COMMISSION STAFF WORKING DOCUMENT SUMMARY OF THE IMPACT ASSESSMENT   Accompanying document to the  Proposal for a  REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL  establishing technical requirements for credit transfers and direct debits in euros and amending Regulation (EC) No 924/2009  (Text with EEA relevance)
Date: 2010-12-16
Institutions: European Commission
Subjects: bank charges, capital transfer, electronic money, financial legislation, impact study, intra-EU payment

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EUROPEAN COMMISSION 

Brussels, 16.12.2010 
SEC(2010) 1583 final 

COMMISSION STAFF WORKING DOCUMENT 

SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying document to the 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

establishing technical requirements for credit transfers and direct debits in euros and 
amending Regulation (EC) No 924/2009 

(Text with EEA relevance) 

SEC(2010) 1584 final 
 SEC(2010) 1585 final 
 COM(2010) 775 final 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

3. 

4. 

5. 

6. 

6.1. 

6.2. 

6.3. 

Introduction .................................................................................................................. 3 

Problem definition........................................................................................................ 3 

Reasons for the slow migration to SEPA..................................................................... 3 

Effects of slow migration without an end-date: a baseline scenario (no intervention) 4 

EU’s right to act and justification ................................................................................ 5 

Objectives..................................................................................................................... 5 

Policy options............................................................................................................... 6 

Analysis of impacts and comparison of options .......................................................... 6 

Impact of additional incentives .................................................................................... 6 

Impact of setting a SEPA migration end-date.............................................................. 6 

Comparison of baseline scenario versus setting an end-date ....................................... 7 

6.3.1.  Comparison in terms of achieving the specific objectives........................................... 7 

6.3.2.  Comparison in terms of stakeholder impact................................................................. 7 

6.4. 

Technical sub-options for the implementation of a SEPA migration end-date ........... 8 

7. 

Monitoring and evaluation ........................................................................................... 9 

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1. 

INTRODUCTION 

The vision of a Single Euro Payments Area (SEPA) aims at creating an integrated market for 
electronic  payments  in  euro,  with  no  basic  distinction  between  national  and  cross-border 
payments.  For  electronic  payments,  a  large  number  of  different  national  payment  formats, 
standards,  and  rules  still  exist  across  the  EU.  SEPA  shall  provide  European  citizens  and 
businesses with low cost, user-friendly and reliable payment services, and create favourable 
conditions for increased competition and development of payments-related innovations. 

The  success  of  the  SEPA  initiative  is  very  important  in  the  current  economic,  monetary  as 
well  as  political  context.  The  potential  direct  and  indirect  benefits  of  SEPA  for  the  wider 
European economy exceed EUR 300 billion over a six-year period – assuming that migration 
to SEPA payment instruments is comprehensive and rapid. Two crucial milestones on the way 
towards the realisation of SEPA have already been achieved: the launch of the SEPA Credit 
Transfer  (SCT)  on  28 January 2008,  and  the  launch  of  the  SEPA  Direct  Debit  (SDD)  on 
2 November 2009. 

SEPA  was  originally  conceived  as  a  primarily  market-driven  project.  The  pan-European 
schemes  are  designed  and  implemented  by  the  European  Payments  Council  (EPC), 
a coordination  and  decision  making  body  set  up  by  the  European  banking  sector.  However, 
there is increasing recognition by all categories of stakeholders that a legally binding end-date 
may be necessary to achieve successful project completion. 

The  scope  of  this  impact  assessment  is  limited  to  two  payment  instruments,  euro  credit 
transfers and euro direct debits. 

2. 

PROBLEM DEFINITION 

Full  integration  of  the  payment  market  will  only  be  accomplished  once  pan-European 
payment  instruments  replace  the  national  legacy  instruments.  At  the  current  stage  however, 
pan-European  payment  instruments  are  far  from  substituting  national  payments.  As  of 
April 2010,  only  7.5 %  of  all  credits  transfers  processed  by  clearing  and  settlement 
mechanisms  were  executed  in  the  SCT  format.  An  extrapolation  of  this  data  results  in  the 
projected completion of SEPA after more than 30 years of migration. 

