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.

Extending Payments Interoperability

[Source: gtnews - Fred Bär, VocaLink - 06 Oct 2009]

The introduction of the single euro payments area (SEPA) is transforming the face of the European payments landscape. It will improve the efficiency of cross-border payments by turning fragmented national markets for euro payments into a single domestic area. It brings standardisation, opportunities for cost reduction and encourages competition, all of which means that the customer should ultimately benefit. But why can’t the principles of SEPA extend beyond Europe? The world’s economy isn’t limited to Europe alone.

We need to harmonise payment processing to help achieve this goal. Interoperability plays a key role and much progress has already been made. Since 2006, the European Automated Clearing House Association (EACHA) has worked to establish an interoperability framework. Furthermore, the International Payments Framework (IPF) was set up to support the growing requirement for efficient processing of low-value cross-border payments on a global scale. Its aim is standardising the technical operating model for interoperability of clearing and settlement mechanisms (CSMs), facilitating reach between infrastructures carrying out payment processing, clearing and settlement. In three to five years, it is expected to enable members to offer clients payments to new countries and/or currencies in a low-cost and efficient manner, eliminating the complexities in international non-urgent payments. This is a significant step towards addressing the issue of international cross-border payments.

However, the group is not alone in striving for this goal. Earlier this year, the National Automated Clearing House Association (NACHA) commenced work to create international standards for e-payments schemes. This signals the first move towards globalising interoperability of payment infrastructures. The development will initially focus on the delivery of a new International Automated clearing house (ACH) Transaction (IAT) rule. The organisation’s goal is to link all participating schemes so that a consumer in one country using online banking can seamlessly make a purchase from an online merchant located in a different country. Interoperability provides a huge opportunity for online merchants by providing access to a global online customer base across participating schemes.

So what are the benefits of interoperability? And how do the benefits move us towards a true standard?

One Big, Happy Family

Banks and payment processors will benefit from the seamless payment processing environment that global interoperability creates. Operationally, it promotes the opportunity for straight-through processing (STP), supporting the principles of SEPA beyond the European marketplace. It could facilitate the removal of unnecessary boundaries enabling banks to choose from a wide range of processors, thereby encouraging competition in the payment processing market. Greater competition results in lower costs, which will further enhance services leading to benefits for the customer. Furthermore, there will be no need for proprietary interfaces with CSMs for payment service providers, as they can easily link up to CSMs or other payment service providers at a comparatively low cost.

Additionally, under the EACHA framework, settlement, credit and liquidity risk will be mitigated through the ‘settlement before output’ model. The model guarantees the payments by ensuring messages are only ever forwarded to the bank of the receiving CSM once settlement has been successfully completed.

All these benefits will ultimately reach the customer, but interoperability can offer a direct benefit to the end consumer. If a cross-border interoperability model is implemented, money can be transferred more quickly, more cost-effectively and without the need to connect to multiple CSMs. This model represents an opportunity to support not only the worldwide financial community but also recipients of international remittances. These are usually family members of foreign workers and the beneficiaries are often dependant on the funds to cover day-to-day living expenses, providing a cushion against emergencies or as funding for small investments. However, transaction fees incurred through bilateral relationships expose a direct expense to the remitter/beneficiary, which is currently expensive compared to the often low incomes of migrant workers and the relatively small amounts sent.

There are markets that are uncompetitive or have regulatory barriers to the provision of remittance services. As a direct result, higher-risk alternative international remittance providers are often used to avoid these high fees. Some remitters revert to unregulated or even illegal cash-based channels and the financial streams disappear in the grey and black economy. Moreover, underdevelopment of a domestic financial infrastructure, particularly in receiving countries, may mean that transferring funds to the access points is slow and unreliable. In some cases, non-cash payment services may only be available in urban locations. Mobile payments service providers are actively entering this space in Latin America and Africa.

An important aspect of the infrastructure is correspondent banking, widely used for cross-border transfers of funds, which can be expensive for low-value payments such as remittances. The opportunity to leverage and enhance interoperability of global payment system infrastructures gives rise to the potential to increase the efficiency of remittance services. Ultimately, this not only aids the customers remitting payments but also reduces the cost of their transfers. This gives banks the opportunity to improve their customer service and increase loyalty while competing with international remittance providers, some of which are looking to enter into the banking world.

Finally, interoperability can support the reduction of fees associated with cross-border ATM withdrawals. At present, the majority of foreign visitors wishing to withdraw money from an ATM can only use dual-currency credit cards, which carry high withdrawal fees. However, in 2007, the Euro Alliance of Payments Schemes (EAPS) was formed to unite the networks of independent domestic card schemes (LINK, ZKA, SIBS, Euro 6000, Eufiserv and Consorzio Bancomat). The scheme, which supports SEPA standards, enables European banks to deliver a standard card payment experience direct to cardholders and retailers alike. This reaches right across Europe, at the lowest cost for all participants achieved through interoperability.

Card interoperability, beyond SEPA, is also taking shape. In 2008, China Union Pay signed an interoperability agreement with LINK to enable their customers to withdraw from any LINK ATM.

One Language for All

While interoperability has numerous benefits for banks, their customers and payment providers, there are also challenges to consider. To ensure consistency of communication formats, the introduction of ISO 20022 enabled standardised the communication for interoperability between financial institutions, their market infrastructures and end-user communities. In the long term, there needs to be a common format for all. For now, however, there are still major obstacles to be overcome in the implementation of a standardised communication format. Nevertheless, the fact that businesses are increasingly automating manual processes as they evolve might help achieve this aim, since it makes it possible for banks to implement XML rather than continue with the outdated MT formats. Ultimately, standardisation of these formats will reduce the complexity and costs of corporate-to-bank communication while increasing the STP rate, not just within SEPA but also beyond Europe. These standards are also helping to achieve a shorter turnaround and delivery time for payments, which is supporting the Payment Services Directive (PSD) requirements in Europe.

What’s more, the large number of clearing houses which payment processors must connect to, as well as bilateral agreements between banks, add time and costs to the transaction cycle. Moving forward, banks should be looking at a direct connection to a CSM to complete the transaction cycle. The CSM infrastructure can also be re-used to support bilateral arrangements. In this way, banks will be able to cut their fees and reduce the risk of payments being delayed or failing, which will ultimately benefit the customer.

The Future is Now

Market demand for efficient payments processing on a global level is on the increase. To future-proof services and support banks in offering the services that their customers want and need, payment providers must leverage the opportunity that interoperability offers.

While SEPA has introduced a new payments landscape, it is time to start looking beyond the borders of Europe, extending interoperability, and introduce a new approach to payments that promotes efficiency and reduces costs for banks and their customers. The industry has already taken its first steps towards achieving this goal. It must, however, continue to work collaboratively in order to create a truly efficient, interoperable infrastructure beyond SEPA.

Update on SEPA and PSD from Sibos Hong Kong

[Source: Joy Macknight, Section Editor, gtnews - 29 Sep 200]

With just under half (41.4%) of the 5,804 participants at Sibos 2009 from the Asia-Pacific region, it may surprise some that the single euro payments area (SEPA) and the Payment Services Directive (PSD) had such a high profile during the week. But significant factors, such as the pressing November deadlines for the PSD and SEPA Direct Debit (SDD) scheme and the majority (45.3%) of Europe, Middle East and Africa (EMEA) delegates at the conference, meant that eurozone payment developments loomed large in the sessions, and saw a flurry of announcements and reports released in and around the conference.

In the week before Sibos, three reports were released, the most significant being the European Commission’s communication ‘Completing SEPA: a Roadmap for 2009-2012’, which was seen as a signal of political will that hasn’t really been there to date. The communication, which is also in line with the view of the European Central Bank (ECB) and will be endorsed by the ECOFIN Council in December, presented a series of actions to be undertaken by EU and national authorities, industry and users over the next three years.

