The ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’, also known as the single euro payments area (SEPA) regulation, effectively mandates migration to SEPA credit transfer (SCT) and SEPA direct debit (SDD) in the euro area by 1 February 2014. According to data made available by the European Central Bank (ECB), the vast majority of stakeholders in the euro area had achieved SEPA compliance by that date.
To avoid difficulties for non-compliant market participants, on 9 January 2014, the European Commission (EC) introduced its proposal to provide for an extra transition period of six months. The EU co-legislators, (the European Parliament and the Council of the EU representing EU governments*), adopted ‘Regulation (EU) No 248/2014 amending ‘Regulation (EU) No 260/2012 as regards the migration to Union-wide credit transfers and direct debits’ in February 2014. Different euro area countries decided on different timelines during which they made use of the option to continue processing non-SEPA formats, i.e. some countries did so during the full six months additional transition period while others settled for a shorter timeline.
On 1 August 2014, the European Central Bank (ECB) pointed out that with migration to SCT and SDD complete, every month “more than two billion payments will now flow across the euro area in new standardised formats.” The ECB added: “The eurosystem, which consists of the ECB and the national central banks of euro area member states, has monitored the migration to and implementation of SEPA from its inception, facilitating open dialogue between all parties (banks, corporates, consumers, public authorities, governments and small to medium enterprises [SMEs]). This approach has contributed to the successful completion of SEPA for credit transfers and direct debits in the euro area, constituting one of the largest financial integration projects in the world.”
Michel Barnier, the EC’s vice-president commented: “Completing the migration of payments to SEPA today is a real success.”
The European Payments Council (EPC), tasked by the EU authorities to develop the SCT and SDD schemes in close dialogue with the customer community, concurs that congratulations are in order. Meeting this milestone has been a tremendous effort for everybody on the demand and supply sides. The industry is proud to have contributed, together with all other stakeholders, to realising this unique integration project launched by the EU institutions and EU governments with the introduction of the euro currency in 1999.
Get Ready for SEPA 2016
1 August 2014 however, does not mark the end of the migration process. The following deadlines mandated with the SEPA regulation also apply:
1 February 2016:
- Transitional arrangements in EU Member States: the SEPA regulation has introduced several possible exemptions regarding the use of the International Bank Account Number (IBAN), the Business Identifier Code (BIC) and the ISO 20022 XML message standards by the February 2014 deadline. EU member states have discretion as to whether they will use any or all of the options to derogate from the 1 February 2014 deadline (until 1 February 2016) with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards by payment service users.
- Niche products which have been granted an exemption: the SEPA regulation in particular, stipulates that some types of credit transfer and direct debit transactions with a cumulative market share of less than 10% in an EU member state could comply with the provisions set out in this legislative act only by 1 February 2016.
31 October 2016: Non-euro countries will have to comply with the SEPA Regulation by that date.
It is important that countries both in and outside of the euro area do not overlook these other deadlines, but rather actively prepare to ensure that they are ready to meet them on time.
Next Steps for Corporates: Don’t Stop at Compliance, Focus on Gaining Efficiencies with SCT and SDD
Early adopters who fully reaped the advantages offered with the SEPA payment schemes and technical standards emphasise that compliance is just the first step, organisations can then focus on generating the efficiencies.
The EPC Newsletter has frequently highlighted the testimony of representatives of corporates who reported on their successfully completed SEPA migration projects. They confirm that full migration to SEPA results in more efficiency and integration of an organisation’s payment business. To give just a few examples:
A common theme amongst SEPA pioneers on the demand side has been about the benefits that streamlined internal processes have had on the day-to-day running of their organisations. Stefan Scheidgen, head of cash management and accounting at Deutsche Post Pension Service Business Division says: “In the process of migrating to SEPA, we consolidated the previous four payment systems into one. We plan to further automate our banking processes, based on the implementation of SEPA schemes and standards, which will result in even more efficiency.”
Early movers also stressed that implementation of the ISO 20022 message standards drives forward standardisation, automation and dematerialisation and therefore, meets a key requirement of corporate treasurers. Luc Waterlot, financial systems and interfaces manager at Electrabel GDF Suez Market & Sales points out: “Using the ISO 20022 XML formats enables us to integrate SEPA and non-SEPA payments. Electrabel is part of the global group GDF SUEZ; within the global group it is expected that standardisation of payment processes based on the ISO 20022 XML formats will lead to cost reductions.”
Finally, the simplified process for the collection of direct debits across Europe which results from migration to SDD is important to acknowledge. Having one process to handle SDDs companywide is particularly beneficial when companies are expanding into new markets. Waterlot stresses that they have had an excellent response from Electrabel’s customers since the implementation of SDD Core. Jordan Castellarnau, treasury manager in the Finance Service Centre within TUI Travel Accommodation & Destinations (A&D) reports: “With SDD Business to Business (B2B) in place, there are now plenty of opportunities for TUI Travel A&D to further enhance its treasury management.”
