SEPA Update. 13 November 2007 Harry Leinonen

SEPA Update

13 November 2007 Harry Leinonen

The views expressed are those of the author and do not necessarily reflect the views of

FACT

a process towards common rules and conventions for payments - faster delivery - lower costs - more automation - good security Payments

from Helsinki to Rome

as easily and efficiently as from Helsinki to Turku

Harmonisation of heterogeneous habits 0 20 40 60 80 100 120 140 BE DK DE GR ES FR IE IT LU NL AT PT FI SE UK Cheques Card payments Direct debits Credit transfers Number

Harmonisation of different development levels ES BE DK DE GR IE IT NL AT PT FI SE UK 0 50 100 150 200 250 300 0 10 20 30 40 50 60 70 80 90 100 Nu m b er o f electro n ic paymen ts p er capit a , 2002–20 0 5 Automation level, %, 2002–2005 Sources: European Central Bank and Bank of Finland.

Development of the EU payment regulation SEPA is a long political process for changing

the EU payment habits

1990 EMU 1st phase The common market 1992 1995 Finnish EU membership Credit Transfer Directive 1997 1998 Settlement Finality Directive Euro account currency 1999 2001 Payment regulation (2560/2001) Banks’ SEPA White Paper 2001 2002 Euro cash EPC established Payment Service Directive 2007 Citizens’ SEPA 2008 2010 Full fledge SEPA 2006 EU Comm. Incentive and Competition reports EU Treaty 1987

Payment systems and habits change slowly

eSEPA 201?

The incentive problems

Banks’ dilemma

Increased competition with - transparent pricing

- rapid delivery

- common standards and - open infrastructures

Customers’ dilemma Changes are costly and require therefore

immediate benefits

Authorities’ dilemma Regulation risks

- too heavy regulation

- slowing down developments - promoting ineffcient solutions - the slow process of regulation

miniSEPA SEPA

or

eSEPA?

miniSEPA is without benefits, only modern eSEPA ensures suffcient customer interest

Basic deliveries ♦ SEPA Credit Transfer

– rule book + ISO 20022 standard from 28 Jan 2008 onwards

♦ SEPA Direct debit

– Creditor based mandate flow, waiting for Directive implementation

♦ SEPA Cards Framework

– Visa and Mastercard as before + co-branding

♦ SEPA Governance model

Credit transfers: open issues ♦ Will IBAN be enough, or is BIC also required

♦ Domestic account number (BBAN) to IBAN conversion support

♦ Support for structured reference/reconciling code

♦ Implementation guides for customer XML-messages ♦ Standards for statement of accounts, file transfer

framework, customer identification and security ♦ Standardisation of optional data fields (eg original

payment day, original payer/payee, payment reason)

Direct debit: open issues ♦ Final definitions of alternative models

♦ Starting date ♦ Reachability

♦ e-mandate description and decisions

Will probably wait until the implementation of the Payment Service Directive

Card payments

: open issues

♦ The coming of an European debit card scheme

♦ Common card, terminal and message standards for card transactions

♦ Interchange fee rules (decisions of EU Competition) ♦ Surcharging rules (decisions of EU Competition)

Everybody waits for EU Competition decisions (probably some already by end of 2007)

Implementation plans ♦ Finnish www.fkl.fi

♦ General link-page www.sepa.eu

Current national implementation plans vary a lot, minimum info requirements will improve situation

Future developments

: eSEPA

– EU Commission support

– EBA (Euro Banking Association) project

♦ e-payments (real-time internet payments

– EPC working group

♦ m-payments

– EPC working group

♦ Customer e-identification

– increased attention

Growing interest for eSEPA,

however, general implementation is far away,

Authorities’ activities ♦ Payment service directive implementation

♦ Regulation 2560 assessment, balance-of-payment reporting harmonisation

♦ e-invoicing project

♦ Next steps objectives revisited ♦ Card competition decisions

“Authority push” is a slow road, but seems to be the most efficient

SEPA-links:

Bank of Finland Bulletin No 2/2006, Towards the Single Euro Payments Area

http://www.bof.fi/en/julkaisut/bulletin/index.htm?year=2006

ECB 5th progress report on SEPA

http://www.ecb.int/pub/pdf/other/singleeuropaymentsarea200707fi.pdf

ECB SEPA link-page to national implementation plans

www.sepa.eu

Finnish national SEPA implementation plan

http://www.fkl.fi

EU commission communication and consulation on SEPA

http://europa.eu.int/comm/internal_market/payments/docs/sepa/sepa-2006_02_13.pdf

Payment System Directive

http://ec.europa.eu/internal_market/payments/framework/index_en.htm

European Payments Coucil (EPC) http:/www.europeanpaymentscoucil.eu

e

SEPA

Thank you, Q&A