As preparation is everything and time is of the essence, Etienne Goosse, secretary-general of the European Payments Council (EPC) looks at the lessons learned from SEPA migration in the euro area.
In February 2012, the European co-legislators - the European Parliament and the Council of the European Union (EU) representing EU member states - adopted Regulation (EU) No 260/2012, establishing technical and business requirements for credit transfers and direct debits, also known as the Single Euro Payments Area (SEPA) Regulation. This legislative act effectively mandates migration to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) in the euro area by 1 February 2014.
To avoid difficulties for non-compliant market participants, in February 2014, the European Commission, the European Parliament and EU governments agreed to amend the SEPA regulation to give the option to continue processing non-SEPA formats until 1 August 2014. However, this date does not mark the end of the migration process. The following deadlines also apply:
- 1 February 2016: Transitional arrangements in EU member states; the SEPA regulation has introduced several possible exemptions regarding the use of the international bank account number (IBAN), the business identifier code (BIC) and the ISO 20022 XML message standards by the February 2014 deadline. EU member states have discretion as to whether they will use any or all of the options to derogate from the 1 February 2014 deadline (until 1 February 2016) with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards by payment service users. The SEPA regulation also stipulates that credit transfers and direct debit transactions with a cumulative market share of less than 10% in an EU member state must comply with the provisions set out in this legislative act by 1 February 2016.
- 31 October 2016: non-euro countries will have to comply with the SEPA regulation by 31 October 2016.
SEPA migration is coordinated at a national level. Article 10 (competent authorities) of the SEPA regulation details how this legislative act is to be enforced. It clarifies that EU member states must designate the competent authorities at national level responsible for ensuring compliance with this regulation.
Coordination of the migration process at national level is key
In euro-area countries that achieved high SEPA migration rates early in the process, many factors contributed to ensuring an overall smooth transition including engagement and leadership by public authorities, cooperation of stakeholders based on a step-by-step implementation plan and targeted communication to ensure a timely launch of migration projects at the level of individual organisations. These actions are coordinated by national SEPA coordination committees.
Early and targeted communication methods
The SEPA regulation defines compliance requirements that have to be met by payment-service providers and users, respectively. According to data made available by the European Central Bank, all payment-service providers in the euro area were SEPA-ready by 1 February 2014. In the majority of euro-area countries, payment service providers had already completed preparations in the third quarter of 2013.
The corporate sector was also generally aware of the legal obligation to achieve SEPA compliance.
However, in May 2013, the council of the EU representing EU member states recognised that - at the time - SMEs, small public administrations and local authorities were "the least aware of SEPA migration and the least prepared for actual migration".
The council of the EU therefore called upon all EU member states to "significantly intensify communication measures primarily at national level to eliminate existing public awareness gaps".
The European Payments Council (EPC) shares the view that assisting, in particular, SMEs and local public administrations should remain a priority. This requires coordinated efforts by national public authorities, and trade associations representing businesses and banks.
Payment service users should avoid the risks of late migration
With its second SEPA migration report published in October 2013, the European Central Bank identified, among others, the following risks for payment service users stemming from late migration:
- The limited capacity and bottlenecks at payment service providers and software vendors: even if many service providers are aware of the increased demand for their services, in order to assist with the migration of payment-service users by a given SEPA compliance date, there may simply not be enough resources if huge numbers of customers concentrate their changeover into a single tight time frame.
- Insufficient end-to-end testing between end users and payment-service providers: even if systems are prepared for testing several weeks before the deadlines, there may be bottlenecks in resources and bandwidth. Payment-service providers' test systems are, generally speaking, not designed to process files or data from a very large number of customers at the same time. This could prevent the payment-service users from carrying out the proper end-to-end testing required before going live with their own systems.
The European Central Bank also pointed out that the experiences of those stakeholders that have already completed migration show that there is a real need for a fine-tuning period after changeover.
Making customer-servicing channels available early
In its first SEPA migration report published in March 2013, the European Central Bank stated: "There is a causality dilemma between the availability of SEPA-compliant customer-servicing channels and payment service users' ability to complete their internal migration projects, owing to the need to align and test data streams."
The European Central Bank therefore recommends that payment-service providers should make customer-servicing channels ready for SEPA transactions as soon as possible.
In addition, individual payment-service providers and other suppliers have developed a host of tools to support bank customers in managing the transition to the SEPA payment schemes and technical standards. These include, for example, tools to facilitate the conversion of account data to the IBAN and to adapt to the usage of ISO 20022 XML message standards in the customer-to-bank space in relation to files of payment transactions.
In summary, preparation is everything and time is of the essence. This applies to all parties involved; for example, public authorities, payment service providers and users.