This communication is significant because for many, whether corporate, bank or public sector, the move to SEPA instruments has lacked a sense of urgency. In July 2009, one and a half years after the launch of SEPA Credit Transfer (SCT) scheme, only 4,4% of all credit transfers used SEPA standards. As Charlie McCreevy, Internal Market Commissioner, said: “By providing a roadmap where actions, actors and deadlines are clearly identified, this communication will play a decisive contribution in helping SEPA successfully achieving its last miles.” In particular, this means bringing on board the public administrators.

The EC set two important deadlines that will drive forward public sector SEPA adoption: the migration of European institutions by June 2010 and the migration of national public administrations by end-2010. With nearly 50% of EU gross domestic product (GDP) and around 20% of all cashless payments made, the public sector has not played the leading role it should in SEPA migration.

At a Sibos session entitled ‘SEPA: Have We Reached Cruising Altitude?’, the consensus was that, although the SEPA aircraft has taken off, cruising altitude was still some ways – and some effort – away. Gerard Hartsink, senior executive vice president, ABN Amro and chairman of the European Payments Council (EPC), wants to see more action from the public sector. “It is clear that public administrators are not making enough progress in all member states,” he said, adding that technology vendors also had to step up and provide the technology for small and medium-sized enterprises (SMEs) in order to help them migrate their payments to SEPA.

Progress Made but Issues Still Lingering

The fifth World Payments Report (WPR), from the Royal Bank of Scotland, Capgemini and the European Financial Management and Marketing Association (EFMA), said that clearly progress had been made on positioning the building blocks needed for SEPA to succeed in the long run, despite the financial crisis, but outlined a number of unresolved issues that still needed to be addressed:

• SEPA cards face certain hurdles, such as issues over scheme compliance. It is too soon to contemplate any additional type of end date for cards beyond the currently agreed deadline of end-2010 for migration to EMV standards (for cards, POS terminals and ATMs), even though some market players are already arguing in favour of it. Interchange fees and standardisation present significant practical hurdles to the SEPA Cards Framework (SCF), with MasterCard having reached an interim solution for calculating fees (after being forced to act by the EC).
• For SEPA migration to speed up, each set of stakeholders needs to overcome their concerns. Banks need to be convinced of the business case for moving forward aggressively and corporates need more information to justify the necessary investments (for example in IT) required for SEPA compliance. Public administrations, prime potential users, have yet to become SEPA advocates.
• The risk of a mini-SEPA remains real, unless stakeholders get certainty on key overarching issues:
  1. A wide range of stakeholders are increasingly agreeing that setting an end-date for full migration to the SCT and SDD Schemes will be an essential step. Earlier in 2009, a European Parliament resolution called for an end date of no later than end-2012 and the EC has since launched a wide-ranging public consultation on the end date question.
  2. SEPA solutions must demonstrate their potential to offer tangible improvements in operational performance. National authorities may have a role to play at a practical level to support and ease SEPA implementation in their local markets.
  3. Banks and corporates need clarity on all the standards to be used for SEPA payments (e.g. around data) in order to prioritise relevant IT investments and progress with SEPA implementation plans.

The report also stressed the need for corporates to be convinced of the benefits of migrating to SEPA instruments. The corporates surveyed gave SEPA only three out of 10 on the priority scale. And yet corporates identified these benefits in the following order:

• Improved reconciliation capabilities.
• Reorganisation/optimisation opportunities.
• Decline in transaction costs (although one respondent said transaction costs could increase as individual incentive deals disappear).
• Alignment of domestic/cross-border transaction prices.
• Enhancement of card acceptance and lower fees.

None of the corporates cited account reduction possibilities. As long as corporates are unclear of the business benefits of SEPA, they are likely to delay switching to SEPA payment instruments, at least in the short term – and especially in the absence of a stated end-date for migration.

The issue of an end date or dates for SEPA is still overshadowing other issues. In an interview with gtnews, Bertrand Lavayssière, managing director global financial services, Capgemini, was very clear: “SEPA has taken some good first steps but we need an end date.” The consensus seems to be that the timeframe needs to be near term enough to stimulate adoption, but far enough away to allow for the refreshment cycle of technology.

In the WPR, corporate executives cited a few specific prerequisites for SEPA to succeed from their perspective:

• More clarity on the impact of the SEPA/PSD, i.e. more communication and information from banks and European authorities.
• More clarity on the benefits of using SDDs, and ways to safeguard the advantages that currently exist in national payment means.
• Card standardisation.
• A single European automated clearing house (ACH) for all participating countries.

Interestingly, SEPA was viewed in a more positive way by non-European, global corporates surveyed than by domestic European corporates – SEPA is seen as facilitating a reduction in their transaction costs, reducing business difference between countries, and allowing a better integration in enterprise resource planning (ERP) systems.

A Land of Confusion

Another report released in the week before Sibos summed up its findings in the title: ‘European Payments: A Land of Confusion’. Commissioned by BT, Earthport and Logica, the Financial Services Club research found that Europe’s policymakers, banks, corporates and infrastructure providers have become increasingly frustrated with 58% of them saying that the PSD is being transposed inconsistently and 63% stating that this is because of different interpretations at the country level. Only 13% believe it is being implemented correctly.

The research surveyed over 350 global payments professionals about SEPA and the PSD’s progress, as well as conducting over 25 interviews with the key organisations involved, including the EC, ECB, EPC, Euro Banking Association (EBA) and European Association of Corporate Treasurers (EACT), as well as leading banks, infrastructures, payment institutions, corporates, vendors, consultancies and more.

The research found that European member states are implementing the PSD in an inconsistent manner that threatens to derail the progress of SEPA. Certain member states were particularly cited as at issue more than others, with Germany and Italy seen to be actively blocking progress while France and Spain are viewed as delaying the process.

On a more positive note, participants do expect new payments institutions to gain market share, particularly money transfer service providers, and that these changes have motivated many banks to look for more innovative services for their clients, particularly around corporate information services, e-payments, m-payments and e-invoicing.

Announcements Round Up

Sibos is the place to announce new products and alliances, and VocaLink led the press release charge, making three announcements mainly around SEPA interoperability. The week before Sibos began, VocaLink announced an interoperability agreement with Krajowa Izba Rozliczeniowa (KIR), the national clearing house for Poland, for SCTs, establishing a bilateral link for the exchange of SCT payments based on the European Automated Clearing House Association (EACHA) interoperability standards. This is despite the fact that Poland is not currently a member of the eurozone.

Additionally, VocaLink and STET confirmed that they are working together to establish a bilateral link for the exchange of SEPA payments based on the EACHA interoperability standards. The provision of reciprocal interconnection services will allow the two organisations to mutually exchange SEPA-compliant payment messages on behalf of their respective clients. The agreement will further enhance their reach within the eurozone.

Lastly, VocaLink announced that it has extended the bilateral agreement with Equens to include SDD payment processing, in addition to the SCT service already offered. The interoperability agreement helps to create a more competitive payments market as banks will be able to choose which processor they want to use for SDDs, as well as SCTs. It is the intention to go-live with the extended interconnection with the start of SDD on 2 November 2009.

Next, EBA Clearing made two announcements. First, it announced that the preparations for the launch of its SDD services on 2 November 2009 continue to be fully on track. The first three scripted testing windows in May, June and July were successfully completed by 19 banks for the STEP2 SDD core service and by 15 banks for the STEP2 B2B service. The number of direct participants signing up for the remaining testing windows prior to the SDD services go-live continues to grow: by early August, EBA Clearing had counted 73 registrations for its SDD core testing and 51 registrations for its SDD B2B testing on the STEP2 platform.

Second, EBA Clearing announced that its new EURO1/STEP1 Directory lists close to 2,400 reachable banks, in addition to the 10,000 participating banks’ bank identifier codes (BICs), a year after the agreement to jointly deliver the payments directory was signed by EBA Clearing and SWIFT at Sibos in Vienna. This means that participant banks are now able to use EURO1/STEP1 for the routing of transactions to close to 7,500 additional BICs across the world. This represents an increase in the reach of the EURO1/STEP1 services by almost 75%.

