1. SEPA and the Payment Services Directive
Wiebe Ruttenberg
Head of Market Infrastructure Division
DG Payment Systems and Market Infrastructure
European Central Bank
Budapest, 17 November 2006

2. Overview Current status, payment market SEPA
Proposed Directive on Payment Services
Customer benefits
Conclusions

3. A single currency, the euro, since 2002, but still:
Current status, payment market
A single currency, the euro, since 2002, but still:
National payment schemes
Diverging standards and practices
Competition mainly on national level

4. This fragmentation means :
Current status, payment market
This fragmentation means :
Longer execution times for cross-border credit transfers,
Only national direct debit schemes
National debit cards are usually not accepted abroad, if not co-branded

5. The Single Euro Payment Area (SEPA)
is a project of the European banking industry, organised in the European Payments Council (EPC), strongly supported by the ECB and the EU Commission
The project aims to develop common instruments, standards, procedures and infrastructures in order to foster substantial economies of scale

6. 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

7. SEPA The SEPA project: Payment instruments Credit transfers
Direct debits
Cards
Horizontal issues
Infrastructure (ACH’s)
Standardisation
- Common regulatory aspects

8. SEPA SEPA framework A set of inter bank rules, practices and standards
The relationship between banks and their customers is outside the SEPA framework
Single banks or banking communities are free to provide additional optional services

9. SEPA SEPA framework Transactions between banks should be in euro
Banks are free to provide SEPA instruments also in non-euro countries
Transactions must be converted from the national currency to euro before being processed

10. SEPA
SEPA Timetable:
1 January 2008, SEPA instruments should be available for users
End of 2010, a critical mass of national payments should have migrated into the SEPA instruments

11. 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.

12. Proposed Directive on Payment Services
Payment institutions (Title II)
A new concept of payment service providers is introduced
Restricted activity to only provide payment services and payment related services
Lighter supervisory requirements
Single passport

13. Proposed Directive on Payment Services
Information and contractual requirements (Title III)
Information requirements
Framework contracts and changes of conditions
Derogation for micro payments

14. Proposed Directive on Payment Services
Rights and obligations (Title IV)
Authorisation and acceptance of payment transactions
User liability max EUR 150 (except when acting fraudulently or being gross negligent)
Refund of an authorised payment transaction
Fees (each party should bear its own fees)
Execution time
Liability provisions for non-execution or defective execution
Dispute settlement

15. Proposed Directive on Payment Services
SEPA
euro payments
an inter bank framework
Payment services directive
all EU currencies and all Member States
The relationship between payment service providers and users

16. ECB on the proposed Directive on Payment Services
A very welcome initiative as it establishes a comprehensive legal framework for payment services in the EU and assists the banking industry in its efforts to establish a SEPA.
Safeguarding requirements regarding payment institutions needed, however to be proportional to the scope of activities.

17. Proposed Directive on Payment Services
Current status
The ECON Committee (Parliament) provided its proposal in September 2006
Negotiations within the EU Council
EU Parliament is expected to vote on its proposal in December 2006

18. Proposed Directive on Payment Services
If adopted during 2006
Proposed transposition time, 18 months
Transposed into national legislation by summer 2008

19. Proposed Directive on Payment Services
In case of a delayed adoption
Implementation of SEPA credit transfers and cards framework seems not to be depending on the directive
Banks claims that there will be problems implementing SEPA direct debit
The ECB is currently investigating

20. A harmonised legal framework:
User benefits
A harmonised legal framework:
Information
Contractual conditions
Authorisation
Execution times
Liability
Dispute settlement

21. User benefits Enhanced competition
Opening up payment markets for other actors
Facilitates for PSP’s to provide services abroad
Easier for users to use payment services provided by foreign PSP’s

22. Conclusions SEPA – the necessary infrastructure and standards
PSD – a harmonised legal framework
Together they will contribute to establish the euro area as one single domestic payment market to the benefits of all its citizens.

23. Thank you very much for your attention