ECB-UNRESTRICTED
Francisco Tur Hartmann
European Central Bank
Efficient Retail Payments in
Europe: A balanced mixed
between regulation and selfregulation
Regulation panel
Brasilia, 10 September 2014
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Overview
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SEPA – A model for payment self-regulation
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Harmonisation through regulation
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EU retail payment governance
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Conclusion
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SEPA – A model for payment self-regulation
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Harmonisation through regulation
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EU retail payment governance
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Conclusions
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SEPA – A model for payment self-regulation
The Single Euro Payments Area
• Objective - the creation of an area of efficient non-cash payments
in euros covering 34 countries
• SEPA has resulted in an integrated euro payments area, ensuring
that cross-border payments become as easy and efficient as
domestic payments
• SEPA covers credit transfers, payment cards and direct debits
• SEPA is enhancing competition by removing national barriers
SEPA is a market driven initiative
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SEPA – A model for payment self-regulation
Self regulation
• The introduction of the euro in 1999 and the
physical currency in 2002 standardised all
cash transactions in the participating EU
countries – Euro area
• However major barriers remained in the electronic transfer of
currency and the payment for goods and services between these
countries
• The European banking industry therefore setup SEPA in
response to the need for a truly euro cashless payments area
• The European Payments Council (EPC) was then established by
the banking industry to facilitate and set out the standards on
which SEPA should operate
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SEPA – A model for payment self-regulation
European Payments Council (EPC)
• The EPC developed two payment schemes:
– A SEPA credit transfer scheme
– A SEPA direct debit scheme
• It also set out a framework for card payments, SCF - SEPA Cards
Framework
• It lays down a set of interbank rules and standards that have to be
observed when executing “SEPA compliant” payment transactions
• The schemes provide a common understanding between banks
and payment services providers on how to move funds from one
account to another within the SEPA area
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SEPA – A model for payment self-regulation
The SEPA rule books for credit transfers and direct
debits
• The EPC is responsible for the development and maintenance of
the SEPA payment schemes as defined in the rulebooks published
by the EPC itself.
• The EPC publishes two main rule books:
– A SEPA credit transfer (SCT) rule book
– A SEPA direct debit (SDD) rule book
• Each rule book is built around a common message format using
the global ISO 20022 xml standard
• The rulebooks were developed with support from all market
players and are continuously redefined via public consultations
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SEPA – A model for payment self-regulation
SEPA for payment cards
• The EPC developed the SEPA for Cards Framework
• Outlines high level principles and rules that when implemented by
the card industry, will deliver a consistent user experience to both
cardholders and merchants when making or accepting euro
payments or cash withdrawals.
• The SCF recognises the EMV standard for SEPA-wide acceptance
of card payments
• The SCF is unlike the rule books for SCT and SDD as its allows for
multiple schemes with common business rules in the area of card
payments
• However fragmentation in the EU cards market still continues and
has not reached the level of the integrated market that we now see
in credit transfers and direct debits
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1
SEPA – A model for payment self-regulation
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Harmonisation through regulation
3
EU retail payment governance
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Conclusions
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Harmonisation through regulation
legal framework underpinning SEPA
Although SEPA is a self-regulatory project of the European banking
industry, its legal framework is to a large extent predetermined by
three important pieces of EU legislation:
1. The Payment Services Directive or “PSD” (Directive
2007/64/EC)
2. Regulation (EC) No 924/2009 on cross-border payments in
euro
3. Regulation (EU) No 260/2012 establishing technical and
business requirements for credit transfers and direct debits
in euro
The above legislation fostered the creation of SEPA through
regulation rather than mandating it
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Harmonisation through regulation
The Payment Services Directive (PSD) - 2007
• Created a modern and comprehensive set of rules applicable to all
payment services in the EU and improved competition by opening
up payment markets to new entrants
• It harmonised terms and conditions across the EU for payments
• Provided for clear rules for a new category of payment service
providers, established by the Directive called Payment Institutions
(PIs)
• It enhanced consumer protection and set minimum service levels
• Provided the necessary legal platform for SEPA
Currently under review
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Harmonisation through regulation
Regulation (EC) No 924/2009 on cross-border
payments in euro
• Principle: charges for payment transactions in euro have to be the
same whether the payment is a national or a cross-border
payment
• Applies to payments in euro, in all EU Member States
• Creates a “domestic payment area” for euro payments in the EU
• Also applies to cash withdrawals in euro across the EU
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Harmonisation through regulation
Regulation (EU) No 260/2012 establishing technical
and business requirements for credit transfers and
direct debits in euro
• The End-date regulation established that as of 1 February 2014 all
credit transfers and direct debits in euro in the euro area should be
based on common (SEPA) technical standards and business rules
• The regulation was subsequently amended to give a extra 6 month