In other news, Fundtech and Microsoft introduced the SEPA Integration Suite, a new suite of service-oriented architecture (SOA) services that adds SEPA transaction processing to a bank’s existing payments infrastructure with minimal disruption and risk. While Distra launched its universal switch, which includes advanced payment switching applications capable of performing a variety of payment processing rules including multi-leg transactions, and supporting multiple payment channel types such as ISO 8583, ISO 20022 and batch. It runs on an intelligent fault tolerant platform proven in a tier one environment, supports Payment Card Industry (PCI) and PSD compliance, and enables real-time transaction metrics and performance reporting.

And finally, Bank of Tokyo-Mitsubishi UFJ (BTMU) has become the first financial institution to adopt Pelican for SEPA software-as-a-service (SaaS). ACE Software Solutions and Capgemini BAS, a provider of application services in the Dutch market, offers the service jointly. Initially BTMU has adopted the service in the Netherlands, for Amsterdam and Paris. Following this implementation, the service will be rolled-out to branches in London and the rest of BTMU’s European network.

Conclusion

In the build up to the November 2009 deadlines, SEPA and the PSD are on everyone’s lips. Sibos 2010 in Amsterdam will be the real test, where the financial industry will come together again to discuss what has happened almost one year after implementation. (Despite it being traditionally the American region’s turn to host SWIFT’s user conference, Amsterdam has pipped Toronto to the post.) How will the financial industry and corporates view SEPA and the PSD? Will the SEPA project be at cruising altitude, or will it be grounded? Today, most believe that the European payments industry has come too far to turn back, but the flightpath is still uncertain.

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).

Europe-wide payment project not yet in credit

An update on the current status of SEPA can be found on this article (via EuropeVoice.com) dated 27 August 2009.

Regarding a possible binding end-date for SEPA the article says:

The prospect of binding end-dates has been warmly welcomed by the EPC and by large multi-country banks, but has been rejected by business groups and consumers.

Savings banks, which generally have very little, if any, cross-border business, have also reacted cautiously, warning that the market should not be rushed.

Hartsink points out that a legally binding deadline has been set by the EU for all banks to provide SDD by November 2010.

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.

Implementing SEPA: our expedition to 
a fully integrated euro retail payment market

Keynote speech by Gertrude Tumpel-Gugerell, at the Annual Conference “The Future of Cards and Payments”
London, 6 July 2009

[Source: www.ecb.int]

Ladies and gentlemen,

It gives me great pleasure today to update you on where we stand in our expedition to a fully integrated euro retail payment market – the Single Euro Payments Area (SEPA). A successful expedition calls for a good combination of exploratory spirit, a sense of orientation and determination. Sometimes just one single person can possess this combination of qualities. Take Captain James Cook, for example: not far from our venue, in front of Admiralty Arch, you will find a statue in memory of this famous British explorer, navigator and cartographer, who died 230 years ago.

Captain Cook undertook three major journeys; likewise, the SEPA challenge comprises three stages: the SEPA Credit Transfer (SCT) scheme, the SEPA Direct Debit (SDD) scheme and SEPA for cards.

The players in the European banking industry have joined forces to establish SEPA and successfully reached the first stage of this demanding but very promising journey – the introduction of the SEPA Credit Transfer scheme. We cannot, of course, hide the fact that a lot of stakeholders – including the Eurosystem – would have appreciated a faster adoption of SEPA by both providers and customers.

The adoption of the SCT scheme has started, but progress remained slow throughout 2008. However, recent figures give reason to hope that the dead calm is coming to an end and that a fresh breeze is ahead. The latest figures give a clear indication that SEPA has reached the tipping point: it is now being used for more than just cross-border payments. Therefore, there is a confident hope that the adoption rate might accelerate further in the near future, especially when we take into consideration the plans of the respective public authorities to adhere to the SCT scheme later this year.

This momentum will be further accelerated by the introduction of the SDD scheme. Forward-looking and European-thinking banks and infrastructures will already be offering SDD by November 2009 while others have up to a year in which to sign up to the scheme. Thanks to the reviewed regulation on cross-border payments, banks offering legacy direct debits in euro will definitely be introducing SDD by November 2010 at the latest. This will motivate a lot of companies to finally set sail and start implementing SEPA.

The outcome of the third stage of the SEPA journey, SEPA for cards, is perhaps the most uncertain. The Eurosystem continues to encourage market participants to introduce a European card scheme. Joint research by the European Central Bank (ECB) and De Nederlandsche Bank shows that the launch of a new European card scheme could provide the impetus for solving the problem of interoperability and overcoming the costly fragmentation of the European card market. Consumers and merchants are likely to benefit most from SEPA when sufficient competition in the card payment market alleviates any potential monopolistic tendencies. The ECB appreciates, therefore, the different initiatives that have a European card scheme as their destination and welcomes the travel preparations made by them. That said, we should not lose sight of our objective by starting even more initiatives. Instead, the projects that have already taken off are invited to get down to business and perhaps combine forces. Now is the time to come up with concrete travel plans, including defining and committing to milestones.

Perhaps it is not by chance that the British Prime Minister’s Strategy Unit is located in Admiralty Arch, with the statue of Captain Cook in front of it. With everything that we hope to achieve for SEPA in the short and medium term, we must not lose sight of the broad SEPA strategy and our long-term objectives.

EC consults on Sepa migration deadline

[Source: Finextra - 09 June 2009]

The danger that SEPA may not happen

In effetti non riguarda i temi web 2.0 ma non ho potuto resistere…è troppo divertente (per chi ha la “fortuna” di conoscere i temi SEPA).

Not exactly relevant with web 2.0 topics but couldn’t resist…too funny (for those “lucky” people who knows about SEPA).

[Source: Chris Skinner's blog]

The danger that SEPA may not happen

I was invited to a conference this week and given the title of the talk as: “Why there’s a very real danger that SEPA may not happen”.

As a good European who believes in the PSD and SEPA, I declined to discuss this and invited my long-time acquaintance Sir Jonathan Brit to speak on my behalf.

Sir Jonathan “Johnny” Brit is the eighth generation of Brit’s to Chair Fusty Bank UK plc, which recently appeared in this blog talking about mobile telephones.

He is one of the old guard, highly bigoted and patriotic, anti-European British people, normally referred to as an ‘old fart’ … although not normally to his face.

I wrote most of his speech down for readers of the Finanser to see what a typical British old fart thinks about SEPA.

However, before you read his speech, please note that the views he expresses are not my own.   For example, he seems to think that that it’s purely a political plot by the French and Germans to take over Europe’s financial infrastructures via the EBA and ECB respectively which is why no-one has any urgency to implement.  This is why nothing’s happened yet, after ten years, and that the lack of leadership, corporate inclusion, end-dates and more, means it is not working.

Not sure I agree with these views so, if you are interested in my views, the Financial Services Club is conducting research into bank, corporate and national readiness for the implementation of SEPA and the PSD during the summer for a publication to be released in September 2009.

If you are interested in participating or sponsoring this research, please contact admin@balatroltd.com.

Meantime, over to you, Sir Jonathan.

Biography: Sir Jonathan “Johnny” Brit is the eighth generation of Brit’s to Chair Fusty Bank UK plc since its founding in 1842, as a bank serving the colonial empire of Britain. Johnny entered the bank as a mailroom errand boy in 1972 and rose through the ranks to take over from his father, Sir James “Jimmy” Brit the Third in 1988. Now, Johnny has handed the reins of the bank to his son, Gerald “Gerry” Brit in order to take the Chairmanship role this year. Johnny is married to Jenny Brit, and has three boys, two German Shepherds, an estate in the country and several mansions overseas in the Windies and India.

Good afternoon.

My name is Johnny Brit, Chairman of Fusty Bank UK plc.

Of course, we’re not actually based in the UK for tax reasons, but it makes sense to have a registered office there as our people trust us more that way.

Now then, I’ve been asked here today to talk about this SEPA thing, which stands for Silly European Payments Agenda I believe.

I’ve got to be careful when I say that, as I ran this past our PR and legal folks and they’ve made sure that everything I’m going to say is politically correct.

That’s why I need to get some things out in the open before we start as I know that you all take this thing very seriously but I ask myself, after almost ten years of all your faffing about trying to work out what it is, whether you are really serious about this stuff.

