_Akzente fr die Zukunft

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_Akzente für die Zukunft
The New Legal Framwork and SEPA
Michael THOM Principal AdministratorEuropean
CommissionInternal Market and Services
DGFinancial Institutions? michael.thom_at_ec.europa
.eu - ?32.2.296.06.68http//europa.eu.int/comm/i
nternal_market/index_en.htmZAHLUNGSVERKEHR
2006- EUROFORUM KonferenzWiesbaden, 3-5 July,
2006The views expressed are those of the author
and do not necessarily reflect those of the
Commission.
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Overview

• Do we need a Single Payments Market?
• - Savings
• - SEPA Vision
• How do we get there ?
• - Role of industry self-regulation is the key
• Payments Services Directive
• The Legislative Process
• Conclusions

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Do we need a Single Payments Market ?

• 1992 Single Market in goods, services, capital
  and persons
• 1999 Euro
• 2001 Euro notes and coins, but
• Today still no single payments market
• Single Payments Market lagging behind
• Does this matter?

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I. Savings with a true Single Market

• 1. Consumers
• Ratio current account costs 81 (240 - 35)
• More choice and competition
• Saving 9 b

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I. Savings with a true Single Market

• 2. Merchants
• Many complaints cost of cards/cost of acquiring
• Vary 201 for debit cards
• Vary 91 for credit cards
• e.g. PIN debit average BEL 5 cents vs. ESP
  1
• Many investigations by national competition
  authorities.
• DG COMP report recently published.

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I. Savings with a true Single Market

• 3. Large corporates and SMEs
• Economies from single treasury department (not
  25) plus location in MS with cheapest offer/best
  product Saving min. 10 b
• Full automation of supply chain and e-invoicing
• e-invoice 5 / manual 50 - 80
• 100 bn (even if to levels of less than Finland
  today)
• Examples automatic supply chain just in time ?
  lorry with goods arrives before money
• SMEs expansion in Single Market frustrated by
  lack of efficient cross-border payment solutions

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I. Savings with a true Single Market

• 4. Banks
• Payments can be as much 40 of banks costs but
  less than 20 revenue ? rationalise and modernise
• Consolidation infrastructure/processing
  Saving 10 b reduce average to 20
  above current best 3
• Increase electronic payments (reduce cash/
  cheques) Saving 5 b
• Opportunities from sell added-value- services
  e.g. e-invoicing not plain vanilla
  payments ? bn

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I. Savings with a true Single Market

• 5. Society as whole
• Cost of payments can be halved in 10 years
• 2 ? 1 GDP (e.g. Norway, Finland)
• i.e. 1 GDP saving every year
• Example of Lisbon economy

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I. SEPA VISION

• Integrated market for payment services
• subject to effective competition with
• Pan euro products and infrastructure (no
  distinction between cross-border and national
  payments within the euro area)
• low-cost, efficient, modern and reliable payment
  services
• facilitate SEPA-wide payment related services, in
  particular e-invoicing

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I. SEPA VISION

• Commitment of Commissioner McCreevy
• Vision shared with ECB
• SEPA- Joint Statement from EC and ECB
• ECB- 4th Progress Report
• Commission fully supports a market-driven, self
  regulatory process
• Therefore role of industry is key

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I. But..

• Huge savings BUT some warnings
• A. Not all will gain necessarily
• Efficient businesses gain market share and
  realise savings
• Some pockets of protectionism may reject change
  and lose. No longer possible to fend off
  competition due to lack of Single Market
• B. Cards
• Real danger of less competition and adverse
  outcome
• Not tolerate price increase and reduced service
  levels

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II. How do we get there ?

