Post on 14-Dec-2015
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Global Transaction BankingDeutsche Bank
Top-10 in Google.com:
— Single Euro Payments Area
— Scottish Environment Protection Agency
— Solar Electric Power Association
— State Environmental Policy Act
— Science Education Partnership Award
— SouthEastern Psychological Association
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Do you really know what SEPA is?
Global Transaction BankingDeutsche Bank
SEPA Background
SEPA Credit Transfer
SEPA Direct Debit
SEPA Status and Outlook
SEPA Benefits
Global Transaction BankingDeutsche Bank
— Domestic Credit-Transfer and Direct-Debit schemes vary considerably throughout Europe
— Example Direct Debit:— Different mandates
— Different submission dates
— Different cut-off times
— Different return timeframes (finality of payment) even post-PSD
— Interbank rules vs. local law
— Different file formats
— No cross-border direct debits
— Potentially forced to use different banks in different countries
— Cumbersome account reconciliation efforts
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The European Payments Landscape pre SEPA (1)
Global Transaction BankingDeutsche Bank
— Domestic Credit-Transfer and Direct-Debit schemes vary considerably throughout Europe
— Example Direct Debit:
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The European Payments Landscape pre SEPA (2)
Italy (RID)
- Due date
- Registration of creditor with Central Bank (SIA)
- Debtor bank needs the mandate (mandate check)
- CBI RID file format
Portugal (EDR) - No due date
- Creditor ID has to be registered with SIBS
- Debtor bank does not need the mandate (no mandate check)
- EDR file format
Belgium (DOM’80)- No due date
- Registration of creditor by DB with CEC/UVC, which assigns a unique creditor ID
- Debtor bank needs the mandate (mandate check)
- DOM’80 file format
Spain (CSB19)- No due date
- No registration of the creditor with central bank
- Debtor bank does not need the mandate (no mandate check)
- CSB19 file format
Global Transaction BankingDeutsche Bank
— 1999: Introduction of the Euro
— 2000: EC Financial Services Action Plan— Also known as “Lisbon Agenda”
— Comprising 42 measures to create a Single Financial Services Market
— 2002: Launch of SEPA initiative by the banking sector— European Payments Council (EPC)
— 2008: First step achieved: launch of the SEPA credit transfer
— 2009: Second step achieved: launch of the SEPA direct debit
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Single Euro Payments Area (SEPA):A political Project
Global Transaction BankingDeutsche Bank
— Instruments and schemes — Credit Transfers (since 28 January 2008)
— Direct Debits (since 2 November 2009)
— Debit-Card transactions
— Phase out of national payment schemes (by 2012/13?)
— Market Infrastructure — From various local systems to pan-European clearing houses (PE-ACH’s)
— Legal Framework (European Commission)— European Payment Services Directive
— Transposition into national law completed in most countries
— EU Regulation 924/2009 (formerly 2560/2001)
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Scope
Global Transaction BankingDeutsche Bank
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Geographic Scope
…only € Transactions!
EU – Euro Countries (16)Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia, Slovakia and Spain
EU – Non-Euro Countries (11)Bulgaria, Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Sweden, United Kingdom
The European Economic AreaIceland, Liechtenstein, Norway
and additionallySwitzerland, Monaco, Mayotte and St.Pierre-et-Miquelon
Global Transaction BankingDeutsche Bank
SEPA Background
SEPA Credit Transfer
SEPA Direct Debit
SEPA Status and Outlook
SEPA Benefits
Global Transaction BankingDeutsche Bank
— Full amount credited to beneficiary – no deductions
— Maximum clearing cycle from transaction initiation to credit on the beneficiary account of:— Currently max. 2 days
— Max. 1 day from 2012
— Central-bank reporting will continue— Threshold increased to EUR 50k from January 2010 (EU Reg. 924)
— Germany remains at EUR12,500
— Not covered by SEPA— Foreign-currency Payments (EU also)
— Urgent Payments
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SEPA Credit Transfer Characteristics
Global Transaction BankingDeutsche Bank
— IBAN and BIC to replace account number and national bank code
— Payment Detail field length: 140 characters
— Optional fields for:— Originator reference (end-to-end reference)
— Purpose Codes
— The orderer bank must pass them on to the beneficiary bank
— The beneficiary bank can optionally display them to the beneficiary
— Category Purpose Codes
— The orderer and/or the beneficiary bank can optionally offer special processing
— E.g. bulk vs. individual booking
— For on-behalf-of payments
— Originator Reference Party
— Beneficiary Reference Party
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SEPA Credit Transfer New Data Elements
Global Transaction BankingDeutsche Bank
SEPA Background
SEPA Credit Transfer
SEPA Direct Debit
SEPA Status and Outlook
SEPA Benefits
Global Transaction BankingDeutsche Bank
— Direct debit scheme based on a signed mandate— Content is standardised
— Language of debtor country
— Creditor captures and maintains mandate data
— Relevant mandate data are part of every SDD (creditor mandate flow)
— Harmonized collection and exception timelines and rules (so-called R-transactions)
