Cash & Liquidity ManagementPaymentsThe SEPA Cards Framework

The SEPA Cards Framework

Interoperability, Openness and Transparency

The EPC adopted the single euro payments area (SEPA) Cards Framework (SCF) in September 2005. This document defines a set of high-level principles designed to help dismantle the technical, legal and commercial barriers that have given rise to the national fragmentation of card payment transactions. The main objective of the SCF is to ensure that payment and cash withdrawal transactions with cards are as convenient, safe and efficient for cardholders throughout the SEPA area as they currently are in their home countries.

The technical interoperability between card schemes will be based on the migration to chip cards that comply with the EMV standards defined by EMVCo, a consortium jointly set up Europay, Mastercard and Visa1.

The SCF aims first of all to improve the openness and transparency of card schemes. To this end, banks must be free to participate in card schemes on the basis of transparent and non-discriminatory criteria, particularly with regard to their home country. Banks may also join card schemes by entering into a single licence agreement for the whole area and by confining themselves if they so wish, to card issuance or transaction acquisition. The SCF will apply to general purpose cards and not to store or loyalty cards with limited acceptance. Conversely, no general purpose card scheme targeting a single country within the SEPA area should exist any longer.

Implementation Options

The EPC has identified three options for the implementation of SCF:

Option 1: One (or more) international schemes will be selected to replace the current national scheme, once the former have become SCF compliant.

Option 2: Once they have become SCF compliant, one (or more) national schemes may extend their operations to the entire SEPA area, or may enter into alliances with other national schemes.

Option 3: ‘Co-branding’, in EPC terminology, between SCF compliant national and international card schemes, enabling interoperability between several national schemes via the use of international schemes.

The different options may co-exist. Card schemes and issuing and acceptor institutions may decide on the option they wish to pursue in order to become fully SCF compliant.

Consequences for Users

In France, where CB bank cards are already co-branded for the most part with either Visa or Mastercard international schemes, the SCF should lead to few discernible changes for users. Ultimately, purely national bank cards will disappear. This does not necessarily mean that all cards will become international, as issuers could choose to issue ‘domestic’ cards that can be used only in Europe.

Card usage should be harmonised as regards the generalised use of a confidential code (PIN code), which will make card usage in Europe comparable to current usage in France. Card acceptance should become more widespread in countries where the acceptance of international cards was hitherto limited.

Requirements for SCF compliance

For banks

Banks must commit to implementing and promoting the Framework within their community and also within the card schemes and standardisation bodies to which they belong. Furthermore, banks that issue cards or act as acquirers must offer SCF compliant cards to cardholders as from January 2008. Merchants must be able to accept transactions settled using SCF compliant cards. In addition, banks must undertake to ensure that the ATMs they deploy accept SCF compliant cards. Lastly, all cards in circulation must be SCF compliant by the end of 2010.

For card schemes

Card schemes must allow the unbundling of functions: in particular, governance must be separated from other operations and schemes must not require that particular service providers be used for certain operations (e.g. network management, authorisation switching, clearing and settlement). In this regard, the pricing implemented by the card schemes shall be transparent.

Technical interoperability is also a founding principle that will be imposed on card schemes seeking to become SCF compliant. This interoperability will be based on EMV standards for card to terminal interface. Interoperability must also cover cardholder to terminal interface and protocols for terminal to acquirer interface and acquirer to issuer interface for the purposes of authorisation and clearing of transactions.

1Participation in SCF compliant card schemes shall be based on transparent and non-discriminatory criteria. The pricing of cards will also be harmonised and uniform throughout the SEPA area, regardless of the country in which the cards are used, for cardholders as well as merchants and banks. The impact of the EMV standards is briefly reviewed in the 2003 Annual Report of the Observatoire de la securite des cartes de paiement (Observatory for Payment Card Security).

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