grace period until the 1 August 2014
• EU legislators noted at even though all relevant technical and
business standards were in place for euro wide credit transfers
and direct debits the market was slow to move to the new
standards
• A end-date for the phase out of all domestic and legacy systems
was thus established in European law
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Harmonisation through regulation
New EU payment regulatory initiatives:
Payment Services Directive 2 (PSD2):
• TPP - Third Party Payment Service Provider – PSD2’s most
significant proposal
– Creation of a new type of regulated entity, the third party payment
service provider (TPP)
– A TPP can now access a payment account held with a PSP with
consent from the payer
– A TPP will use a payment initiation service to allow for PSP account
access
– A payer will have the right to use a TPP to obtain payment services
– PSPs cannot refuse payments initiated by a TPP for a payer
– Of key importance for e-commerce as it stimulates competition and
positions SCT and SDD as alternatives to debit/credit cards
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Harmonisation through regulation
New EU payment regulatory initiatives:
Interchange Fee Regulation
• Price cap:
– Cap on debit card interchange of 0.2% and on credit card interchange
of 0.3% of transaction value
– Cap applies 2 months (cross-border) and 24 months (all) after entering
into force of Regulation
• Card scheme business rules:
–
–
–
–
–
Abolishment territorial restrictions to licensing
Separation of card schemes and processing entities
Free co-badging and brand choice
Unblending of fees
Abolishment “Honour all Cards” rule
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Rubric
1
SEPA – A model for payment self-regulation
2
Harmonisation through regulation
3
EU retail payment governance
4
Conclusions
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EU retail payment governance
Good governance is:
• Essential to advance market integration, innovation and security
• All about weighing various interests
Security
Ease of use
Cooperation
Competition
Self-regulation
Regulation
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EU retail payment governance
• Retail payments industry = network industry
• In network industries there is the need to cooperate to be able to
compete
• Cooperation means involvement of all relevant stakeholders, not
only banks / payment service providers
• Cooperation needed not only at European level, also at national
level: top down and bottom up coordination and fertilisation
• Cooperation needed not only for SCT and SDD migration, but also
for innovation, cards, standards, etc.
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Rubric
EU retail payment governance
Governance is a shared responsibility in the EU
Catalyst,
Operator
Strategy and
facilitation
Euro Retail
Payments Board
European
Commission
Legal
Framework
Eurosystem
SEPA
New ECB
chaired
group
Consumers, merchants, corporations,
public administrations
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Rubric
EU retail payment governance
The new Euro Retail Payments Board (ERPB) - Why
• SEPA August 2014: key milestone. But work is not over!
• SEPA Migration: a solid base for further development and
integration of retail payments in euro  start of a new phase in the
European retail payments integration process.
• The need to address retail payment issues in their broadest sense
at European level by means of a European dialogue between
banks, other payment service providers and end-users of payment
services goes beyond 1 August 2014!
• ERPB created in December 2013 by the ECB Governing Council
aims to address the above issues
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Rubric
EU retail payment governance
ERPB members and participants
• Composition: ECB Chair
– On the supply side of the market
 four representatives of the banking community
 two representatives of payment institutions
 one representative of e-money institutions
– On the demand side of the market
 two representatives of consumers
 one representative of each of the following stakeholder categories:
o
retailers with a physical presence,
o
internet retailers,
o
businesses/corporates,
o
small and medium-sized enterprises and
o
national public administrations.
– National central banks
 Five national central banks (NCBs) representing the Eurosystem and one NCB
representing the non-euro area NCB community (all on rotating basis)
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EU retail payment governance
What can the ERPB achieve
• Powers: ERPB to act on its own initiative, but no formal powers to
impose binding measures. Close involvement of the ECB (chair) and the
European Commission (active participant) to ensure that directions
taken by the ERPB are not in conflict with the common European
interest.
• Work delivery: the ERPB will be an output-driven body. For the
execution of its mandate, the ERPB may establish working groups for a
limited period of time for dealing with specific work priorities. This
feature introduces a substantial difference with respect to other
European bodies.
• www.erpb.eu
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Rubric
1
SEPA – A model for payment self-regulation
2
Harmonisation through regulation
3
EU retail payment governance
4
Conclusions
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Rubric
Conclusions
Self-regulation can foster a integrated efficient payment market
• SEPA is the logic consequence of European integration and was largely
brought about by the actions of market players
Regulation must foster integration and efficiency not hamper it
• EU regulations have helped the market to act to create SEPA and only
introduced a end-date to create certainty for the use of the new payment
standards
The SEPA end-date is just the beginning
• SEPA will enhance competition and facilitates innovation of panEuropean payment services like online e-payments, m-payments and einvoicing.
Post SEPA migration governance becomes an important driver
• The newly created ERPB addresses retail payment issues in their
broadest sense at European level by means of a European dialogue
between banks, other payment service providers and end-users of
payment services
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Conclusions
SEPA could be a reference for any retail
payments integration, harmonisation
and/or modernisation project in other
regions of the world!
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THANK YOU
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