transaction, the payee's payment service provider shall provide the payee without undue delay in the same way as laid down in Article 41(1) with the following information:
(a) the reference enabling the payee to identify the payment transaction and, where appropriate, the payer, and any information transferred with the payment transaction;
(b) the amount of the payment transaction in the currency in which the payee's payment account is credited;
(c) the amount of any charges for the payment transaction and, where applicable, a breakdown thereof, or the interest payable by the payee;
(d) where applicable, the exchange rate used in the payment transaction by the payee's payment service provider, and the amount of the payment transaction before that currency conversion; and
(e) the credit value date.
Transaction identifier, payer
Amount
Charges
Exchange rate used
Credit value date 35

36. 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.. 36

37. Rights and obligations
Obligations for the user
Act according to the contract
Reasonable safety measures
Direct notification of loss/theft
And more.. 37

38. PSD wrap up PSD provides harmonisation of:
Market access: besides credit institutions and electronic money institutions also payment institutions
Rights and obligations
Implementation in national legislation ultimately 1november 2009

39. European law: other items
Renewal of regulation 2560
No price difference between domestic and cross border direct debits
Adaptation of the electronic money directive
Greater consistency with the PSD
New prudential regime

40. Potential for SEPA compliancy NL
Niet sepa-compliant te maken instrumenten:
Acceptgiro (4%), Chipknip (4%) en de overige binnenlandse en buitenlandse instrumenten (ca 0,5%), zoals cheques
8,5% van de huidige betalingen kunnen in de toekomst niet
met Europese producten worden gedaan
Daar gaat het migratieplan niet direct over

41. Impact of SEPA Consumers Firms (private and public) Retailers Banks
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

42. 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

43. Migration 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
Need for an end date

44. Migration Plan of the Netherlands
Objective: an orderly and efficiently change over from domestic payments to SEPA
Scope: all existing payment instruments for which there is a SEPA-alternative
Consequences and choices for different stakeholders
Market driven migration
Identifying barriers, changes and solutions
Mid 2009 evaluation: an end date can foster migration

45. Points of concern SEPA National Forum on the Payment System
Price developments
Range of options open to consumers and retailers, caterers and other regarding debit card brands
User-friendliness of migration to IBAN and BIC
Safety of SEPA direct debit
Prolongation of direct debit contracts and mandates
Standardisation in the Bank-client domain
Interbank Swich support service
Dispute handling
Accessibility of the noncash payment system
Consultation process

46. Closing remarks
The first phase of SEPA (SCT) was introduced succesfully on 28 January 2008
SEPA will transform the European landscape
SEPA is good and has benefits for all users!
Legal harmonisation is essential
Implementation and transition will be planned carefully
End date can stimulate the migration
SEPA will raise further dynamics: e-invoicing, e- and m-payments etcetera