I don’t think so.

Now we all know why, don’t we?

Yes, because it’s just a Stupid European Political Agenda isn’t it?

It’s politics

This SEPA thing and all that stuff about a Payment Services Directive was only dreamed up by the poor political eurocrats in Brussels because they couldn’t pay for their books and cups of tea without incurring cross-border charges.

That’s why this thing came about and that’s why it’s here.

It’s nothing to do with saving costs and increasing efficiencies, which is what the politico’s claim … but only because that sounds good. No.

It’s just to reduce their own unnecessary expenses of having to live in boring old Brussels whilst paying for a nice penthouse villa on the Riviera or chic bordello in Bermondsey.

That’s the truth of it.

I know it’s true, you know it’s true, and as a political agenda we can pretty much ignore it can’t we because, by the time they get around to realising we haven’t done it, they’ll no longer be MEPs and the new lot come in and we can mess them around too can’t we.

Now certainly that’s what we’ve been doing over here in Blighty – ignoring it that is – and I thought most of you European Johnny’s had been doing the same which is why nothing has happened.

But then I cannot believe how much of a dust-up there has been about this over the past ten years.

I mean you’ve had conferences, meetings, committees, working parties, conventions … you name it and you’ve had it. All about this silly euro thingy and these associated SEPA and PSD bits.

And for how long have you been doing this?

Ten years!

A decade of what?

Pwah! This all began ten years ago for god’s sake and what have you got?

Sure, there’s been the Regulation 2560 which banned razor blades and biro’s.

Sorry? Oh I didn’t realise. I thought you said “I ban BIC”, not IBAN BIC.

Well, either way, IBANs and BICs haven’t happened have they?

Certainly, most of the corporates we deal with haven’t implemented these … but that’s because we do it for them as it is a sure-fire way to keep our business customers locked into the bank.

In fact, I don’t want them to change their SAP and ledger systems to work with IBANs and BICs as they will then have portability of their bank account.

That may be what the eurocrats want, but I don’t want that so they can just go and stuff their standards up their rears, as I’m keeping my customers locked into Account Numbers and Sort Codes. We’ll handle the IBAN and Biccies.

I guess that is why, after ten years, less than 2% of all potential Eurozone credit transfer payments are migrated onto these new SEPA Credit Transfer (SCT) services, as there is no critical mass or need for this amongst the people we serve.

Funnily enough, fewer than 2% of all credit transfer volumes in 15 months would mean that to get to the total market space SEPA is meant to reach would take 100 years.

A century to achieve critical mass?

Sounds about right to me as that means SEPA won’t happen in my lifetime.

That’s also why in ten years, there’s no legal structure in place, no movement of other electronic payments, and just an inconsistent idea that there might be some sort of standardised direct debit thingy.

Ten years and I think that you, like me, have just been ignoring this thing hoping that those Brussely Eurocrats will go away and stop worrying about their travels around Europe and bank fees.

Trouble is, they haven’t gone away, have they?

That’s why we are all eagerly waiting the Payment Services Directive in November or, as we call it, the Psssttt or the Okey-Kokey Directive. Y’know, you put your left leg-in and your right leg-out, so no-one knows which leg is which and then we can charge lots for it.

November 2009

Now everyone thinks that we have all been waiting for the Psssttt, because then direct debits can come in on November 2nd and suddenly there will be lots and lots of volume.  That’s because all the businesses and authorities of Europe will place all their payments and transfers electronically through standardised systems and infrastructures.

Complete baloney of course, as most of our corporate customers haven’t been consulted about this. I mean, we did allow them in the room didn’t we, but only as long as they didn’t say anything or for as long as we could ignore them.

That’s why corporates had no representation on any of our committees and discussion groups, but we are here to serve them of course … just as long as we can keep them locked in to our bank and not someone else’s.

So now we have these deadlines, with 1st November 2009 looming large as the date when things really things start … but then things won’t finish as we have no end dates, do we?

We have no end dates because no-one can agree on this euro thing – who’s in and who’s out – and because we have no leadership.

No-one is forcing this through because the leadership has to come from the politicians, and the politicians don’t want to rock the boats in their home countries over something that’s not a domestic issue.

After all, how many cross-border payments do we make?  Less than 2%!

That’s why the politicians don’t want to upset their home countries and create a backlash.

It’s a French and German plot

The Germans may want SEPA as they have the European Central Bank but German banks don’t want it because they have no central infrastructures; the French want it because the EBA is based in Paris and offer a PEACH, but French banks don’t want it because it will damage their fee rates; the Italians are trying to work out what a Euro is; the Spanish are asleep and saying ‘manana’; and the rest of Europe are trying to work out what the hell the other guys are up to.

Meanwhile, the Dutch are leading the whole thing because they’re the only people who speak the main languages of Europe. It would have been the Swiss otherwise, but they’re not in Europe so they had to bow out by default.

Typical jolly European beanies.

And even with all of that, they can’t agree.

I mean, the PSD is meant to be a hard deadline date for implementation by 1st November 2009 and the Swedish, who will have the Presidency of the European Union by then, have already said they cannot implement it.  But at least the Swedish are honest, as the rest of the countries are just keeping quiet and pretending.

For example, look at the French.

They go and push for all this stuff and put all the infrastructure in Paris – yes, the EBA who run all this SEPA stuff, where are they based? Paris! – and then, after all that, what do the French go and do? They say “non” and totally ignore it all.

Oh yes, and just in case you missed it this was the announcement of France not bothering with SEPA Direct Debits until November 2010.

Typical francais I say, especially as they announce this the day after the European Payments Council agreed all the banks of Europe would have these direct debity thingies in place by November 2009.

Sacre Coeur, mon dieu and grande m*rde.

Anyways, the French SEPA Committee, made up of the Banque de France and the French Banking Federation, are probably following Monsieur Sarkozy’s lead and thought: “C*sse-toi“.  And at least I’ve read “La Princesse de Cleves”.

Anyways, this is normal French thinking and short of bunging a few tractors across the Channel Tunnel to block electronic payments moving across borders, the French can only stick to their guns and try to ignore this silly political agenda.

Which brings me to another thing.

What is SEPA for anyway?

All it does is create a nice large zone for the Germans and French, who don’t want it, to control the finances of the Spanish, Italians and rest, which is a good reason for not being in the euro isn’t it?

I mean this SEPA thing is only good for 2 countries isn’t it?

Sure, there are 16 countries in the Eurozone but, after the recent credit crisis, you’ve got the Germans controlling interest rates, the French controlling the infrastructure, and the Spanish, Italians and rest all suffering with crippling unemployment and stagnation with no hope of getting out of it.

That’s why there are no end dates because we all want to keep our national infrastructures in place just in case. Just in case we have to go back to French francs, Italian lira, Spanish pesetas and Deutsche marks.

And the British?

This is why we British are not in the Eurozone for very good reasons, the utmost of which is our right to retain our sovereignty. The Queen is very important to this island and represents our long heritage of ruling the world which is why everyone speaks English, even the French.

So, we need to retain our sovereignty and stay out of the euro for this reason.

In summary, after ten years we’ve got a little bit of something and a lot of nothing.

No end dates, no leadership and no mandate to make this change happen.

Ten years!

The Americans put a man on the moon in six years. Their moonshot was announced in 1963 and achieved in 1969.

In six years, Americans can put a man on the moon and in Europe in ten years we can’t even get an agreement on a direct debit.

That’s why we here in Fusty Bank UK plc are outsourcing all of our Eurozone payments to our trusted allies … NACHA.

Thank you and goodbye.

Please note once again that the views expressed in this blog entry are not my own but Johnny Brit’s.

If you are interested in what is happening with SEPA and the PSD, the Financial Services Club is conducting research into bank, corporate and national readiness for their implementation for a publication to be released in September 2009. If you are interested in participating or sponsoring this research, please contact admin@balatroltd.com.

French banks down tools on EU-wide payment project

BRUSSELS, Nov 26 (Reuters) .

French banks have suspended the launch of new pan-European payment services due to confusion over tariffs in the latest setback for a key EU project to improve consumer choice and boost growth.

