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De Nederlandsche Bank. 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. Agenda. SEPA-basics SEPA-products

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Sepa and the payments services directive michael van doeveren

De Nederlandsche Bank

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


Agenda

Agenda

  • SEPA-basics

  • SEPA-products

  • Payment Services Directive

  • Migration

  • Closing remarks


Sepa and the payments services directive michael van doeveren

The euro is the common currency of 16 countries today, but retail paymentsare still organised nationally


Sepa and the payments services directive michael van doeveren

SEPA means an uniform payments market

EU


How to realise sepa

How to realise SEPA?

  • Self-regulation: European Payment Council of banks develops standards and products

  • Payment Services Directive: legal harmonisation


Epc technical harmonisation

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


European payment market

EU

European Payment Market

Bron: ECB, Eurostat


Payment trends in the eu

Payment Trends in the EU

  • Number of transactions per type of payment instrument (billions)

Source ECB


Sepa migration is like a cascade

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!


Sepa and the payments services directive michael van doeveren

BIC

  • BIC: Bank Identifier Code

  • Issuing agent (on behalf of ISO): SWIFT

I

N

G

B

N

L

2

A

X

X

X

Branch code

Bank code

Country

code (ISO)

Location

code

BIC8

BIC11

BIC: standardised construction


Sepa and the payments services directive michael van doeveren

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


Iban examples

IBAN examples

IBAN Examples

FinlandFI21 1234 5600 0007 85

FranceFR14 2004 1010 0505 0001 3M02 606length 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 19812874 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


Sepa credit transfer in use since 28 january 2008

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


Sepa direct debit introduced on 2 november 2009

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


Impact of sepa for cards

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


Legal harmonization payment services directive

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


Scope payment services

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.


Payment institution

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


Payment institutions

Payment institutions

Proportional prudential supervision

License

Capital requirements

Internal processes


Rights and obligations

Rights and obligations

Information requirements - single payment transactions

Information to the payer

priorafter 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

Information to the payee

Reference, payer

Amount

Charges

Exchange rate

Credit value date


Rights and obligations1

Rights and obligations

Information requirements - Payments via framework contract

prior after receipt

Information for payee

Transaction identifier, payee

Amount

Charges

Exchange rate used

Debit value date

Payment service provider

Supervisor

Product features

Charges

Safeguard requirements

Transaction identifier, payer

Amount

Charges

Exchange rate used

Credit value date


Rights and obligations2

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..


Rights and obligations3

Rights and obligations

Obligations for the user

Act according to the contract

Reasonable safety measures

Direct notification of loss/theft

And more..


Psd summing up

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


European law other items

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


Sepa and the payments services directive michael van doeveren

Need for Standardisation!


Standardisation sepa for cards

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


What is emv

What is EMV?

  • EMV: Europay, MasterCard, VISA

  • Worldwide standard for

    • Chip on cards

    • (readers) ATM & EFT POS terminals

    • Debit and credit cards

insert

  • Much safer than magstripe


Status migration emv cards

Status Migration: EMV Cards

Status 1 January 2010 (Source: EPC)


Status migration emv atm s

Status Migration: EMV ATM’s

Status 1 January 2010 (Source: EPC)


Status migration emv pos terminals

Status Migration: EMV POS Terminals

Status 1 January 2010 (Source: EPC)


Sepa awareness dutch end users

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


Transition stage dutch end users

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


Concluding remarks

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)


Questions

Questions?


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