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SEPA Direct DebitCharacteristics
Global Transaction BankingDeutsche Bank
— IBAN & BIC instead of legacy account number & national bank code
— Unique mandate number— To be issued by creditor
— Country-specific creditor ID— Issuance to be defined per country
— Example Germany: via central bank
— Mandate date— Likely a fictitious date for existing mandates
— Remittance Information (Payment Detail) field length: 140 characters
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SEPA Direct DebitNew Data Elements (1)
Global Transaction BankingDeutsche Bank
— Mark as B2B or Core SDD
— Mark as first or one-off direct debit, or as recurrent direct debit
— Optional creditor reference (end-to-end reference)
— Optional transaction codes— Purpose Codes
— The creditor bank must pass them on to the debtor bank— The debtor bank can optionally display them to the debtor
— Category Purpose Codes— The creditor and/or the debtor bank can optionally offer special processing— E.g. bulk vs. individual booking
— For on-behalf-of collections— Creditor Reference Party — Debtor Reference Party
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SEPA Direct DebitNew Data Elements (2)
Global Transaction BankingDeutsche Bank
— Usage— Core SDD: can be used with consumers and companies
— B2B SDD: can be used with companies only
— Status of micro-enterprises to be determined by country
— A micro-enterprise is defined as an enterprise which has less than 10 employees and whose annual turnover or balance sheet is equal or less than 2 million Euro (2003/361/EC)
— Return right by debtor— Core SDD: 8 weeks after debit
— B2B SDD: no return right after debit
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SEPA Direct Debit Core vs. B2B Scheme: Main Differences (1)
Global Transaction BankingDeutsche Bank
— Mandate check by debtor bank— Core SDD: optional
— B2B SDD: mandatory
— Usage considerations
— Acceptance of B2B scheme by debtor/debtor bank
— Implications on processes (especially if both schemes are used)
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SEPA Direct Debit Core vs. B2B Scheme: Main Differences (2)
Global Transaction BankingDeutsche Bank
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SEPA Direct DebitTimelines
D: Due date = debtor’s debit date = inter-bank settlement date
D-14 CD: Customer pre-notification of amount & due date (unless other timeframe is agreed)
D-1 BD: Submission of first, one-off and subsequent SDD
D+2 BD: Latest date for bank returns
No refund right for debtor
D+36 M: Mandate expires 36 months after last SDD submission
CD = Calendar DaysBD = Business DaysW = WeeksM = Months* = optional reduction to D-1 in discussion
D: Due date = debtor’s debit date = inter-bank settlement date
D-14 CD: Customer pre-notification of amount & due date (unless other timeframe is agreed)
D-5 BD:* Submission of first & one-off SDD
D-2 BD:* Submission of subsequent SDD
D+5 BD: Latest date for bank returns
D+8 W: Maximum refund period for debtor for authorized transactions
D+13 M: Maximum refund period for debtor for unauthorized transactions
D+36 M: Mandate expires 36 months after last SDD submission
B2B Direct DebitCore Direct Debit
Global Transaction BankingDeutsche Bank
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SEPA Direct DebitMandate Sample Core Scheme
IBAN & BIC
Authorization of the debtor‘s bank in addition to the creditor
Mandate Number
Additional examples in “EPC Guidelines for the Appearance of Mandates” from 04.12.08:http://www.europeanpaymentscouncil.eu/knowledge_bank_list.cfm?documents_category=1
and at:http://www.europeanpaymentscouncil.eu/content_preview.cfm?page=the_sepa_direct_debit_mandate
Creditor ID
Global Transaction BankingDeutsche Bank
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IBAN & BIC
Authorization of the debtor‘s bank in addition to the creditor
Mandate Number
Additional examples in “EPC Guidelines for the Appearance of Mandates” from 04.12.08:http://www.europeanpaymentscouncil.eu/knowledge_bank_list.cfm?documents_category=1
and at:http://www.europeanpaymentscouncil.eu/content_preview.cfm?page=the_sepa_direct_debit_mandate
Creditor ID
SEPA Direct DebitMandate Sample B2B Scheme
No refund right
Global Transaction BankingDeutsche Bank
SEPA Background
SEPA Credit Transfer
SEPA Direct Debit
SEPA Status and Outlook
SEPA Benefits
Global Transaction BankingDeutsche Bank
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Strategic Benefits
Risk Control
Co
st
Re
du
cti
on
SEPA
SEPA
SEPA
SEPA
Trends Result: Increased Centralization
Reduction of banking partners/accounts
Seamless IT interfaces Elimination of paper
Rationalization
SWIFT for corporates XML formats SEPA
Standardization
Centralized Treasury SSC/Payment factories Single ERP Outsourcing
Centralization
Shared Service Centers
Centralization of liquidity regionally(In-house banks)
Payment factories/“on behalf of” payments
Collection factoriesvia SDD
Collections“on behalf of”
Local cash management by subs
Centralization of liquidity by country
Global Transaction BankingDeutsche Bank
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Account Consolidation
SEPA TransactionsSEPA Countries
Clients need just one account in Europe for making payments and collections
Corporate
Global Transaction BankingDeutsche Bank
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Limitation of Centralization with SEPA
Geographic / Currencies(only EUR)
Instruments(e.g. checks, Ribas,
letters of exchange, etc.)
