Italy Not Ready for PSD, Says Industry Players

[Source: gtnews - 27 Oct 09]

Italy will not have fully transposed the Payment Services Directive (PSD) into law in time for 1 November launch date, according to key players in the Italian banking and payment services community at an industry event in Milan. Despite appearing to be on target according to the European Payments Council (EPC) website, the picture is “very patchy”, said Carlo Tresoldi, president of SIA-SSB, pinpointing contentious areas such as payment service provider (PSP) provisions (Title II), transparency of conditions (Title III), rights and obligations (Title IV), and final provisions (Title VI).

The delay of Italy and other national legislators in transposing the PSD is of great concern for industry players across Europe as they are suspended in limbo, to a degree, and this situation may not change in the near future. Tresoldi said that it would still take a long time for the directive to be fully adopted, adding that the EU regulators have indicated they will review the directive in 2012, with an eye to developing a PSD II the year after to fill the gaps.

Speaking to just over 500 participants at SIA-SSB’s fourth ‘Do You SEPA?’ conference entitled ‘Landing on the PSD Planet’, Tresoldi also highlighted the reality of implementing the directive heterogeneously, stating that Italy, for example, is still not clear on its national transposition path. “The current PSD implementation scenario is producing worrying forecasts in terms of the harmonisation objective,” he said.

Giampaolo Galli, director general of Confindustria, an organisation representing Italian manufacturing and services companies, agreed with Tresoldi’s points on the problems associated with differentiated national implementation. “Within the national implementation, we need to provide highly harmonised instruments because this will affect the benefits for corporates,” he said, adding that the main concern in Italy is that the industry will lose some its payments system functionality by moving to a European standard.

Issues plaguing the implementation of the single euro payments area (SEPA) schemes identified at last year’s event have continued this year, such as the lack of an end date for legacy instruments and the lag in public administration uptake. Implementing a ‘mini-SEPA’ is seen as a significant risk, particularly with a lack of effective commitment from the national governments, corporate and consumers, according to Tresoldi.

Franco Passacantando, managing director central banking, markets and payments system area, Bank of Italy, said that SEPA’s problems lie in the fact that the advantages have not yet materialised, mainly due to the lack of mass adoption. “The SEPA Credit Transfer scheme has only 4-5% uptake, which is far away from the 20% objective to be reached by December 2010,” he said. He also highlighted the slowness of public administrations to take up SEPA instruments, and added that the co-operation around common infrastructure was still very low.

“SEPA is no longer reversible, but we should be aware that it will take more time and cost more than originally thought,” he warned.

PSD and SEPA research results

A research report has been published on September 8th by The Financial Services Club, sponsored by BT, Earthport and Logica.

The report can be purchased on a single user licence basis at The Financial Services Club. A free copy of management summary of qualitative analysis (19 page pdf, 300kb) and a free copy of key answers to quantitative views (27 page pdf, 1.5mb) can be downloaded below.

Download Survey Summary

Download Results Summary

The press release says that there are alarming differences in country interpretations and implementation.

In particular:

When asked: “how ready are your banks for the implementation of SDDs in your country?”

• Belgium: 13 out of 15 respondents said ready (87%)
• Germany: 20 out of 24 respondents said ready (83%)
• Austria: 10 out of 12 respondents said ready (83%)
• Italy: 10 out of 12 respondents said ready (83%)
• Spain: 6 out of 8 respondents said not ready (75%)
• Ireland: 11 out of 18 respondents said not ready (61%)
• Sweden: 4 out of 8 respondents said not ready (50%)
• France: 4 out of 8 respondents said not ready (50%)
• UK: 36 out of 78 respondents said not ready (46%)
• Netherlands: 4 out of 9 respondents said not ready (44%)

When asked: “How well prepared do you believe your national authorities are for the implementation of the Payment Services Directive on 1st November 2009?” the survey found that only 15% of country-based respondents felt their country was ‘very ready’; 23% felt ‘quite ready’; 30% ‘just about ready; 27%, ‘not really ready’; and 6% ‘not ready at all’.

When asked: “How is your country implementing the PSD?”

• 7% of respondents say their country is implementing the full PSD with no changes;
• 60% state they are implementing the full PSD with changes that are permitted;
• 19% are implementing part of the PSD, but the important parts (10% with no changes and 9% with changes that are permitted);
• 10% are transposing with changes that are not permitted; and
• 4% are not implementing the PSD at all.

CONCLUSIONS

The Payment Services Directive is flawed in both its drafting and transposition.

The 23 Additional Optional Services (AOS) mean that Member States have inconsistencies over how currencies are treated and whether they are in or out of PSD’s coverage (the ‘leg-in’ / ‘leg-out’ issue); how small businesses are classified as consumers or corporates; how payment accounts are defined; how direct debit products are defined; and more.