• Removal of barriers
• Legal New Legal Framework
• Commercial and Technical
• Industry-self regulation
• (EPC Rulebooks and Frameworks)

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II. Role of industry self-regulation key

• Industry response to problems ? EPC ? SEPA
• Remove commercial and technical barriers
• EPC Rulebooks and Frameworks (credit
  transfers, direct debits, cards, etc.)
  Tremendous achievement agreement 7000 banks,
  29 countries
• Ambitious project and key dates 2008 and 2010
• NOT just cross-border ?
• need fundamental change in payments landscape
• Commission support
• - objectives allow realisation full Single
  Market potential
• - self-regulation the preferred path

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II. Role of industry self-regulation key

• Conditions for efficiency and savings in network
  industry
• Common open standards transparent/accountable
  development process
• Infrastructure and processing full technical
  and commercial interoperability
• Transparent cost based pricing
  (efficient instruments
  drive out expensive)

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III. Payments Services Directive

• Objectives and principles
• Remove legal obstacles to SEPA (pan-european
  products)
• Improve competition
• Facilitate STP/efficiency
• Promote consumer confidence in modern payment
  instruments
• Full harmonisation no gold plating
• Min. regulation and max. self-regulation

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III. Overall approach of NLF

• 3 Pillars
• 1) Market access / new providers / prudential
  rules
• 2) Transparency / information requirement
• 3) Rights and obligations of users and providers

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III. Structure of the NLF
Title I Subject matter, scope and definitions
(Articles 1-4) Title II Payment service
providers (Articles 5-23) Title III
Transparency of conditions for payment services
(Articles 24-40) Title IV Rights and
obligations (Articles 41-75) Title V Amendments
and Payments Committee (Articles 76-77) Title
VI Final provisions (Articles 78-87) Annex
Definition of Payment services under Article 2(1)
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Title 1 Scope

• Three elements
• Execution of payment transactions within the
  meaning of the Directive
• At least one PSP in the EU (one leg inside EU)
• Made in any currency
• In addition
• Titles III IV apply up to EUR 50 000
• See also list of payment services in the Annex
  negative scope under Article 3 (list of
  exclusions)

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Title II Payment Service Providers

• Qualitative prudential regime for new category of
  PSP payment institutions (PI)
• Reflects the low level of risk involved in this
  activity proportionate regulatory regime.
• All PIs have to be registered in their home MS
  (including those having benefited from a waiver
  under Article 21).
• Only authorised PIs have European passport
• Non-exclusive activities (Art. 10(3)).
• Access to open payment systems (Art. 23).

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Title III Transparency requirements

• Allow payment service users to shop around on the
  basis of an informed choice more competition!
• Three regimes
• Single transactions
• Framework contracts.
• Micro-payments under framework contracts up to
  EUR 50.
• Full clarity on currency (Art. 39) and surcharges
  (Art.40)

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Title IV Rights and obligations

• D1 mandatory execution time all credit
  transfers without currency conversion / default
  for other payments.
• PSP liability non-execution or defective
  execution of a payment transaction strict
  liability limited to the EU, outside the EU only
  successful delivery to other PSP
• PSU liability misuse of payment instrument
  (limit-150) except fraud and gross negligence
  (corporate users excl.)
• Full amount credited without any deduction to
  beneficiary.
• Refunding Conditions for refund where payment
  transaction has been authorised.
• Irrevocability PSU ability to reject a payment
  wrongly made on his/her behalf is limited.

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Titles V VI Amendments, Payments Committee
and final provisions

• Comitology process for the up-dating of the list
  of activities under Annex amounts
• Full harmonisation
• Grandfathering clause (Article 80)
• Repeal of Directive 97/5/EC
• Transposition within 12 months from adoption

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IV. The Legislative Process

• COMMISSION
• Proposal adopted on 1st December 2005
• COUNCIL
• Proposal favourably received and
• High priority for Austrian and Finnish Presidency
• Six working group meetings held
• EUROPEAN PARLIAMENT
• Lead Committee
• ECON (draftsman Mr Jean Pièrre Gauzès (EPP/FR)
• Other Committees involved
• IMCO (draftswoman Mrs Mrs Mia De Vits (PSE/BE)
• JURI (draftsmanMr Rainer Wieland (PPE /DE)
• Good progress- First reading completed by Autumn
  ?

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V. Conclusions

• Potential of SEPA for EU economies huge
• Rapid adoption of Payments Services Directive
  top priority
• PSD necessary, but not sufficient
• Industry role to remove other barriers key
• Self-regulatory action preferred approach - but
• SEPA too important to fail

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Thank you very much for your attention!
Your questions are welcome!
If you should need further information please
contact
Michael Thom, Principal Administrator DG
Internal Market Tel. [phone] E-mail
Michael.Thom_at_ec.europa.eu