Potentially legal and tax constraints
Corporates still need Banks able to Support them with Local Services throughout Europe
SEPA
Global Transaction BankingDeutsche Bank
SEPA Background
SEPA Credit Transfer
SEPA Direct Debit
SEPA Status and Outlook
SEPA Benefits
Global Transaction BankingDeutsche Bank
— 28 January 2008: SEPA Credit Transfer (SCT) went live— More than 4.400 banks have joined the scheme
— Broad reachability achieved (95% of payment volume)
— SCT Migration
— File conversion by some banks
— First clients with “real” XML files
— Public sector starts to move
— 2 November 2009: SEPA Direct Debit (SDD) went live— Some 3.000 banks have joined the scheme
— Only limited reachability achieved (70% of DD volume)
— SDD migration expected to start from November 2010
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Current Status
Global Transaction BankingDeutsche Bank
— The SCT is not a mass payment instrument yet…
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SCT Statistics (1)% of European ACH Volumes
Source: ECB
Global Transaction BankingDeutsche Bank
— …but is widely used for cross-border payments
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SCT Statistics (2)XCT vs SCT
Source: EBA
* Credit transfers that are in line with the convention on credit transfers in euro of the European banking industry, i.e. retail payments of up to 50,000 euro per transaction.
0
100000
200000
300000
400000
500000
600000
700000
Ap
r 0
8M
ay
08
Jun
08
Jul 0
8A
ug
08
Se
p 0
8O
ct 0
8N
ov
08
De
c 0
8Ja
n 0
9F
eb
09
Ma
r 0
9A
pr
09
Ma
y 0
9Ju
n 0
9Ju
l 09
Au
g 0
9S
ep
09
Okt
09
No
v 0
9D
ez
09
Jan
10
Fe
b 1
0M
rz 1
0A
pr
10
Ma
i 10
Jun
10
Jul 1
0A
ug
10
Da
ily #
of
XC
Ts
& S
CT
s
Month
EBA Step2No. of XCTs vs. SCTs
# of XCTs
# of SCTs
Global Transaction BankingDeutsche Bank
— SDD volumes are currently negligible
— There are various reason for this…
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SDD StatisticsNumber per Day
Source: EBA
Global Transaction BankingDeutsche Bank
1. End date for existing domestic schemes
2. Reachability of debtor banks
3. Validity of existing mandates
4. Core SDD with D-1 submission deadline
5. Information/education of consumers
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Dependencies for SCT/SDD Migration
Global Transaction BankingDeutsche Bank
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1. End Date for existing domestic SchemesApproach of the European Commission
— End-date consultation during summer 2009— Result: majority favors end dates
— End 2009 / Beginning 2010: Resolutions by European Parliament and ECOFIN Council ask Commission for end dates
— Working paper for regulation of end dates published in June 2010:— Regulation by EU Commission (to be published in September/October 2010)
— End date for EUR credit transfers 1 year after entry into force / 2 years for EUR direct debits
— 4 years for both CTs and DDs for non-Euro countries
— But only for EUR-transactions
— End-to-end format (ISO 20022) regulation (not just inter-bank)
— Niche products (<10 % of total volume of an instrument within a country) can be excluded for 3 years after entry into force
— EPC rules not considered – instead definition of so-called “Essential Requirements”
Global Transaction BankingDeutsche Bank
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2. Reachability of Debtor Banks (1)
Global Transaction BankingDeutsche Bank
— Reachability dependent on EPC adherence process and EU Regulation 924/2009— Regulation 924:
— Mandatory reachability for Core SDD for all banks in the Euro-Zone by November 2010
— November 2014 for non-Euro-Zone EEA countries
— Optional reachability for B2B SDD remains
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2. Reachability of Debtor Banks (2)
Global Transaction BankingDeutsche Bank
— Continued legal validity for Core SDD ensured for most countries
— No solution found yet for Germany— Currently, need to obtain new mandates
— Due to recent developments in Germany, a solution is expected
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3. Validity of existing Mandates
Global Transaction BankingDeutsche Bank
— Of interest for certain countries
— D-5/D-2 can potentially have negative effects, e.g:— Delayed liquidity
— Increased risk
— More complicated processes
— D-5/D-2 does not make sense for countries where no mandate check occurs
— Status: Under discussion as an AOS in e.g. Germany
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4. Core SDD with shortened Submission Deadline
Global Transaction BankingDeutsche Bank
— Currently:— Slow SCT migration
— Voluntary SDD adherence process for banks
— Until November 2010:— SDD pilots
— Mandatory reachability for Core SDD of all banks in the Euro-zone
— From November 2010:— Slow SDD migration
— 201?: — End date for existing domestic instruments
— Mass migration to SCT and SDD
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Expected Migration Scenario
Corporate Preparation
Analysis
Budgeting
Planning
Implementation
End of Project