SEPA could fail without binding legislation – ECB
With all the stakeholders involved in the grand SEPA project, it seems remarkable that consensus has been reached at all in some areas, never mind definitive action to move SEPA forward. After a series of stumbling starts, there is at last some momentum in the areas of credit transfers and direct debits, but the SEPA Cards Framework remains a thorny issue.
Perhaps now that some building blocks of SEPA have been put in place, some vested interests are urging for a concrete timescale to be laid out so that the SEPA vision can be fully realised.
The European Central Bank is now calling for the imposition of concrete end-dates, following the December 2010 call from the European Commission which proposed an end-of-2012 timeline for the European banking and payments industry to move to EU-wide credit transfers and direct debits. The European Central Bank, which had initially called for an end-of-2012 date for credit transfers and a shift to direct debits taking place the following year, has now reiterated its proposal for an extended timetable in its formal response to the European Commission's December paper.
"Taking into consideration the payment industry's need for sufficiently long lead times, the European Central Bank suggests setting concrete dates, which could preferably be at the end of January 2013 for credit transfers and the end of January 2014 for direct debits," it stated in its position paper, published in April. The European Central Bank stated that it remains supportive of the European Commission's push for binding legislation, and warns that failure to act could scupperthe entire SEPA initiative.
"A Union act of general application, binding in its entirety and directly applicable in aft Member States, is...considered essential for successful migration to SEPA, as the project would otherwise face a serious risk of failure," it stated.
The European Central Bank is also calling on the European Commission to provide clear guidance on the regulation of interchange fees for debit card transactions. In 2009, the European Commission introduced a temporary default interchange fee for cross-border direct debits, together with a temporary endorsement of national interchange fees for direct debits.
"Both of these Articles will no longer apply on 1 November 2012," noted the European Central Bank. "In order to avoid a legal vacuum hampering migration to SEPA direct debit, it is important that a long-term solution for interchange fees for direct debits is established." If the waters weren't muddy enough already for various stakeholders, the European Commission also finds itself falling foul of the European Payments Council. While others are,urging the European Commission to take a more active role in pushing SEPA forward, the European Payments Council wants it to stay firmly in the background. In its 2010 annual report, the European
Payments Council warned the Commission not to abuse its executive powers and take on a standards-setting role in the push for SEPA, arguing that banks must retain their primacy in the development of payment systems.
"Self-regulation by banks provides the most efficient means to create innovative, effective, secure and stress-resistant payment systems," the Council stated, in a rebuff to the Commission's call for an end date of 2012 - the Commission claims it was forced to make such a call because self-regulation by the banks had failed, with minimal take-up of new payment instruments evident. Commission policymakers noted that if the trend were allowed to continue, it would take 25 years for the full benefits of SEPA to be felt.
However, the European Payments Council claims that the Commission's "interference" in payment scheme development is a worrying trend.
European Payments Council chairman Gerard Hartsink said: "The development of payment schemes through self-regulation by banks in close dialogue with customers represents the established approach in ail national banking communities. It is simply not warranted or efficient that standards should be defined and evolved by law on an ongoing basis. It is not appropriate for the European Commission to take on the role of a de-facto scheme manager and standard setter in the area of payments."
It's not often that one can have sympathy with lawmakers, but with the European Commission charged with making the regulations that will ultimately govern SEPA, it finds itself in an unenviable position. It is vitally important for the entire SEPA initiative that the Commission does not alienate banks, payment networks and other stakeholders by setting rules or standards that could deter activity - but at the same time, it has to be firm enough to give the respective stakeholders a metaphorical kick up the backside to get them moving and to deliver SEPA-compliant products and services to their customers. The rest of 2011 and 2012 will surely test the Commission's resolve to make the SEPA project a success.
payments cards and mobile May | June 2011