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Payment systems: efficiency and fairness Roadmap for the Single Euro Payment Area European Parliamen

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Cards: 1-7-2002; credit transfers 1-7-2003. Commission ... embedded to guarantee a proper preparation and a timely implementation of decisions ... – PowerPoint PPT presentation

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Title: Payment systems: efficiency and fairness Roadmap for the Single Euro Payment Area European Parliamen


1
Payment systems efficiency and
fairnessRoadmap for the Single Euro Payment
AreaEuropean Parliamentary Financial Services
Forum
EUROPEAN PAYMENTS COUNCIL Towards our Single
Payment Area
Gerard Hartsink Chairman European Payments
Council Brussels, January 27, 2004
2
Agenda
  • Legal and economic landscape
  • EPC governance framework
  • Progress for retail payments
  • Progress for large value payments
  • Conclusions

3
Legal Landscape
  • Regulation 2560 (Dec 2001) on cross-border
    payments in Euro
  • Decision of the European Parliament and the EU
    Council
  • Euroland Domestic Concept
  • Euro reality for 305 million Europeans in 12
    countries
  • Cards 1-7-2002 credit transfers 1-7-2003
  • Commission
  • Consultative Communication December 2, 2003  New
    Legal Framework
  • for Payments in the Internal Market 

4
Cross-Border and Domestic Payment Transactions
Estimate based on 1999 figures, with a CAGR of
6 Source EFMA SWIFT TARGET ECB statistics
McKinsey analysis EU 15, 2001
5
Retail Payments Transactions in the EU 15 (1)






Note 2001 figures, not including cash
transactions Source ECB Bluebook (Addendum,
September 2003) non Euro countries
6
Retail Payments Transactions in the EU 15 (2)
7
Retail Payments Transactions in the EU 15 (3)
8
EPC Governance Framework
  • EPC vision
  • EPC Charter principles
  • EPC Council structure
  • Dialogue with other SEPA stakeholders

9
European Payments Council vision
  • March 2002 SEPA Workshop
  • White Paper Euroland our Single Payment Area!
  •  We, the European banks and Credit Sector
    Associations,
  • Share the common vision that Euroland payments
    are domestic payments,
  • Join forces to implement this vision for the
    benefit of European customers, industry and
    banks, and accordingly,
  • Launch our Single Payment Area 

Major players of the European payments industry
and a fair representation of smaller players (42
banks and 4 associations EBF, EACB, ESBG, EBA)
10
Some principles of the approved EPC Charter
  • The EPC the  decision making body for the
    European payments industry 
  • Major players of the payments industry with a
    fair representation of the smaller players
  • Proper representation of banks of 10 acceding
    countries
  • The European Credit, National Banking, and
    Payment Associations should all be embedded to
    guarantee a proper preparation and a timely
    implementation of decisions
  • The EPC will give the strategic guidance to the
    standards process executed by ECBS, SWIFT, card
    companies, etc.

11
Council Structure country dimension DRAFT
  • Seat numbers could be adjusted through  wild 
    cards
  • Market shares are validated by ESCB as TTP

12
Dialogue with other SEPA Stakeholders (1)
  • Authorities
  • European Commission PSMG meetings
  • Bilateral meetings
  • European Parliament EMAC hearings
  • Central banks (ECB and ESCB)
  • COGEPS meetings (co-operation model)
  • Roles ? catalyst role
  • ? oversight role
  • ? regulator role
  • ? operator role (settlement services)

13
Relations with ECB (ESCB)
  • The Eurosystem very much welcomes the decisions
    taken and general commitments made by the EPC
  • In many cases the EPC has articulated political
    intentions, but concrete deadlines and milestones
    are still missing. The EPC needs to transform its
    objectives into a fully-fledged project with a
    sound plan and fixed deliverables. A convincing
    arrangement for the enforcement of EPC decisions
    needs to be developed and communicated to all
    banks and the general public.
  • Today SEPA indicators for design and for
    implementation available.

ECB June 2003
14
Dialogue with other Stakeholders
  • Banks customers - Treasurers EACT (together
    with ECB)
  • - Retailers Eurocommerce
  • - SMEs UEAPME
  • - Consumers BEUC
  • - Government treasurers in pipeline
  • Key messages - What do you expect from SEPA?
  • - What is our EPC vision?
  • - What is your and our progress so far?
  • - What are your top 10 concerns?