Every country is using AOS to protect historical products, services and infrastructures.

This inconsistency means that there is no harmonisation across Europe’s payments instruments, even though this is a maximum harmonisation directive.

It is highly likely that 2012, when the European Commission review the transposition and implementation of the PSD, that a revised PSD will be drafted eliminating AOS and other anomalies, such as multilateral interchange fees on cross-border direct debits.

The result is that the PSD will not support an integrated and harmonised European payments marketplace until 2013 or beyond.

The Single Euro Payments Area is progressing but too slowly.

SEPA’s clearly gained momentum as banks convert core systems to use the new schemes and formats; by way of example, SEPA Credit Transfers have more than doubled in volume from under 2% of all credit transfers in the Eurozone in May 2009 to almost 5% by August 2009.

SEPA is still progressing far too slowly to be convincing however, and when SEPA Direct Debits come into play in November 2009, if the new schemes are not demonstrating critical mass within an eighteen month timeframe, then the SEPA program will be deemed to have failed.

SEPA has strong support amongst the banking community, but not amongst corporates and other end-users; this support needs to be promoted through political weight of force by ensuring all member state public authorities and utilities migrate to the use of SEPA instruments during 2010 and by the introduction of an end-date for SEPA migration as a regulatory mandate.

The SEPA end-date is expected to be around the end of 2013, but the migration of end users (corporates) and obsolescence of existing national infrastructures is not expected to happen until the end of the next decade (2018 or thereafter).

SEPA Direct Debits: Benefits for Corporates (1)

In the first part of the Guide to European Payments, Tony Richter from HSBC Global Payments and Cash Management explains how, overall, the benefits of the SEPA Direct Debit scheme are derived not only from receiving payments quicker and cheaper than before, but also in making corporates’ processes more standardised across Europe and thereby reducing operational costs.

Read the first part of the guide from gtnews.

End user warn of SEPA Direct Debit failure

A report on SEPA SDD has been released yesterday by the End User Committee associations, which comprise:

• the European Association of Corporate Treasurers (EACT);
• the Confederation of European Business (BUSINESSEUROPE);
• the European Association of Crafts and SMEs (UEAPME);
• Bureau Européen des Unions de Consommateurs (BEUC);
• EuroCommerce, the European wholesaler and retailer organisation;
• the European insurance and reinsurance federation (CEA);
• the European e-commerce and Mail Order Trade Association (EMOTA); and
• the European Federation of Magazine Publishers (FAEP).

Read more on this blog post on the Financial Services Club Blog.

Survey reveals PSD paradox

From banking technology.

Nearly 80 per cent of respondents to a joint Sibos Daily News and BT survey believe the Payment Services Directive (PSD) is a major change for their institutions. Despite this, only just over half (53 per cent) have read the PSD document. “It is frustrating that only half of the respondents have read the PSD document, when it has been in circulation for nine months, and the PSD comes into force in November next year,” said Chris Pickles, head of marketing, investment banking and global accounts, BT Global Services. “I don’t understand why respondents would identify the PSD as a major change for their institution but have not yet bothered to read the document.”

When asked on which initiative they were spending more time – the single euro payments area (Sepa) or the PSD, 79.4 per cent of respondents said Sepa. Again, Pickles said this revealed a paradox: “Sepa is still getting the majority of attention, but the respondents feel the PSD will represent a major change. Sepa is a banking initiative and has no legal standing. There are no mandated deadlines for Sepa, unlike the PSD.”

Since the introduction of Sepa credit transfers in January this year, the banking industry has been told Sepa will add value to their business. At the launch, the European Commission (EC) stated that Sepa would provide banks with opportunities to “develop innovative products, enter new markets and win new customers as well as increase the efficiency of back office processes”. When asked whether Sepa would enable their organisations to add value to payments or transaction services businesses, 53.6 per cent of our survey respondents said yes, but 46.4 per cent said no. “Most banks have not made clear why Sepa represents added value,” said Pickles.

Sixty-one per cent of respondents view the PSD as a compliance problem, rather than a business opportunity. Pickles draws parallels here with another EC initiative, the Markets in Financial Instruments Directive (Mifid). “The attitude towards Mifid at the start was very much that it was a compliance problem, but it has proved to be a business opportunity for a number of players. The multilateral trading facilities created by Mifid, such as Turquoise and Chi-x are challenging the incumbent exchanges. The same may well happen with the payment institutions that will be created under the PSD. Payment institutions should open up competition in the payments space because the existing competition is not adequate today.”

EBA publishes Payment Services Directive guide

EBA publishes Payment Services Directive guide