The European Union has plans for a single euro payments system or SEPA to give its 495 million consumers cheap payments of bills and purchases in euros from a single bank account.

The move is designed to encourage cross-border competition and spur the creation of jobs and growth, the EU’s executive European Commission has said.

The project requires the bloc’s 8,000 banks to invest billions of euros changing their systems to comply with common SEPA standards on credit transfers, direct debits and payment cards.

SEPA-compliant credit transfers were launched in January by banks across the EU but the French Banking Federation (FBF) said on Thursday its members have suspended work pending clarification from European authorities on tariffs, in particular charging for services that banks supply to each other, it said in a statement.

“As long as these rules are not clarified, the French banks, like many European banks, cannot start the work on the timetable because like all businesses, banks need to know their economic and legal risks,” the statement said.

Banks across the EU are worrying how the new services would be paid for after last December when the Commission said MasterCard’s (MA.N: Quote, Profile, Research, Stock Buzz) interchange fee on its cross-border credit cards and Maestro direct debit cards violated EU competition rules.

The interchange fee is charged to retailers for processing a card payment but retailers have dubbed it a tax on consumers.

MasterCard is appealing the decision, a process that will take months but the November 2009 deadline for a full switch to SEPA products in Europe is looming.

The Commission and the European Central Bank has said banks could use an interchange fee on direct debits but only for an “interim period” and if it was justified — a move that banks say has “destabilised” their planned SEPA business models. (Editing by Dale Hudson and Elaine Hardcastle)

Sixth SEPA progress report from ECB

SEPA: Significant progress made but concerns need to be addressed without delay
(Sixth SEPA progress report)

November 24, 2008 · No Comments

Release here.

In the sixth progress report on the Single Euro Payments Area (SEPA), published today, the Governing Council of the ECB welcomed the evident progress made on this project, but emphasised that work urgently remains to be done to ensure the success of SEPA. The sixth progress report also contains a list of “Ten milestones for SEPA implementation and migration”.

There have been many new developments since the publication of the fifth progress report in July 2007. The successful launch of SEPA in January 2008 was a major achievement. With the introduction of the SEPA Credit Transfer (SCT) on 28 January 2008, the first benefits of SEPA have materialised for banks and, more importantly, for the end-users of payment services. National SEPA implementation and migration plans have been drafted and published. Most automated clearing houses that were processing credit transfers in euro are now able to process SCTs. In January 2008, SEPA was also started for card payments, but more effort is needed in this area if the goals of the SEPA project are to be achieved, for example the emergence of at least one additional European card scheme. Preparations for the third type of payment instrument, SEPA Direct Debit (SDD), have continued over the past year, resulting in the adoption of the Rulebooks. The launch of the SDD is scheduled for 1 November 2009. Nevertheless, the launch of this important SEPA instrument needs to be accompanied by clarification between the banking sector and the relevant competition authorities with regard to the possible interbank pricing models. This issue needs to be resolved urgently. Finally, considerable progress has been made in the fields of e-payments and mobile payments.

The areas which require most attention now are: a) the timely launch of the SEPA Direct Debit on 1 November 2009; b) the emergence of an additional European card scheme; and c) measures to stimulate migration to SEPA Credit Transfer and SEPA Direct Debit, including the setting of a realistic, but ambitious end-date for national credit transfers and direct debits.

The key messages of this report, which should be followed up by the market to ensure the success of SEPA, are as follows:

1. Banks need to ensure more communication, clear product offerings and the delivery of a consistent customer experience in order to stimulate the uptake of SEPA Credit Transfer by all customers, with public administrations, in particular, becoming early adopters.

2. The remaining obstacles to a timely launch of SEPA Direct Debit should be overcome. To move forward, solutions must be found urgently, e.g. by providing clarity on the launch date, ensuring the continued validity of existing mandates, meeting customer requirements, increasing communication efforts and closing the debate on the multilateral interchange fee.

3. SEPA needs to enable end-to-end straight-through-processing (whereby payments are processed smoothly and without manual intervention) and to move beyond core and basic products by embracing innovative products and services, such as m-payments, e-payments, e-invoicing, etc.

4. The setting of a realistic, but ambitious end-date for the migration to SCT and SDD is a necessary step in order to reap the benefits of SEPA early.

5. A more ambitious approach needs to be taken towards the SEPA for Cards and supporting market initiatives to create a European card scheme.

6. The European payment industry should ensure that it has adequate influence over the SEPA cards standards, which should preferably be non-proprietary standards – The EPC is to advance the SEPA cards standardisation programme.

7. Security is the basis for trust in SEPA payments, and all stakeholders need to continue and even intensify their efforts.

8. Infrastructures are leading by example, but the remaining restrictions on interoperability should be removed.

9. Good governance of the SEPA project requires changes to the EPC’s mandate and organisation. One short-term step would be to strengthen the EPC’s Secretariat so that it can adequately support the EPC in its many tasks. In the medium to longer term, more substantial changes are needed to improve the EPC’s effectiveness, transparency and accountability.

10. Clarity and certainty with regard to the SEPA tasks: the SEPA implementation and migration milestones provide a list of concrete tasks that the Eurosystem expects to be fulfilled to ensure the success of the SEPA project.

The addressees of the report are not only the banks and future payment institutions, but all relevant stakeholders, such as corporates, public administrations, merchants and consumers.

The report, which is being published in English today, will be available in other official Community languages in due course.

Single Euro Payments Area : EACT favours setting an end date for SEPA Credit Transfer

Corporate treasurers, like other stakeholders, have been invited by the European Payments Council in a Customers Stakeholders Forum to review and enhance the SEPA rulebooks developed by the banks during the past years. SEPA Credit Transfer seems to be at the time the only mature instrument almost satisfying all stakeholders.

In order to achieve a more efficient and transparent payments landscape, EACT recognizes the need to agree with all market participants on a deadline by which the legacy systems will be deactivated. This will enable all stakeholders a proper, harmonized and meaningful migration planning. As there are only a few but none the less important enhancements needed to make the SCT an attractive payment instrument for the corporate treasurers (see the notes for Editors), the EACT proposes to commit to an end date linked to the solution of the issues indicated by EACT, their incorporation in a future SCT Rulebook, and the market availability of the SCT features requested.

To ensure sufficient time for controlling the risk and cost of the transition to SCT, a 24 month period after the rulebook availability and an 18 month period after market availability is necessary.

In order to make a smooth transition, EACT strongly recommends that the switch takes place anytime between March and September in order to avoid year-end complications.

Olivier Brissaud, the EACT board member in charge of European Affairs, has played an active part as co-chair of the European Payments Council’s Customer Stakeholders Forum. Olivier Brissaud said: “It is vital that introduction of the SEPA Credit Transfer takes place at an agreed date and only after the EPC has completed its rulebook and the banking market has fully addressed the outstanding questions. Failure to resolve these remaining issues will create unacceptable risks and costs for the corporate community”.

Note for Editors :
EACT has identified the following enhancements to the SCT Rulebooks:
1. “Same Day Value” payments and “Guaranteed value date to beneficiary”
2. “Optional” BIC codes
3. Standard Bank Reporting of SEPA data
4. ISO and non-ISO 140 chars EACT Remittance information
5. Check Unique Entity Identifier (UEI) of beneficiary *
6. Report “Requested Execution Date” and remove semantic confusion
7. SEPA Banks agree to an end-date to accept ISO 20022 Payment Initiation messages.

NOTES : all seven points are in EPC’s remit.
*Point N. 5 requires an additional explanation.
A Unique Entity Identifier (UEI) is a long-standing request of the EACT. In SEPA, a code is needed to identify creditors of SDD and, we maintain, all account
owners. This code should be an “international” one. ISO will soon examine a proposal in this sense. EACT request to the EPC is an AOS allowing banks to credit an SCT to an account based on the IBAN and the UEI, if this item is present in the payment order. No change is required in the SCT format (the field is already provided in the message).