15
Progress for retail payments
  • Challenges
  • Credit Transfers
  • Direct Debits
  • Infrastructure(s)
  • Cards
  • Cash

16
Challenges for Retail Payments
  • For existing (domestic) payment instruments
  • - optimising processes of (for) existing
  • Euro payment instruments
  • - removal legal (reporting) obstacles
  • For new pan-Euro(pean) payment instruments
  • - commitment to change national payment
    habits of all stakeholders?
  • - commitment on end-to-end standards?
  • - uniform legal environment?
  • - modernisation (simplification) regulatory
  • framework for Euroland (Europe)?

17
Credit Transfers
  • Approved recommendations
  • IBAN (International Bank Account Number)
  • Credeuro resolution
  • ICP (Interbank Convention on Payments)
  • Cross border cheque recommendation (Dec 2003)
  • FATF (Financial Action Task Force) recommendation
    7
  • In Pipeline
  • Recommendations on several standards
  • Recommendations on mobile payments
  • Remark
  • Implementation by banks and customers
  • ECB report on standards Q1/Q2, 2004

18
Direct Debits
  • Approved recommendations
  • Pan-European Direct Debit scheme report (Dec
    2003)
  • In Pipeline
  • Final choice of model(s)
  • Dialogue with stakeholders (also tax authorities)
  • Remark
  • Landwell report 2003
  • New Legal Framework for Payments (Dec 2003)
  • Governments launching customers

19
Infrastructure ECB position (1)
  • Payment Systems
  • require high initial investment
  • their use is subject to large economies of
    scale effects
  • Number of existing systems

Source ECB
20
Infrastructure ECB position (2)
Retail payments in euro
ECB's objective
TOMORROW
Domestic
Cross-border


Single Euro Payments Area
payment areas

payments
Efficient domestic infrastructure
Inefficient cross-border infrastructure
Efficient pan-European infrastructure




High volume
Low volume
High volume


Low cost
Low cost
High cost
High service level Low prices ? 0-3
Low service level High prices ? 17-24
High service level Low prices
Source ECB
21
Infrastructure EPC position
  • Approved recommendations
  • PE-ACH (pan-European Automatic Clearing House)
    concept
  • PE-ACH governance guiding principles
  • Receiver capability of all banks
  • In Pipeline
  • Implementation of receiver capability by all
    banks
  • Remarks
  • PE-ACH Step2 scheme of EBA Clearing Company
  • EBA STEP2 More than 1,100 direct and indirect
    participants
  • Operational since Q3 2003

22
Cards
  • Approved recommendations
  • 8 recommendations standardisation,
    SEPA-compliant rules,
  • legal obstacles, data collection,
    implementation, etc.
  • Recommendation on fighting and preventing fraude
    (Dec 2003)
  • In Pipeline
  • Dialogue with international and national schemes
  • Remarks
  • EPC cards paper for the market (www.europeanpaymen
    tscouncil.org)
  • ECB card report Q2, 2004

23
Cash
  • Approved positions and recommendations
  • ECB (ESCB) is partner
  • 9 Recommendations joint cards and cash
    strategies, promotion electronic products,
    standardisation (equipment), legal obstacles,
  • NCB functions, etc.
  • Recommendation on cross border cash
    transportation (Dec 2003)
  • Recommendation on NCB core functions (Dec 2003)
  • In Pipeline
  • Inventory national cash schemes
  • Remarks
  • Cash is most expensive payment instrument

24
Progress for large value payments
  • Target 1
  • Target 2

25
Target (today)
ECB
NCB
TARGET Interlinking Network
NCB
ILC
ILC
NCB
ILC
ILC
NCB
ILC
NCB
ILC
NCB
ILC
NCB
ILC
NCB
ILC
NCB
ILC
NCB
ILC
NCB
ILC
ILC
ILC
NCB
NCB
ILC
ILC
NCB
NCB
Source ECB
26
Target 2 ESCB approach
  • October 24, 2002
  • Strategic Decision of Governance Council on
  • Multi platform system
  • System for large value Euro payments
  • Core service with options for NCB to provide
    additional services
  • Euro system wide price structure

27
Target 2 EPC approach
  • Common position on Target user requirements
  • Single integrated system
  • Core functionalities
  • Compliance with core principles BIS
  • Service level improvement
  • Timing project deliverables
  • Decisions ECB (ESCB) Q1 2004 Mono platform

28
Conclusions
  • The EPC was able to re-establish the trust of the
    ECB and EC
  • in the payments industry
  • The ECB and the EC and other stakeholders
    (Corporates, retailers) expect deliverables with
    concrete deadlines and milestones
  • Key words for the future are standardisation and
    consolidation for retail payment systems and
    for Target 2
  • Governments should remove legal obstacles
    a.s.a.p. and should become the launching
    customers (e.g. tax) for the new payment
    instruments for Euroland
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