SEPA migration: end of our good old national credit transfers and direct debits
The European Commission proposed last December 16th, the text of its regulation project on the
end dates of national credit transfers and direct debits.
After awaiting the release of this regulation project, we will now await the date of its entry into force!
This text is at an early stage of discussion. It must be ratified by the European Parliament and the Council under the Hungarian presidency next term beginning in January 2011 or in that of Poland or even Denmark's if it lasts more than a year. It means
the regulation can still change due to amendments these two bodies would ask.
The end dates are therefore still uncertain and we can only make assumptions about the timing of the adoption of the final text.
So which assumptions can be made for this entry into force date: December 2011 (fairly realistic) or June 2012?
The regulation defines, in Article 5 the following dates at the latest:
. 12 months after the entry into force of the regulation for the ending of national credit transfers (CT) i.e. according to our assumptions
between late 2012 and mid
.24 months after the entry into force of the regulation for the ending of national direct debits (DD) i.e. according to our assumptions
between late 2013 and mid 2014.
Which are the concerned payment services?
These dates apply to all existing credit transfer and direct debit services in
However the services for which the number of transactions is smaller than 10% of similar payments volume could wait some time, depending on the choice of the member states for them to become SEPA compliant (according to Article 7 - Waiver). In France for
instance, 12 months could be added to the national direct debits end date for the TIP (Titre Interbancaire de Paiement) which in 2009 represented just 4.5% of the DD volume. The TIP could then disappear in 2014-2015 in favor of a SEPA compliant DD service
yet to be defined.
Technical interoperability to force migration to the SEPA Direct Debit (SDD) and SEPA Credit Transfer (SCT)
Does the ending of national payment services involve the migration to SEPA payment instruments (SCT and SDD) or can other European payment schemes arise?
This alternative which has been much debated should receive a response through Article 4 of the Regulation regarding interoperability. By imposing the same rules for both national and cross-border credit transfers or direct debits as well as a mandatory
participation of the majority of the member states PSP - Payment Service Providers - (banks, payment institutions ....), the European Commission appears to have imposed without naming them the SEPA instruments (SCT and SDD) defined by
EPC, the European Payments Council.
The European Commission has also imposed technical requirements sorts of functional specifications partly based on the EPC "Rule Books". Among these requirements is the use of the
ISO 20022 XML messages standard for the batches exchanged between the PSP and their clients.
Impacts for companies
Companies but also governments, associations, public authorities ... should not only respect the deadlines for migration to SCT and SDD but also do so by adopting the ISO 20022 XML SEPA standard for their file transfers with their banks. Migration scenarios
should therefore be thought twice, for example by making a choice between a short term migration scenario to SEPA payment instruments but without immediate change of format (use of conversion tools offered by banks) versus a longer term migration scenario
adopting new rules and standards at the same time.
Impacts for banks and other PSP
The impact of this regulation for the PSP is undoubtedly the loss of interchange fee per direct debit transaction when existing. However, one possibility is left opened: the so called "R" transactions such as Reject, Return ... could be billable between
PSP under certain conditions.
An obligation is also made to the issuing party (PSP) to ensure the receiving Party (PSP) bank detail
BIC (Business Identifier Code) is correct. And finally this project regulation introduces for the PSP the obligation to be reachable for SCT.
Impacts for consumers
SEPA migration should be as transparent as possible for consumers; the most difficult will be for them to provide bank details in the international format
IBAN (International Bank Account Number) even for national transactions. For example, the new SEPA Direct Debit mandate form must be filled with the debtor IBAN
and BIC. Although present on their bank documents for many years, these details are not familiar to them.
An evolutionary regulation
The new regulation will revise the current (EC) No 924/2009 coming from Regulation (EC) No 2560/2001. Integrating
technical requirements this Regulation will certainly have to evolve under the operation of SEPA.
The European Commission will use all legal tools at its disposal to achieve the development of SEPA, including the use of "Delegated Acts" as defined in
Article 290 of the Treaty of Rome: A legislative act may delegate to the Commission the authority to adopt non-legislative acts of general application to supplement or amend certain non-essential elements of the legislative act.
Would SEPA finally be on track?
Catherine Gondelmann Bredin
Consulting and training for SEPA payment services