Do European businesses seize SEPA opportunities? Survey conducted by Atos Consulting and Deloitte gives answers

WEBWIRE – Tuesday, September 30, 2008

Do European businesses seize SEPA opportunities? Survey conducted by Atos Consulting and Deloitte gives answers

Rotterdam/Utrecht, The launch of SEPA Credit Transfer in January 2007 marked the first tentative step towards the implementation of SEPA (Single Euro Payments Area). However, European businesses are insufficiently prepared for the implications of SEPA and seize its opportunities. Furthermore, the banking sector seems unable to offer reliable and adequate support to the businessworld. These are the findings of the SEPA survey conducted by Atos Consulting and Deloitte among the members of the European Association of Corporate Treasurers in 9 European countries. The full report will be presented at EuroFinance conference in Barcelona on 1 October 2008.

“This survey not only gauges the level of familiarity with SEPA among the business community, it creates familiarity at the same time”, explains Olivier Brissaud, chairman of the European Association of Corporate Treasurers.

Although the implementation of SEPA will require considerable investment, it is widely expected to be highly profitable. Various studies confidently predict revenues of between EUR 50 and EUR 175 billion over the next 6 years. Although European businesses are aware of the cost savings potential and opportunities presented by SEPA, 43% of respondents are unable to quantify the investments required, while 48% have no clear insight into the financial benefits arising from SEPA.

Banking sector missing out on golden opportunities
Whilst most respondents (84%) are familiar with SEPA, 79% are not ready to implement SEPA and 80% have failed to draw up a strategy. Banks play an important role in implementing SEPA on behalf of the business community, but are missing out on golden opportunities. Only 56% of respondents have been approached by their bank to discuss SEPA, and only 53% of banks have suggested a solution. According to respondents, only 26% of banks have suggested a suitable solution.

Seizing opportunities
“Companies are aware of the opportunities presented by SEPA. The next step is to seize these opportunities and translate them into genuine cost savings by improving cash- and treasury management via uniform pan-European transmission and via improved account management”, believes Folkert Zwinkels, partner at Deloitte.

“To further stimulate the necessary adoption of SEPA it is vital that banks join forces with appropriate partners and support businesses with suitable solutions that facilitate the successful launch of SEPA”, Paul van der Knaap, partner at Atos Consulting concludes.

The aim of SEPA – an initiative of the European Commission – is to move towards a fully harmonised European payments area, in which enhanced transparency and competition will eventually result in more efficient and cheaper payment transactions. SEPA Credit Transfer (SCT), the pan-European standard in electronic transfers, was launched on 28 January 2008. The European variant of the automatic debt collection system, the SEPA Direct Debit (SDD), is expected to go live in 2009.

About Atos Origin
Atos Origin is an international information technology services company. Its business is turning client vision into results through the application of consulting, systems integration and managed operations. The company’s annual revenues are EUR 5.8 billion and it employs 50,000 people in 40 countries. Atos Origin is the Worldwide Information Technology Partner for the Olympic Games and has a client base of international blue-chip companies across all sectors. Atos Origin is quoted on the Paris Eurolist Market and trades as Atos Origin, Atos Worldline and Atos Consulting.

About Atos Consulting
Atos Consulting, the global consulting practice of Atos Origin, is a leading provider of business, process and technology consulting services. With more than 2,500 staff globally, it focuses on delivering proven, pragmatic solutions to the telecom, manufacturing, financial services and public sectors.

About Deloitte Touche Tohmatsu
Deloitte Touche Tohmatsu is an organisation of independent member firms focused on providing top-quality professional services and advice. Our service is based on a worldwide strategy for about 140 countries. The expertise of 150,000 professionals from all over the globe and the offices of our member firms helps make this a reality. Services are offered in four professional disciplines: accounting, tax advice, consulting and financial advice. Our member firms work for some of the world’s largest corporations as well as national companies, the public sector and fast-growing businesses. Deloitte Touche Tohmatsu is a Swiss Verein. Neither Deloitte Touche Tohmatsu or any of the member firms accept responsibility for the actions or negligence of other member firms. Each member firm is an independent legal unit working under ‘Deloitte’, ‘Deloitte & Touche’, ‘Deloitte Touche Tohmatsu’ or any other related name. The services outlined in this publication are provided by the member firm in question and not by Deloitte Touche Tohmatsu Verein.

TietoEnator Achieves Sepa Credit Transfer Successes

SEPA Migration Fails to Satisfy Sibos Delegates

Press Release

A survey by ACI Worldwide at this year’s Sibos has found that 78 percent of those delegates questioned who expressed an opinion ‘strongly agree’ or ‘agree’ that the migration to SEPA instruments has been disappointing to date. Moreover, 46 percent of respondents feel there is nothing more that the banking industry’s self regulation of SEPA can deliver and they overwhelmingly believe that the time is right for SWIFT to play a role in reversing the present situation.
The key findings from the survey include:
• 78 percent of respondents who expressed an opinion believe that the migration to SEPA instruments has been disappointing to date
• 75 percent of respondents believe that there is now a role for SWIFT to play in extending bank-to-bank collaboration to provide the SEPA business solutions required by the market
• 77 percent of respondents believe that if SWIFT allows greater access to its network for corporates, it can assist in the take-up of SEPA and the adoption of end-to-end standards

Paul Styles, business solutions manager at ACI Worldwide, commented on the findings, “SEPA started as a framework to benefit corporates and consumers but has morphed into an interbank framework that has been moulded primarily by the banks. It’s not surprising therefore that SEPA migration has been considered disappointing to date. However, we agree with the majority of Sibos delegates that as an ‘external’ body, SWIFT could help to make SEPA a more attractive proposition for corporates. SWIFT could have an important role to play in helping the banking industry formulate a business case for corporates’ SEPA migration. Such an approach would also help avoid the ‘mini-SEPA’ dreaded by the regulators, where significant regional or country-specific variations exist.”

The survey targeted 104 Sibos 2008 delegates, representing financial institutions, corporates and vendors.

Banks foresee higher costs for SEPA than PSD

Banks foresee higher costs for SEPA than PSD

European banks expect to spend between €10 and €100 million each to apply the new provisions of the Payment Services Directive, the EU legislative initiative designed to increase competition in the payment sector and facilitate a gradual migration to a non-cash economy, according to a new survey.

The poll, carried out in June across 30 major EU banking institutions by the payment system consulting organisation PSE Consulting, reveals that banks expect relatively limited costs but minimal competitive benefits of the new directive. On the basis of the answers collected, PSE Consulting estimates that the total cost for banks will be €6 billion by November 2009, when the directive is supposed to enter into force. In addition, almost 60% of the sample are sceptical about the actual advantages that the new rules will bring.

The survey comes as the banking sector voluntary agreed to establish the Single Euro(pean) Payment Area (SEPA), an initiative to harmonise bank procedures with the aim of creating a genuine EU market for payment services. According to the consultancy TowerGroup, SEPA costs the EU banking sector around €10 billion in investments, much more than the implementation of the PSD.

The two initiatives are expected to bring benefits for consumers, who will be able to enjoy cheaper and more competitive payment services throughout the EU, as the Commission keeps pointing out. But banks themselves are set to profit from SEPA and the PSD by gaining easier access to other EU national markets. Indeed, the relative majority of the financial institutions interviewed by PSE Consulting (37%) consider the increased cross-border competition as the most positive effect of the PSD on their revenues.

The following table explains the differences between SEPA and the PSD:

Corporates Still Not Sold on SEPA

Corporates Still Not Sold on SEPA
Joy Macknight, Section Editor, gtnews – 08 Jul 2008

The third EBAday was held in Helsinki on the 25 – 26 June. Over 600 corporates, banks and technology vendors got together to discuss the big issues facing the payments industry, particularly around SEPA and the PSD.

Six months after the introduction of the single euro payments area (SEPA) credit transfers (SCT), corporates are still challenging the banks to come up with a business case to encourage corporate adoption of SEPA instruments. Speaking at EBAday in Helsinki at the end of June, Peter Hasfeld, in charge of specialist cash management projects, including the SEPA implementation project, at German chemical company BASF, said that in the short term he could only see costs and no benefits, and challenged the banks to provide incentives for corporates to move across to SEPA. He also added that until the implementation of SEPA direct debits (SDDs) in November 2009, the benefits to be gained from closing down multiple national euro accounts wouldn’t be realised.