2.1. 

Reasons for the slow migration to SEPA 

Root cause: Uncertainty of SEPA completion and phase-out of legacy products. The lack of 
a common time horizon encourages  market players on the supply and demand side  to delay 
migration  efforts.  As  long  as  existing  legacy  payment  instruments  can  be  used,  payment 
service users will postpone the required migration efforts. On the other side, banks shy away 
from necessary infrastructure and marketing investments for SEPA until they are certain that 
customers and their systems are 'SEPA-ready'. Hesitation on the supply side is exacerbated by 
the perceived lack of clarity on an appropriate long term business model for SDD complying 
fully with EU competition rules. Both sides of the market – supply and demand – are waiting 
for the other one to move first. 

Reluctance to invest: first mover disadvantage. Payment service providers (PSPs) deciding to 
market the new SEPA instruments early and actively have a major first mover disadvantage. 

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During the transition period these PSPs still have to support duplicate costs, i.e. for both the 
existing payment systems as well as the new SEPA system. 

Missing  incentive  for  PSPs  to  develop  SEPA  products  fully  meeting  user  needs.  As  long  as 
there  is  no  certainty  about  SEPA  completion  PSPs  can  continue  to  offer  existing  legacy 
products  to  their  customers  and  do  not  have  a  sufficient  incentive  to  develop  and  actively 
market SEPA products which meet all customer requirements. 

Fragmented demand side and low level of SEPA awareness. The market for payment services 
is  characterised  by  the  demand  side  (payment  service  users)  being  much  more  fragmented 
than the supply side (PSPs) and not aware of SEPA benefits. 

2.2. 

Effects  of  slow  migration  without  an  end-date:  a  baseline  scenario 
(no intervention) 

Untapped economies of scale due to diverging payment standards and processes. Despite the 
existence of SCT  and  SDD payments domestic transactions, are  still  done  predominantly in 
national  legacy  formats.  In  2009,  there  were  still  over  20  different  national  processing 
infrastructures  and  schemes  for  retail  euro  payments.  These  differences  hamper  the  inter-
operability  of  payment  services  between  Member States  and  impede  the  realisation  of 
economies of scale effects. 

On  the  demand  side,  businesses  operating  in  a  multi-national  environment  still  need  to 
organise  their  treasury  operations  and  cash  pools  at  national  level.  They  have  to  maintain 
relationships  with  many  PSPs  offering  different  kinds  and  levels  of  services  and  using 
different payment formats. 

Limited  competition  in  the  EU  payments  market.  Currently,  any  PSP  planning  to  enter 
a foreign  market  for  payment  services  needs  to  fulfil  a  number  of  purely  national  technical 
and  business  requirements.  The  complexity  and  the  resulting  cost  of  such  adjustments 
represent a significant barrier for operators which want to offer their services abroad. 

Cross-border mobility of payment service users is also an important requirement for effective 
competition  in  the  payments  market.  The  opening  of  a  payment  account  in  another 
Member State  today  is  often  refused  by  PSPs  on  the  mere  basis  that  the  consumer  is  not 
a resident or a national in the Member State concerned. Consequently, the choices of users are 
often  restricted  to  the  incumbents  of  the  national  markets  and  the  provision  of  payment 
services on a cross-border level is non-existent or more complicated than necessary. 

As regards direct debits specifically, the persistence of business models based on multi-lateral 
interchange  fees  (MIFs)  between  PSPs  in  a  limited  number  of  Member  States,  set  up  to 
finance the whole operation of the direct debit system, also restricts competition and prevents 
the emergence of an effective, efficient and competitive market. 

Hindered  innovation.  A  fragmented  payments  market  impairs  the  emergence  of  efficient 
pan-European  payment  related  innovations,  such  as  online  and  mobile  payments  or 
e-Invoicing. As innovative services mostly emerge at national level only, there is a risk that 
market fragmentation is increased and perpetuated. 

Non-productive  investments  and  duplicate  operational  cost  for  legacy  and  SEPA  systems. 
Many participants in the European payments market suffer from duplicate, transitional costs 
of providing or using payment services. Simultaneously maintaining national legacy payment 

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platforms  and  a  new  pan-European  SEPA  platform  requires  significant  extra  resources  and 
leads to a missing return on already taken investments. 

