The Single Euro Payments Area in a global context · The Single Euro Payments Area in a global...
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The Single Euro Payments Area in a global context
Gertrude Tumpel-Gugerell Member of the Executive Board of the ECB
NACHA’s 2008 Global Payments Strategies Conference,
Brussels, 22 January 2008
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The Single Euro Payments Area (SEPA)
aims at achieving a fully integratedmarket for euro retail payment services.
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Outline
I. Financial integration
II. Key components of SEPA
III. SEPA for cards
IV. SEPA and innovation
V. Conclusions
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I. Financial integration
The Eurosystem has a keen interest in financial integration and the efficient functioning of the financial system.
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1. Financial integration
Financial integration is key for:
• Conducting monetary policy
• Safeguarding of financial stability
• Promoting the smooth operation of payment systems
• Enhancing competitiveness of the financial sector
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I. Financial integration
Financial integration means:
• Single set of rules
• Equal access
• Equal treatment
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I. Financial integration
1952Member States establishing the European Coal and Steel Community:Germany, France, Italy, the Netherlands, Belgium and Luxembourg.
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I. Financial integration
Today
Member States in the EU:Germany, France, Italy, the Netherlands, Belgium, Luxembourg, Denmark, Ireland, United Kingdom, Greece, Spain, Portugal, Austria, Finland, Sweden, Czech Republic, Cyprus, Estonia, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia. New Member States (2007):Bulgaria and Romania.Candidate Countries:Croatia, the Former Yugoslav Republic of Macedonia and Turkey.
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I. Financial integration
Population: 300 494(millions)GDP: 11 12(PPP, € trillions) Size of capital markets: 362 337(% of GDP)
Markets of similar size, market with similar rules?
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I. Financial integration
Chart 1: Use of payment instruments by non-MFIs in the EU (2000 to 2006)
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2000 2001 2002 2003 2004 2005 2006
Source: ECB
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ear
Credit transfers
Direct debits
Cards
Cheques
E-money transactions
Transactions increased; cards now number one
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I. Financial integration
Trends in payments are similar in EU and globally.
But habits differ:
– Use of payment instruments differs among regions.
– The industry has to develop common solutions that are able to cope with the different payment habits in Europe.
– Users should have similar choices between payment services across Europe.
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I. Financial integration
Most used in HU,RO; Less used in PT
Chart 2: Relative importance of Credit transfers
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I. Financial integration
Most used in PT; Less used in RO
Chart 3: Relative importance of payment cards
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I. Financial integration
Most used ES, DE; Less used PL
Chart 4: Relative importance of direct debits
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I. Financial integration
Most used MT, CY; phasing out in many countries
Chart 5: Relative importance of cheques
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BE BG CZ DK DE E E IE G R E S FR IT CY LV LT LU HU MT NL AT P L P T RO S I S K FI S E UKperc
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I. Financial integration
• Consumers’ habits of purchasing goods and services are changing: – More competition and new business
opportunities.
– Innovative payment solutions are likely to change consumer habits.
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II. Key components of SEPA
In the Single Euro Payments Area (SEPA) it should be possible to make euro payments under the same basic conditions regardless of its location.
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II. Key components of SEPA
Before 1999/2002: Fragmented markets National currenciesNational payment productsNational processors
Now: mowing towards integrated marketsSingle currencyUnified set of rules for payments in euro Adoption of international standards
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II. Key components of SEPA
SEPA launch
• SEPA credit transfer: one European standard, for every customer from 28 January 2008.
• SEPA direct debit: two European options (core and business related) available from November 2009.
• Cards market: one European framework (including common chip standards and market arrangements) from January 2008.
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II. Key components of SEPA
“Industrialisation of financial services”: increase productivity and product offerings by using standardised platforms
Sources: DB Research (2007)/ Rundshagen and Riese (2006)
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III. SEPA for cards
The ultimate goal is an integrated and competitive cards market where you can use “any card at any terminal”.
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III. SEPA for cards
Current cards market:
•Strong national card schemes; although: tendency towards high MIF in some countries [efficiency]
•Boundaries of collective agreements (competition versus cooperation) [competition law]
•Limited room for manoeuvre for schemes [governance]
•Lack of standardisation [technical barrier]
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III. SEPA for cards
Need for an additional pan-European card scheme:
• Increase choice for stakeholders
• Without moving to a duopoly
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III. SEPA for cards
From 2008: start of SEPA cards framework
• To define strategy (e.g. co-branding, alliances, European scheme)
• To adjust arrangements (e.g. separation of scheme and processing, interoperability)
• To adopt further card standards (e.g. EMV)
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III. SEPA for cards
In the long run:
Gradual alignment of business models and progressive merger of schemes will lead to abolishment of regional schemes.
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IV. SEPA and innovation
Need for a broadening and deepening of SEPA to come to a fully integrated and innovative market.
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IV. SEPA and innovation
Broadening SEPA: Involvement of corporates, merchants and consumers
• Stakeholders forums
• End-to-end straight through processing
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IV. SEPA and innovation
Deepening of SEPA: Modernisation and innovation
For example:• Online payments
• Mobile payments
• E-invoicing
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V. Conclusions
SEPA will fundamentally transform the European payments landscape.
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V. Conclusions
1. SEPA is necessary and inevitable.
• SEPA will start 28 January 2008 with credit transfers; direct debit and cards will follow.
• National legacy instruments will disappear over time.
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V. Conclusions
2. SEPA is of global relevance.
• SEPA adopts latest international standards (i.e. ISO, EMV, etc.).
• SEPA facilitates entry of international service providers to Europe.
• SEPA increases competitiveness of European service providers.
• SEPA Rulebooks as an example of regional integration.
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V. Conclusions
3. SEPA is innovative.
• Banks start combining SEPA with projects on e/m-payments.
• The payments sector globally and in Europe is transforming - from a narrow transaction focus towards a holistic service approach.