In a session entitled ‘Moving the customer to SEPA’, he said: “The problem of SEPA is that we have a lot of projects that we need to evaluate, manyof which bring us big benefits with where we can see business opportunity or the best business case. And yet, so far, there has been no business case put forward for a quick SEPA implementation, which means there is no urgent priority for a SEPA project. We have been involved in the SEPA discussion for many years, but there is no urgency, no incentive.” He added that only Switzerland has promised free SEPA payments processing so far, which he believes is a value-add and important incentive.

Hasfeld placed the responsibility to provide the lead in creating a business case squarely at the feet of the banks. “It is in the banks’ interest to reduce the complexity that we have and move away from parallel systems – we can’t have domestic systems with SEPA, so the banks should encourage us to move payments to SEPA instruments. It should also be the banks that show us the positive test cases – the first move that they should make is move their own payments onto SEPA,” he argued. “Sometimes we talk to SEPA experts at banks and I ask them when they will move their salary payments to SEPA and they can’t answer. Yet they expect us to move our salary payments first.”

No Fixed End Date

The fact that there is a lag in not just corporates and banks moving their payments over to SEPA instruments, but also public bodies, is indicative of the big question still left unanswered – the end date. Although there has been talk of 2010, in order to adhere to the Lisbon Agenda deadline, there is still much debate as to whether that is a realistic timeframe in which to ’switch off’ legacy payment instruments.

Speaking in the same session as Hasfeld, Jonathan Williams, director of product strategy and communications at Experian Payments, said that the SDD will be a trigger to start the move from legacy systems but doesn’t think that the industry will see 1 November 2009 as a key date. “I think it will be six months after that. The trigger for customers should be that all their applications will have to be moved across to SEPA as soon as possible, but no corporate is going to move across to SEPA if they have no benefits associated with that and if they have to invest a lot of money in their business applications,” he explained.

Guy Pantall, head of geographic coverage for EMEA core cash, treasury services, JPMorgan, agreed that an end date is needed and posed the question as to who should set the date – whether it should continue with industry self-regulation or whether the regulators should step in. “Without a compelling event, we may never get there. However, it needs to be set realistically and well into the future timeframe. Does it need to be imposed in a regularity sense? Are the banks getting together? That is not so reassuring. All banks have diverging interests, from regional banks to local banks, all with different vested interests, I am not sure that we will agree among ourselves so maybe something imposed from the outside will help,”he said. “If we don’t get this issue resolved fairly quickly, a threat will emerge as new players come in and disintermediate us – the Payment Services Directive (PSD) may be a catalyst that will help. So, some sort of end date – yes; regulation – perhaps.”

Paul Styles, business solutions manager, wholesale banking at ACI Worldwide, commented: “In the main plenary on the first day, there was a reference to building the railway, getting the track right and standardisation across Europe, and we must ask ourselves – are we doing this too quickly? Are we seeking, for political reasons, to move SEPA along too fast? I think that is becoming a very valid question. Particularly because everybody is skating around the issue of the end date and no one is stepping into that vacuum and making the decision. It won’t help anybody if national communities decide their own end dates – we need a general end date.”

Styles believes that it has to be the regulators that set the end date. “SEPA, so far, has been based on self-regulation and I think we have gone as far as we can with that. I think the regulators have to step in to set a realistic end date, not a politically driven end date.”

PSD – a Move Away from Harmonisation?

Gerard Hartsink, chairman of the European Payments Council (EPC), also pointed to the need for certainty around PSD implementation to solve some of the problems that SEPA has generated and called on the European Commission (EC) to provide more clarity.

But as the session called ‘Towards Effective PSD Compliance: what is at stake for banks? How to make PSD compliance easy?’ effectively illustrated, clarity is even more elusive with the PSD than SEPA. During the session, the panel of experts, who lead the PSD work in their organisations, disagreed on a number of issues covered under the directive, such as whether subsidiaries constitute micro-enterprises under the PSD, and whether non-euro payments will also come under the directive. Yet, with the deadline of November 2009 for transposition of the directive into national law quickly approaching, time is running out for clarification.

Ruth Wandhöfer, vice president and SEPA market manager at Citi, pointed out that there is a problem with the PSD at the European level because each country can interpret the directive and is allowed to make changes to suit their national conditions. “SEPA harmonisation is challenged by the PSD because the PSD reinforces a domestic focus. The directive does not provide legal support for SEPA and today there is still discussion at the European level to gain a common understanding of even the main points of the PSD,” she explained.

The whole relationship between SEPA and the PSD was also debated. Seppo Tanninen, senior counsellor, Finnish Ministry of Finance, said: “The PSD is not SEPA – it is not intended to implement SEPA rules but covers every e-payment in EU. And it must be remembered that it is primarily a consumer protection directive.” He claimed that ‘maximum harmonisation’ will not happen and that the EU will never have a truly harmonised landscape for payments because of the number of different directives in place.

No matter how much is up for discussion, argued Simon Newslead, senior manager at RBS, if a firm hasn’t started to investigate how the PSD will affect its business and begun implementing changes, then it had better hurry up. “You can’t wait for everything to be cleared up or until it is pasted into national legislation,” he advised.

But there is always resistance to change, particularly when so much is still being debated.

Conclusion

What was clear from the conference was that there were more questions than answers regarding changes to the European payments landscape. ACI’s Styles summed up the general sentiment felt during the two days: “I think that a lot of people have turned up at this event hoping for some new information, insights and enlightenment and they haven’t received it.”

But it wasn’t for lack of trying. The Euro Banking Assocation has invited all the players to the table – banks, corporates and technology vendors – because the end game of full straight-through processing (STP) needs co-operation between all industry participants. As Harri Nummela, executive vice president, head of banking and investment services, Pohjola Bank, said in his plenary speech: “Getting banks to function together is not enough. We need full STP – that must be the ultimate goal. Neither the banks, CSMs, ERP and software providers nor companies can do it alone – everybody has to play a part.”

German retailers are against the adoption of SEPA payments

From: Payment News and Industry Social Networking – 2008 (epnn)

German Retailer Federation (HDE) is against plans to give up direct-debit payments which are settlement instruments for cash-and-carry and services bills. The method is not compliant with the standards of the European Central Banks’ Single European Payments Area (SEPA).
Germans are more inclined to use direct debit, which uses data from an ATM card combined with a signature of the cardholder, instead of credit cards. An advantage of this method is that firms may make direct debit entries after receiving the approval from the customer via a phone call, without a signature or any other identification method. The German retailers fear they may be facing higher settlement costs for payments if ECB’s SEPA project is adopted.
SEPA has been launched in 2008 and will be implemented across the 15 countries that share the Euro. The project aims to standardize retail payments in Euro, enabling payments under the same conditions from a single account, regardless of its location.
Germany’s central bank and credit lobbyists are discussing when direct debt is to be abolished. HDE, the German Retailer Federation claims that direct debit and SEPA complaint settlement could coexist.
HDE consists of about 410,000 independent companies with a yearly turnover of more than EUR 550 billion. The German Retail Federation represents the needs and interests of the whole retail sector. It has 100,000 business members from all sectors, locations and sizes. The HDE head office is located in Berlin.

SEPA – A Catalyst for Payments Consolidation by Way of Systems Integration

The following is an article by Paresh Madani – Head, Payments Center of Excellence, PrimeSourcing, i-flex solutions.

SEPA – A Catalyst for Payments Consolidation by Way of Systems Integration

(A paper presented at the SEPA Conference (International Payments) November 8-9, 2006)

This paper talks about how the Single European Payments Area (SEPA) initiative presents an opportunity for various banks across Europe to consolidate and optimize their payments processing. Corporates and banks, in particular, will be evaluating a number of routes toward SEPA compliance but, eventually, a phased approach will take precedence over the others. Let us look at how SEPA will affect – and influence – key players, and delve into how technology and, most importantly, systems integration will be critical in achieving SEPA compliance. While there have been a number of discussions and debates on how SEPA will affect banks, corporates and their customers, not enough is being discussed about how Information Technology can play a pivotal role. SEPA presents a unique setting for banks to consolidate their fragmented payment processing to a few platforms of scale. These platforms will centralize payment and messaging flows, to the ultimate benefit of the end-user.