A  protracted  migration  to  SEPA  would  result  in  an  overall  loss  of  EUR 43 billion  for  the 
economy  just  over  six  years  period.  The  negative  effects  would  be  spread  over  all 
stakeholders with the exception of consumers. 

3. 

EU’S RIGHT TO ACT AND JUSTIFICATION 

By its nature an integrated euro payments market requires a Community-wide approach as the 
underlying standards, rules and processes have to be consistent across all Member States. This 
supports  the  aim  of  Article 3  of  the  Treaty  on  the  European  Union  stipulating  an  internal 
market and an economic and monetary union whose currency is the euro. The alternative to 
a Community-wide approach would be a system of multilateral or bilateral agreements whose 
complexity  and  costs  would  be  prohibitive  as  compared  to  legislation  at  European  level. 
An intervention at EU level therefore complies with the subsidiarity principle. 

4. 

OBJECTIVES 

In accordance with the identified problems, the following policy objectives are identified: 

General: 

– 

– 

– 

To  increase  the  efficiency  and  competitiveness  of  the  EU  payments  market  by 
realising  economies  of  scale  and  operational  synergies  on  both  the  supply  and 
demand side. 

To  create  an  open  and  level  playing  field  for  competition  in  the  payment  service 
market  at  European  level  and  facilitate  downward  price  convergence  for  payment 
services in Europe. 

To  establish  a  pan-European  platform  from  which  innovative  and  value-adding 
payment services and products can be launched. 

Specific: 

– 

– 

To achieve full operational integration of the payments market in Europe for credit 
transfers and direct debits. 

To  eliminate  excess  complexity  and  the  duplicate  cost  resulting  from  the  need  to 
maintain multiple payment platforms on the supply and demand side. 

Operational: 

– 

To  create  transparency  and  market  certainty  regarding  SEPA  completion  for  credit 
transfers  and  direct  debits  and  the  phase-out  of  corresponding  national  legacy 
payment instruments. 

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5. 

POLICY OPTIONS 

Three main scenarios can be envisioned: 

No  intervention  –  baseline  scenario.  Under  this  scenario,  SEPA  migration  would  be  left  to 
market forces. 

Give  new  impetus  to  SEPA  migration  by  additional  incentives.  In  this  scenario  the  SEPA 
migration process could be accelerated and reinforced by a series of measures at the level of 
Member States. 

Setting  a  SEPA  migration  end-date.  Under  this  scenario,  an  end  date  for  SEPA  migration 
would  be  set  by  a  Regulation.  National  legacy  payment  instruments  would  need  to  be 
phased-out and replaced by pan-European instruments. 

6. 

ANALYSIS OF IMPACTS AND COMPARISON OF OPTIONS 

6.1. 

Impact of additional incentives 

Slow  SEPA  migration  process  could  be  in  principle  boosted  by  a  series  of  measures 
undertaken  by  or  aimed  at  different  SEPA  stakeholders  at  the  national  level.  On  the  supply 
side  a  full  scale  communication  and  awareness-raising  campaign,  addressed  to  the  payment 
service users would be useful. On the demand side these measures could be complemented by 
investment  support  for  companies,  for  example  relaxed  amortisation  rules,  write-off  of  the 
cost  of  personnel  training  or  even  tax  rebates.  In  addition,  public  authorities  could  play 
an avant-garde  role  in  the  migration  processes  and  actively  promote  SEPA  payment 
instruments. Some forms of coordination at the EU level could be also contemplated. 

A  major  advantage  of  such  an  approach  would  be  the  fact  that  it  does  not  require  lengthy 
legislation procedures and remains quite flexible. A fundamental weakness of such approach 
is that any set of non-binding measures aimed at simply accelerating SEPA migration will not 
resolve  the  root  problem,  as  discussed  in  2.1.  Besides,  such  measures  may  be  simply  too 
costly in the current economic climate and their added value difficult to measure in terms of 
increased welfare. 

The option of additional incentives is therefore discarded. 

