The European Payments Council (EPC) has published its Activity Report 2010 containing a clear message: incentivised by market demand, self-regulation by banks provides the most efficient means to create innovative, effective, secure and stress-resistant payment systems.
The payment schemes and frameworks developed by the EPC – at the request of European authorities and in close dialogue with payment service users – are key elements necessary to create the single euro payments area (SEPA). The EPC report highlights further substantial progress achieved in the following areas covered by the EPC work programme.
- Updated versions of the SEPA Credit Transfer (SCT), the SEPA Core Direct Debit (SDD Core) and the SEPA Business-to-business Direct Debit (SDD B2B) scheme rulebooks and related implementation guidelines were released in November 2010. The enhanced rulebooks include new mandatory and optional elements that reflect customer requirements as identified during the annual three-month public consultation. The maturity of the SCT and SDD schemes was demonstrated by the limited number of requests for modifications identified during the 2010 scheme change management cycle. The scheme rulebooks contain sets of rules and standards for the execution of SEPA payment transactions that have to be followed by payment service providers (PSPs). These rulebooks can be regarded as instruction manuals that provide a common understanding on how to move funds from account A to account B within SEPA. In accordance with industry best practice, banks and their service providers have sufficient time to address the rulebook updates ahead of November 2011, when these revised rulebooks will come into effect.
- At the end of 2010, almost 4500 banks representing close to 100% of SEPA payment volumes offered SCT services. EU law required all banks in the euro area to be reachable for cross-border direct debits (SDD Core) from 1 November 2010 onwards. At this time, 3904 PSPs participated in the SDD Core scheme. Of those, 3374 also offered SDD B2B services.
- The EPC established the Certification Authority Supervisory Board (CASB), which handles applications from certification authorities who wish to become EPC approved in offering electronic mandate (e-mandate) services under the SDD schemes. The option to issue an e-mandate included in the SDD schemes provides an additional means of authorising direct debit collections. The e-mandate option is compatible with the ‘creditor-driven mandate flow’. This is a direct debit model that relies on a mandate issued by a payer (debtor) to be sent directly to the biller (creditor). The SDD schemes are built on this model that is used in the large majority of European Union (EU) Member States today. At the same time, the e-mandate option caters to the requirements of payers accustomed to an alternative pre-SEPA direct debit model – the ‘debtor-driven mandate flow’. Payers used to this model expect their bank to issue the mandate. The e-mandate solution is one of the many optional features included in the SDD schemes enabling banks to offer competitive SDD services and products in response to market demand.
- The EPC approved version 5.0 of the SEPA Cards Standardisation Volume – Book of Requirements. The standardisation volume is progressed by the Cards Stakeholders Group (CSG). The CSG includes representatives of the main sectors active in the cards domain including banks, retailers, vendors, processors and card schemes. The standardisation volume defines functional and security standards requirements, as well as an evaluation methodology designed to achieve interoperability based on open and free standards within the SEPA cards market. The EPC also approved the resolution ‘Preventing Card Fraud in a Mature EMV Environment’. This resolution sets the conditions for further increased security of card payments based on the EMV chip only option and in the area of online payments with cards.
- The EPC together with the Eurosytem substantially advanced the creation of the single euro cash area (SECA). The aim is to establish a level playing field where basic cash functions performed by each of the national central banks in the euro area are interchangeable. The EPC’s cash repositioning strategy contributes to reducing the costs of wholesale cash distribution.
- The EPC and the GSMA, which represents the worldwide mobile communications industry, published a joint paper titled ‘Mobile Contactless Payments Service Management Roles – Requirements and Specifications’. In addition, the EPC released the ‘White Paper on Mobile Payments’. The white paper highlights the EPC’s initiatives for mobile payments in SEPA designed to facilitate implementation and interoperability of user-friendly mobile payment solutions across the 32 SEPA countries.
In the view of the EPC, payment service users are important partners in the SEPA process. The EPC appreciates the continuous dialogue taking place in the EPC Customer Stakeholders Forum (CSF) established in 2007. The CSF specifically addresses the requirements of payment service users with regard to the SCT and SDD schemes and related standards. CSF members represent a wide cross-section of interest groups acting at the European level including consumers, corporate and small and medium-sized enterprises (SMEs).
EPC chair Gerard Hartsink said: “The development of payment schemes through self-regulation by banks in close dialogue with customers represents the established approach in all national banking communities – and in SEPA. This model ensures an optimally efficient, systemically stable and competitive payments market. The EC now seeks broad executive powers to determine payment functionalities as outlined in the EC’s proposal for a regulation establishing technical requirements for credit transfers and direct debits in euros published in December 2010. It is the EPC’s firm belief, however, that innovation must not be hampered by the EC’s intended interference. It is simply not warranted or efficient that standards should be defined and evolved by law on an ongoing basis. It is not appropriate for the EC to take on the role of a de-facto scheme manager and standard setter in the area of payments.”