Gerwin Braam, senior bank manager at AkzoNobel treasury and investor relations and its SEPA project manager concludes: “SEPA implementation for AkzoNobel has led to more efficient account reconciliations for our SDD payments, lower IT costs, increased scale of automatic processing, reduced number of bank accounts and banking relations, easier centralisation of our cash management, and increased business opportunities across the SEPA region.”
The EPC remains committed to contributing, together with all other stakeholders, to the creation of an efficient and secure SEPA payments landscape. The SEPA payment schemes, as set out in the SCT and SDD Rulebooks, continue to evolve based on a transparent change management process which provides any interested party with the opportunity to participate. This evolution reflects changes in market needs and updates of technical standards developed by international standards bodies, such as the International Organization for Standardization (ISO).
The next generation rulebooks (SCT Rulebook version 8.0, SDD Core Rulebook version 8.0 and SDD B2B Rulebook version 6.0) and associated implementation guidelines will be published in November 2014. These rulebook versions will then take effect in November 2015.
Stay Engaged in the Conversation on SEPA 2.0: an Overview of Regulatory Action now in the Pipeline Impacting the European Payments Market Going Forward
The European authorities driving the SEPA process – the EC, the European Parliament (EP), the Council of the EU representing EU governments and the European Central Bank (ECB) – have clarified that migration to harmonised SEPA payment schemes and technical standards, as mandated by EU law, does not conclude this EU integration project.
SEPA is “more than just credit transfers and direct debits. It is also about card payments and might also cover internet and mobile payments. It will contribute to the further harmonisation of retail payments in the internal market”, vice-president of the EC, Michel Barnier, reiterated on 1 August 2014. Consequently, further regulatory action intended to bring about ‘SEPA 2.0’ is now in the pipeline.**
European Commission ‘payments legislative package’: Published in July 2013, it includes the proposals for a revised Payment Services Directive (PSD2) and a new regulation on interchange fees for card-based payment transactions. These legislative proposals remain under review by the EP and the Council of the EU representing EU governments.
Work programme of the Euro Retail Payments Board (ERPB), chaired by the ECB: On 19 December 2013, the ECB announced the creation of the ERPB, which replaces the SEPA Council. The ERPB would “help foster the development of an integrated, innovative and competitive market for retail payments in euro in the European Union”. Members of the ERPB include representatives from the demand and supply sides, as well as representatives from the EU national central banks. The EC is invited to join as an observer. The ERPB’s work will consist mainly of identifying strategic issues and work priorities (including business practices, requirements and standards). (The EPC is a member of the ERPB.)
Recommendations developed by the European Forum on the Security of Retail Payments (SecuRe Pay Forum): The SecuRe Pay Forum was established in 2011 as a voluntary cooperative initiative between relevant authorities from the European Economic Area (EEA), supervisors of payment service providers and overseers. To date, the ECB has published final recommendations for the security of internet payments, draft recommendations for the security of mobile payments and the final text of the recommendations for the security of payment account access services – addressed to the European Banking Authority (EBA) – developed by the SecuRe Pay Forum.
European Banking Authority (EBA) opinion on virtual currencies (VCs): The EBA opinion, published in July 2014, sets out the result of the assessment whether VCs should or can be regulated. It is “addressed to EU legislators as well as national supervisory authorities in the 28 [EU] Member States.” It remains to be seen what specific EU regulatory action, if any, will result based on the EBA opinion.
Considering that going forward, the institutional SEPA landscape will become even more complex, the EPC would welcome it if possible duplication of efforts by the ERPB, the Commission and other regulatory bodies could be avoided. Whether or not SEPA will deliver on its potential also depends on the authorities adhering to and communicating a harmonised vision of who should do what to achieve ‘SEPA 2.0’.
*The Council of the European Union (EU) is the EU institution where the EU member states’ government representatives sit, i.e. the ministers of each EU Member State with responsibility for a given policy area.
**The latest edition of the EPC Newsletter provides in-depth information on the regulatory initiatives listed above. Readers are also invited to visit the new EPC infographic ‘SEPA at a Glance’. It provides a timeline highlighting key milestones of SEPA roll-out and an overview of the actors involved in the SEPA process at the European level and their interaction.
(NB: the EPC, representing the European banking industry in relation to payments, is not an EU legislative body. More generally, the EPC is not part of the EU institutional framework. The EPC has, therefore, no role in the adoption of any EU laws or other regulatory initiatives establishing SEPA compliance requirements.)
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