6.2. 

Impact of setting a SEPA migration end-date 

A study by CapGemini estimates that the benefits of a swift migration from legacy payment 
instruments  to  SEPA  instruments  could  reach  EUR 123 billion  over  a  six-year  period. 
According  to  the  study,  the  estimated  total  benefit  results  from  an  even  higher  gain  on  the 
demand side (EUR 175 billion) offset by a loss on the supply side (EUR 52 billion). Benefits 
on the demand side are driven by two factors: 

– 

– 

operational cost savings due to optimisation of payment operations; 

a  positive  effect  from  the  reduction  of  bank  fees  resulting  from  more  intense 
competition. 

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The study predicts that the benefits on the demand side would be spread fairly evenly across 
all stakeholders, i.e. consumers, businesses and the public service. These benefits are just the 
direct effects of migrating to SEPA rapidly. 

In more qualitative terms, an end-date for SEPA credit transfers and direct debits accelerates 
benefits for the stakeholders in the following areas: 

Increased standardisation leading to complexity reduction and economies of scale. With full 
SEPA  migration,  businesses  would  be  able  to  centralise  their  euro  cash  management  and 
simplify/automate their payment procedures. For consumers, who are becoming increasingly 
mobile  standardised  cross-border  payments  would  eliminate  the  need  for  several  bank 
accounts in different countries. 

Increased competition in an open and more transparent playing field. For PSPs, an integrated 
payments  market  would  lower  entry  barriers  across  borders,  thereby  attracting  new  market 
players and intensifying competition.  Furthermore,  standardised payment instruments would 
allow  consumers,  businesses,  and  public  administrations  to  more  easily  compare  payment 
products and thus allow users to benefit from more intense competition and better prices. 

Opportunities for pan-European innovation. Through common standards and the creation of 
a European  level  playing  field,  a  completed  migration  to  SEPA  would  foster  payments 
modernisation and the development of new services such as mobile and online payments, or 
e-Invoicing, on a pan-European basis. 

6.3. 

Comparison of baseline scenario versus setting an end-date 

6.3.1.  Comparison in terms of achieving the specific objectives 

Objective/Option 

Effectiveness 

Integration of the 
European payments 
market for credit 
transfers and direct 
debits 

Elimination of duplicate 
cost and excess 
complexity of payment 
systems 

Efficiency 

Base scenario 'do 
nothing' 

Setting an end-date 

0 

+++ 

0 

++ 

0 

++ 

Contribution to objectives: 
+++ (Strong); ++ (Moderate); + (Weak) positive contribution  
– – – (Strong); – – (Moderate); – (Weak) negative contribution; 0 neutral contribution 

6.3.2.  Comparison in terms of stakeholder impact 

Stakeholder 

Benefits 

Costs 

Overall 
effect 

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Businesses 

Public 
Administrations 

Improved cash/treasury management 
Greater liquidity 
Reduced banking fees and internal payments 
admin costs 
Straight-through-processing 
Development of added value services 

Migration effort 
– new or 
upgraded 
payment 
systems and 
processes 
Staff training  

Reduced banking fees and admin costs 
Straight-through-processing 
Development of added value services 
Increases the benefits of public tendering of 
payment services, since offers could be better 
compared and inefficiencies caused by 
national payment formats should disappear. 

Migration effort 
– new or 
upgraded 
payment 
systems and 
processes 
Staff training 

Consumers 

Reduced banking fees/wider range of services 
due to increased competition 
More innovative, user-friendly, secure, and 
convenient payment instruments 

Banks/PSPs 

Scale economies/Operational savings 
New business opportunities as competition 
barriers reduced 

Change of 
habits – IBAN 
(and BIC 
where 
necessary) 

Investments 
for SEPA 
payment 
platform 
Revenue 
impact for 
incumbents 
due to 
increased 
competition 

+++ 

++ 

++ 

+ 

Overall effect compared to the baseline scenario 

Based on this comparison, it is recommended to pursue the option of setting an end-date. 

6.4. 

