The European Payments Council (EPC), the coordination and decision-making body of the European banking industry in relation to payments, today released updated and enhanced versions of the SEPA Credit Transfer (SCT) Scheme Rulebook and the SEPA Direct Debit (SDD) Scheme Rulebooks. 1 November 2010 marks another important target date on the route to SEPA as from today all banks in the euro area are reachable for cross-border SEPA direct debits as mandated by European Union (EU) law.

The single element now required to achieve an integrated euro payments market is a clear deadline for the transition to the SEPA payment schemes. The EPC calls on EU lawmakers to set an end date for migration to SCT and SDD through EU Regulation. The EPC believes that a possible forthcoming regulatory intervention relating to SEPA, as outlined by the European Commission earlier this year, would derail the entire SEPA project. As such it would eliminate the extensive benefits SEPA would offer bank customers.

The SCT and SDD Schemes evolve based on a transparent change management process providing all stakeholders with the opportunity to introduce suggestions for changes to the SEPA Schemes. Proposed changes to the schemes are subject to a three-month public consultation. As a result of this annual change cycle, the SCT and SDD Schemes incorporate numerous features introduced by end users. The limited number of requests for new elements to be introduced into the newly released Rulebooks demonstrates the maturity of the SCT and SDD Schemes and highlights that they are fit for purpose. In accordance with best industry practice, banks and their service providers have sufficient time to address the Rulebook updates ahead of November 2011, when these revised Rulebooks will come into effect.

1 November 2010 is also an important target date for the roll-out of SDD services by banks. EU Regulation (EC) No 924/2009 establishes mandatory reachability of all banks in the euro area for cross-border direct debits. In practice, this means that any consumer who holds an account in the euro area, which provides the option to make euro direct debit payments at a national level, can now make cross-border payments by SEPA Direct Debit as well. As a result, paying bills becomes significantly easier for mobile European citizens. At the same time, companies are now able to collect payments by SDD across the euro area resulting in enhanced business opportunities.

EPC Chair Gerard Hartsink comments: “The scene is set to bring SEPA to its successful conclusion. It is now up to EU lawmakers to provide planning security to all market participants by setting a clear deadline for migration to the SEPA Schemes.”

Earlier this year, the European Commission indicated that it may introduce a formal proposal for a Regulation establishing end dates for euro credit transfer schemes and euro direct debit schemes to comply with ‘essential requirements’. The EPC welcomes the European Commission’s willingness to legislate on end dates for migration to SEPA. Based on statements of the European Commission in March and June 2010, however, the EPC has several significant concerns regarding the possible forthcoming Regulation:

• The Regulation might fail to establish definite end dates for the phasing out of existing national euro payment schemes. This would prevent the realisation of potential financial benefits which could be reaped from migration to a set of harmonised SEPA Schemes. Existing national euro payment schemes could become compliant with the ‘essential requirements’. As a result, domestic transactions would still be handled by national schemes whilst the SEPA Schemes would be used exclusively for cross-border transactions. This scenario is called a ‘Mini-SEPA’.
• The Regulation might allow for multiple competing and ‘interoperable’ euro credit transfer and direct debit schemes. This concept would do little to overcome the fragmentation of the euro payments market and disregards that an optimally efficient payment environment would require that all payment service providers of all payment service users adhere to the exact same scheme rules and standards (which does not prevent competition on SEPA payment products and services). The EPC does not understand why the European Commission contemplates now a scenario so radically different from the approach it has promoted over the past decade.
• The Regulation could render obsolete substantial investments made by early movers both on the demand and supply sides who – in response to previous calls by regulators including the European Commission – have already renewed their payment architecture to comply with the SEPA Schemes developed by the EPC. Banks and other stakeholders shouldered these investments based on the shared expectation and understanding that national euro payment schemes would be phased out. The change of emphasis to ‘essential requirements’ and multiple competing schemes, however, fundamentally contradicts this original assumption upon which these investments were made.

Gerard Hartsink concludes: “In line with expectations expressed by the EU Finance Ministers, the European Parliament and the European Central Bank, the forthcoming Regulation must set end dates for the phasing out of existing national euro credit transfer and euro direct debit schemes to ensure that the high costs of running multiple payment schemes in parallel can be eliminated. A regulatory intervention based on the European Commission’s considerations published in March and June 2010, would effectively derail the entire SEPA project and eliminate the extensive benefits SEPA offers bank customers. The EPC welcomes the recent announcement by the Commission that a public hearing will be held in November 2010 to ensure that all market participants are consulted on the most appropriate approach to a regulatory intervention related to SEPA.”

An Audio edition of this release can be played here:

European Payments Council Marks Further Progress Towards the Single Euro Payments Area (SEPA) and Calls on EU Lawmakers to Set End Dates for Migration to the SEPA Schemes Through Regulation