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De Nederlandsche Bank
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
29 June 2009
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Agenda
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What, why and how about SEPA?
SEPA-products
Payment Services Directive
Impact of SEPA
Migration
Closing remarks
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In 16 countries the Euro........
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Euro area
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.....but completely different standards, products and rules for retail
payments…
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and the goal of the European Union is to achieve
an integrated European payments market
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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
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Why SEPA?
European Politics
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
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How to realise SEPA?
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Self-regulation: European Payment Council
of banks develops standards and products
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Payment Services Directive: legal
harmonisation
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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
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Payment chain
debit
credit
payment
instruction
payment
information
bank
bank
clearing
debit
payment
information
credit
payment
instruction
seller
buyer
good/service
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BIC
• BIC: Bank Identifier Code
• Issuing agent (on behalf of ISO): SWIFT
I
N
G
Bank code
B
N
L
Country
code (ISO)
2
A
Location
code
BIC8
X
X
X
Branch code
BIC11
BIC: standardised construction
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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:
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The Bank Identifier in an IBAN is country specific
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The length of the bank identifier varies from country to country
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Each country has its own Basic Bank Account Number system
• Summary:
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Country code and check-digits
: uniform
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Bankidentifier and BBAN
: country specific
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IBAN examples
IBAN Examples
Finland
FI21 1234
France
FR14 2004
Germany
DE89 3704
Ireland
IE29 AIBK
Luxembourg
LU28 0019
Netherlands
NL91 ABNA
Norway
NO93 8601
Poland
PL61 1090
United Kingdom
GB29 NWBK
(composition: country code check
5600
1010
0044
9311
4006
0417
1117
1014
6016
0007
0505
0532
5212
4475
1643
947
0000
1331
85
0001 3M02 606
0130 00
3456 78
0000
00
lengte 27
lengte 18
0712 1981 2874 lengte 28
9268 19
digits Bankidentifier branchindentifier BBAN)
Source: www.swift.com 20080811 IBAN Registry
• Remarks:
• IBAN and BIC contain both bank identifiers, but they could differ
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IBAN and BIC contains both a country code, but they could differ
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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
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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 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
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Competition on cards in SEPA
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Point-of-sale card payment system
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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
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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
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SEPA for cards
Vision of the Eurosystem (1)
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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
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SEPA for cards
Vision of the Eurosystem (2)
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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’
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Need for
Standardisation!
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Standardisation SEPA for Cards
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Card to terminal (EMV)
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Terminal-to-acquirer (EPAS, ERIDANE)
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Acquirer-to-issuer (ISO 8583 and ISO 20022)
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Certification of cards and payment terminals
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Options for SEPA Compliancy
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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
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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?
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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
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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
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Role public sector
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SEPA is a project banks: self-regulation via EPC
However…
 European Commission
 Payment Services Directives
 Public users are the early adopters
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Eurosystem: catalyst role
 6th Progress report November 2008
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Legal harmonization: Payment
Services Directive
Content:
Proportional supervisory regime for nonbank payment service providers
Transparency requirements
Rules about the relationship of the
payment service provider and user
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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
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Payment institutions
Proportional prudential supervision
 License
 Capital requirements
 Internal processes
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Rights and obligations
Information requirements - single payment transactions
Information to the payer
prior
after 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
Information to the payee
Reference, payer
Amount
Charges
Exchange rate
Credit value date
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Rights and obligations
Information requirements - Payments via framework contract
prior
after receipt
Payment service provider
Supervisor
Product features
Charges
Safeguard requirements
Transaction identifier, payee
Amount
Charges
Exchange rate used
Debit value date
Information for payee
Transaction identifier, payer
Amount
Charges
Exchange rate used
Credit value date
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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..
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Rights and obligations
Obligations for the user
 Act according to the contract
 Reasonable safety measures
 Direct notification of loss/theft
 And more..
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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
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Potential for SEPA compliancy NL
Non SEPA Compliant
instruments
9%
SEPA Credit Transfers
29%
SEPA Cards
36%
SEPA Direct Debits
26%
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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 20022 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
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Benefits of SEPA
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Efficiency, level playing field and transparency
lead to cost benefits for society in the long run
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Reduction costs for average user of payment
services in Europe
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Comfort/User-friendliness
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Innovation
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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
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Migration Plan of the
Netherlands
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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
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Points of concern SEPA
National Forum on the Payment System
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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 systemDe Nederlandsche Bank
Consultation process
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Closing remarks
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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, eand m-payments etcetera
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