Serious about SPA? Business Partner Forum Conor Devane
Dubai, May 21, 2008 Conor Devane Agenda Payments in the European Union Payment Services Directive and SEPA SEPA Standards Certification Impact on our customers Impact on our business Payments in the EU Global Payment Transactions EU-27 Payments Market Market Concentration Payment Services Directive and SEPA European Payments Council
Multiple Initiatives with a Common Goal SEPA Progress Report Driving a single payment area for the euro zone European Central Bank Directorate General For Competition DG Internal Market and Services Payment Services Directive Creating the legal frameworkfor a single market Retail Banking Sector Inquiry Creating a truly open market at all levels of the value chain European Payments Council SEPA Cards Framework Developing the options, standards and implementing SEPA Payment Services Directive (PSD)
PSD applies to any local currency in the EU27 not just the euro Has been approved by the EU Parliament Transposition period to end by Nov 1st 2009 PSD status To increase competition in the payment services market To increase transparency in the information provided by banks and payment service providers To introduce harmonised and guaranteed service levels 3 main goals Charging principle Elimination of value dating Rights with respect to refunds for authorised and unauthorised transactions Maximum execution time fixed at 1-day maximum from 2012 Whats new? The PSD is a key enabler of SEPA. Together they will help to enhance Europes competitiveness 9 9 SEPA the vision Euro area EU 27 EEA Switzerland Key: SEPA will enable a single Euro payment service covering: payments (credit transfers) direct debits cards What SEPA aims to achieve: Standardisation Remove the technical and commercial barriers between current national payments markets Full availability Make the SEPA credit transfer and direct debit schemes available to all users Universal access Remove the technical barriers that prevent the full and widespread cross-border acceptance of cards Reachability Establish the conditions that allow all counterparties to be reached 10 10 How SEPA and the PSD differ in scope
Credit Trans. Cards Some Cash Other EU euro 13 EU non- euro 14 EEA CH 15 currencies P S D SEPA is for only SEPA PSD SEPA applies only to euros Starts with Euro zoneand extends to EU + EEA + Switzerland Will include cash and electronic/mobile payments in time Changes will need to be madeto both the competitive bank-to-customer space and the bank-to-bank space PSD covers all 15 EU currencies Applies to EU and possibly to EEA (Iceland, Lichtenstein, Norway), if they opt in Includes some cash and electronic/mobile payments PSD is only in the competitive bank-to-customer space SEPA Roadmap SEPA Standards Standardising for SEPA
SEPA Cards Framework (SCF) The Volume to complement the SCF Payments and withdrawals with cards in SEPA: applicable standards and certification process Claude Brun Norbert Bielefeld SEPA Cards Framework The SCF spells out high level principles and rules which when implemented by banks, schemes and other stakeholders, will enable European customers to use general purpose cards to make payments and cash withdrawals in euro throughout the SEPA area with the same ease and convenience than they do in their home country Standardising for SEPA
Card-to-terminal domain (CIR - Common Implementation Recommendation) Define application template for terminals for interaction with SCF compliant schemes cards Discussion forum for the application of EMV specifications and user interface issues Terminal-to-acquirer domain (EPAS consortium) Define Core requirements for message exchanges between terminals and acquiring hosts to guarantee functional interoperability Medium term: provide acquirers and terminals with detailed specifications to guarantee full interoperability between each acquirer and each acquiring host Standardising for SEPA
Acquirer-to-issuer domain (EPC Expert Group) Define minimum requirements for message exchanges between acquirers and issuers to guarantee functional interoperability Medium term: define convergence path for multiple specifications, and alternative aligned to ISO CT and DD specifications Certification / approval domain (CAS - Common Approval Scheme) Focus on both cards and terminals, alignment with EMV and PCI PED global specifications Establish a framework of security requirements to which SCF compliant schemes will comply Establish a framework for certification / approval Certification Certification The Volume The Volume
Payments and withdrawals with cards in SEPA: applicable standards and certification process Scope, objectives of EPC work on standardization Governance and standards maintenance aspects Consultation and validation process Intellectual property, copyright aspects Detailed description of the scope (cross domain matrix) Certification and type approval The card-to-terminal space The terminal-to-acquirer space The acquirer-to-issuer space Timelines Impact on our Customers Large banks are generally positive
Will be able to move outside domestic markets Medium, small banks will suffer May lose business from domestic subsidiaries of multinational corporations New entrants will provide innovative services in competition or in cooperation with banks Debit Schemes Debit Schemes Debit Card Rates Credit Card Rates EMV migration at POS Processing Landscape Netherlands Acceleration of SEPA Battleground Processing Trends Acquisitions
Mergers Alliances SEPA Battleground Quest for: Larger volumes Larger customer base Extension of: Value Chain SEPA coverage Processing Market Share SEPA = Sell uropean Processsors to Americans
SEPA Impact First Model : American acquisitions SEPA = Sell uropean Processsors to Americans Acquisitions EPI Delta Singular Telecash APSS GZS Polcard Muzo CardTech Essentis Alliances First Data = Lloyds TSB/ABN Amro/BNL Elavon = Citibank / Bank if Ireland / A & L / Euronet = OMV SPA = Save uropean Processors from Americans
SEPA Impact Second Model : European acquisitions & mergers SPA = Save uropean Processors from Americans Acquisitions Banksys, BCC by ATOS GBC by SIA SSB Mergers TAI/Interpay (Equens) PBS/BBS (Nets) VOCA / Link SIA / SSB LSE / Borsa Italiana SPA = Set up uropean Processing Alliances
SEPA Impact Third Model : European aggregations & alliances SPA = Set up uropean Processing Alliances Alliances EufiServ Berlin Group EAPS Aggregations SiNSYS International payment card processor created by 3 national processors, now owned by SIA SSB and ATOS Crucial questions How will interchange fees evolve?
Will the Euro Alliance attain critical mass? What will banks do with their historic processors? Which interbank processors will be sold or merged? Will ACH and card processing merge? Will we see the emergence of a pan-European processor? How far will standardisation go? And issuing? Will the market become a defacto duopoly between Visa and Mastercard, or will a third European scheme emerge? BNP Paribas, Socit Gnrale, Deutsche Bank, Commerzbank, DZ Bank and Deutsche Postbank have have begun talks about creating a European credit card scheme that would compete with MasterCard and Visa But is there a compelling business case? Impact on POS And for POS? Impact on POS suppliers
National debit schemes will disappear Local certifications will disappear Barriers to entry based on local standards, local certifications will be removed Cost of entry to European markets for competitors will be reduced Impact on POS suppliers
Tenders will increasingly be Pan-European, starting with major retailers Market for integrated solutions (e.g. Payware) and multinational switches will grow The ability to respond in multiple countries will be critical Low-cost hardware (Chinese, Indian) will compete more easily Processors will become a bigger share of the market compared to banks Questions?