Technical sub-options for the implementation of a SEPA migration end-date 

In order to be effective an end-date needs to be clearly defined at technical level. A number of 
sub-options  for  the  end-date  implementation  exist  in  six  relevant  areas.  These  sub-options 
have been compared against the sets of criteria deriving directly from the policy objectives. 

Reference  basis  for  adopting  pan-European  credit  transfers  and  direct  debits.  The 
recommended option is to establish an end-date on the basis of general essential requirements 
which  need  to  be  fulfilled  by  pan-European  credit  transfers  and  direct  debits.  The  essential 
requirements will also include the existing international and non-proprietary standards. Two 
other  alternatives  were  assessed  and  rejected,  in  particular  an  approach  based  on  existing 
schemes and rulebooks as developed by the EPC and an approach limited to existing technical 
standards. 

Transaction  domain.  It  is  recommended  to  follow  an  approach  where  the  essential 
requirements  would  apply  throughout  the  whole  payment  transaction  domain.  An estimated 
EUR 84 billion  of  operational  savings  on  the  demand  side  depends  entirely  on  payment 
market  integration  extending  beyond  the  inter-bank  space.  Consequently,  the  option  of 

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limiting essential requirements to the inter-bank space has been assessed and rejected for the 
above reasons. 

Cross-border  opening  of  bank  accounts.  It  is  recommended  to  abolish  any  discriminatory 
treatment  of  non-residents  and  non-nationals  as  regards  the  opening  of  payment  accounts. 
This  would  ensure  that  the  full  benefits  of  SEPA  in  terms  of  increased  competition 
(EUR 91 billion)  could  be  reaped.  A  continuation  of  the  current  practice  has  been  assessed 
and rejected for the above reasons. 

Product  specification.  It  is  recommended  to  apply  an-end  date  also  for  niche  products  i.e. 
credit  transfers  and  direct  debits  which  represent  low  volume  payments  and  offer  specific 
functionalities. However, in order to allow for the necessary adaptations in the pan-European 
schemes,  a  transitional  period  in  the  range  of  3–5  years  shall  be  granted.  Two  other 
alternatives  were  assessed  and  rejected,  namely  an  all-inclusive  approach  applying  to  niche 
products  in  the  same  way  as  to  standard  products,  and  a  permanent  exclusion  of  niche 
products from the essential requirements. 

Member States  scope.  It  is  recommended  to  pursue  the sub-option  with  a  common  end-date 
for  the  euro area  and  a  later  common  end-date  for  the  non-euro area,  since  euro  payment 
volume  shares  in  non-euro area  represent  only  an  estimated  2 %  of  all  euro  payments.  Two 
other  alternatives  were  assessed  and  rejected,  in  particular  individual  end-dates  by  Member 
State, and a common unique end-date for euro and non-euro area Member States. 

Deadline.  It  is  recommended  to  pursue  the  sub-option  of  separate  end-dates:  one  year  after 
entry  into  force  of  the  Regulation  at  the  latest  for  credit  transfers  and  two  years  for  direct 
debits.  The  sub-option  of  a  common  end-date  for  credit  transfers  and  direct  debits  was 
assessed and rejected. 

Clarity on the long term business model for pan-European direct debits. It is recommended to 
prohibit  the  general  application  to  every  direct  debit  transaction  of  multi-lateral  interchange 
fees  (MIFs)  between  PSPs  (and  measures  of  equivalent  object  or  effect)  and  to  allow  MIFs 
only under certain conditions for direct debit transactions which cannot be properly executed 
or which are being reclaimed by a PSP. To ensure a level playing field, bilateral and unilateral 
interchange fees for these transactions should also only be allowed if cost based and aiming at 
an efficient allocation of costs to the entity having caused these transactions. The alternatives 
of  continuing  the  current  practice  or  imposing  a  positive  or  a  capped  MIF  for  every  direct 
debit  transaction  have  been  assessed  and  rejected  as  they  would  not  address  the  currently 
perceived lack of clarity which slows down migration to SEPA. 

7. 

MONITORING AND EVALUATION 

An evaluation is recommended three years after the entry into force of the regulation so as to 
assess how effective and efficient it has been in terms of achieving the objectives presented in 
the impact assessment and to decide whether new measures or amendments are needed. 

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