Impact
There has been enough written about the impact of SEPA; the loss of revenues due to increased cross-border competition being uppermost on everyone’s minds. Studies conducted in the market indicate that despite SEPA bringing in increased efficiencies on account of greater Straight-Through Processing (STP) and better liquidity management, revenue losses and investment costs for SEPA adoption will outweigh the cost savings.

Opportunities
Then again, just as loss of revenue can be considered a negative, it can also be treated as an impetus to streamline the fragmented payments processing infrastructure, increase efficiencies, and help evolve new payments business models. The effect of SEPA on the banking sector as a whole would depend on banks’ ability to reduce infrastructure costs, reduce manual handling in some parts of the payment processing chain, and also evolve profitable pricing models. Developing new products, re-engineering pricing models to develop new lines of revenue, and steering customers towards the most profitable payments instruments are some strategic decisions that can help banks invest in future growth. For instance, banks could look at creating payments business models to include in-sourcing of payments business for other financial institutions.

Strategizing – The Way Forward
It is critical for financial institutions to adopt a proactive approach and address any concerns related to fragmented product-based silos in the process, thereby, avoiding inefficient processing; for instance, in the duplication of payment processing across different product processor-based systems. In the face of rising competition and falling revenues, banks may be called on to replace or adapt their existing product processing systems for cross-border payment transactions. Such systems would need to develop the capacity to accommodate new interfaces. Banks will need to look at integrated STP systems that help them add value and reduce costs.

Impact on Key Players
As stated earlier, while SEPA is expected to bring in increased efficiency in payments processing, there is also the apprehension of investment costs outweighing any saving in costs. Hence, it will become extremely critical to effectively manage the ramifications of multiple entities in the face of SEPA. Banks are expected to face maximum challenges; especially, in terms of overcoming increased competition, high investments, new pricing models, needs for re-evaluating and re-engineering payments infrastructure and, most importantly, the evaluation (/evolution) of new payment business and outsourcing models as part of the larger objective of creating Payments Business Utility Services.
As commercial and economic borders open up with SEPA, corporates will again have to look at new business models in order to cater to the business opportunities that would emerge post implementation of SEPA. Offering consistent pricing to customers both within and across national borders, and consolidating and centralizing treasury functions, and evaluating accounting structures would enforce changes on their existing back-office ERP applications. The end customer community may reap the maximum benefits, though they will have to carefully consider the availability and levels of new business services post SEPA implementation. These benefits will include low costs, speed in transfer, ease and reliability, and transparency in (as in domestic) cross-border accounting. A slew of business and technology considerations will have to be assessed before embarking on any change in payment processing and related IT Infrastructure. For instance, from a business perspective, the factors are:

• New rulebooks and frameworks for complying with SEPA Business Rules
• Bulk payment processing capabilities for low-value processing used for paying through ACHs such as STEP2
• Debit Transfer Processing
• TARGET2 Liquidity Management
• Pricing and billing capabilities
• Achieving operational efficiencies

On the Technology Side…
• Implementation of new payment instruments resulting in changes/ replacements of systems for new instruments such as SEPA Credit Transfer
• Adoption of open standards (ISO 20022) for SEPA Credit Transfer, Direct Debit, TARGET2 Liquidity Management
• Implementation of new SWIFTNet business solutions
• Integration with new clearing/ market infrastructures
• Inter-operability between multiple systems
• Ability to process volumes Needless to say, SEPA does not offer banks a common or single solution. It is recommended that banks view the multitude of factors specific to their business and future goals before setting forth on any implementation.

Consolidating Payments Processing
If one were to pick the top few areas that banks would be evaluating to achieve payments processing efficiencies, it would most certainly have to include:
• Increasing the rates of STP (areas such as analyzing payment patterns for auto-enrichment and repair; automatic matching of payments between Directs and Covers)
• Centralized liquidity management
• Understanding a variety of transactional attributes that would be used in the derivation of pricing
• Efficient payment flow tracking and tracking of payments (dashboard functionality, automatic handling of exceptions)
To analyze transactional patterns and attributes for pricing and payment flows, Payment Analytics would come into play. If one considers the different processing steps involved in an all-encompassing payment processing model, we recommend the following steps for optimization:
• Receipt, safe-store and authentication
• Message enrichment and transformation – (including auto
repair)
• OFAC/Compliance checking
• Debit account validation (including IBAN check)
• Debit authority check-mandate verification (for DD MT204 &
PEDD)
• Funds/Credit check (VOSTRO disposition) and earmarking
• Payment routing (Chain build)
– Book clearing, NOSTRO (Serial, Direct-cover)
• Credit account validation/qualification (including account v/s name matching)
• FX processing (standard rates, special rates, among others)
• Pre-advise (MT210)/notification generation and dispatch
• Pre-advise (MT210) matching (for incoming)
• Direct v/s Cover matching – MT103 v/s MT202 / MT910 (for incoming)
• Fees and charges calculation (including correspondent fees)
• Cut-off times check (clearing/ treasury) and value dating
• Liquidity desk–scheduling, warehouse, timed payment holds, among others
• Liquidity desk – Funds checks (including TARGET2 cash messaging)

Liquidity desk – Payments prioritization, alternate routing
(if needed)
• Message formatting and bulking (if required)
• Message final validation (OFAC, cut-off, etc.) and release (InterAct, FileAct)
• Acknowledgment (ACK/NACK)/confirmation match and handling
• Book-keeping and MIS
• Advising (SWIFT, e-mail, fax, paper)

If one considers the overall enterprise payments IT infrastructure, there could be multiple options for the consolidation of payment processes and components such as:
• Payment initiation systems
• Payment types (wholesale and retail)
• Payment processing factory components (currently siloed across different product processors and
payment processing systems)
• SWIFTNet solutions for business (Funds, etc.) and market infrastructures (STEP2, TARGET2,
Faster Payments), thereby consolidating the SWIFTNet ISO20022 processing
• Liquidity management
• Payment interfaces and gateways- consolidate via a centralized messaging hub
• Complementary systems (e.g. Accounting, Billing)
• Payment networks

Many SEPA migrations will witness the gradual consolidation towards an enterprise payments infrastructure. It would be advisable for banks to move to component-based, service-oriented payments architecture with a central messaging hub to interface with the myriad of systems, including direct business processing. Common payment processing components such as compliance checks, credit management and pricing can be developed as Web Services, which can then be reused across applications.

Possible Approaches for SEPA Migration
From a generic implementation adopted by the smaller banks (e.g. indirect participants) by connecting to an external SEPA compliant SWIFTNet infrastructure, to banks
wanting to create a consolidated payments, liquidity and SWIFTNet infrastructure as discussed earlier, the approaches towards SEPA migration can vary. Significant among these routes will be that of a SEPA SWIFTNet messaging hub that can act as a single window to external networks and systems and connecting to market infrastructures such as TARGET2 and STEP2, as well as for other SWIFTNet Business Solutions in the areas of funds, cash reporting, exceptions and investigations and trade services.

Systems Integration – The Way Forward
In a nutshell, there are going to be multiple businesses and IT infrastructure changes that will drive compliance towards SEPA and, ultimately, towards the larger goal of enterprise payments infrastructure consolidation. Most organizations have set up a SEPA Implementation Committee/ Group cutting across business and IT divisions. While such groups will have SEPA compliance in immediate focus, they cannot afford to ignore the larger objectives, and not define roadmaps accordingly. All these paths will lead to changes across multiple applications and payment processes, and the creation of new applications and processes. This would imply that most SEPA initiatives would involve systems integration, thereby, introducing the need for selecting an IT solutions partner. A cost-effective solution backed by a vendor’s expertise in global payment processes is what will win in the end.

Author
Paresh Madani
Head,
Payments Center of Excellence,
PrimeSourcingTM, i-flex solutions