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Promoting Competition by the New EU Payment Services Directive:

Overview of the aims of the Directive and its scope – State of play of

transposition Javier PALMERO ZURDO

Retail issues, consumer policy and payment systems (H3)DG “Internal Market and Services”

European CommissionJavier.Palmero-Zurdo@ec.europa.eu - 0032/2.296.36.70

“AK e-payment”Brussels, 15 May 2008

The views expressed are those of the author and do not necessarily reflect those of the Commission.

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Overview of the aims of the PSD and its scope

I. Evolution A step forward an EU Single Payments

Market

II. Why ? Economic benefits

III. How & Who? PSD / COM / ECB / EPC

IV. PSD The 3 pillars

V. PSD … and SEPA scopes

VI. Conclusions

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I. Evolution: a step forward an EU Single Payments Market (SPM)

• 1992: Internal Market.

• 1999 : Euro

• 2001: Regulation (EC) 2560/2001 on cross-border transfers / principle of equal charges

• 2002 : Euro notes and coins but still national payment markets

• 2003: Communication on a New Legal Framework (NLF)

• 2005: Commission proposal for a PSD

• 2007: PSD adoption

• 2008: SEPA launch – first SEPA credit transfer

• 1/1/2009: Deadline for PSD transposition

• End 2010: Critical mass migration to SEPA product

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II. Why?

POLITICALLY NEEDED FOR MORE ECONOMIC

INTEGRATION IN EURO-AREA

Legal barriers: Fragmented legal framework – 27 sets of different national rules

Commercial and technical barriers: a market driven process – European Payments Council (EPC) – agreements between banks of 31 countries

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46 legal entities in 10 countries Banking relationships with multiple

banks in 16 countries different accounting systems some SAP 4.6/B some SAP 4.6/C Usage of 20 different electronic banking

packages

Domestic: 10 different formats supported Cross border: 7 different formats used For 13 entities paper based delivery to

the bank For 8 entities manual input in bank

software Direct debits: 6 formats supported Electronic receipts: 5 different formats

for 3 countries applied

Systems Formats

SEPA offers potential for extensive efficiency gains

SEPA potential for corporates

Example: big corporate operating in 25 European countries

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SEPA benefits for corporates

European entities as internal clients to shared

service center

Shared service center acting as company‘s

interface to banks

Using one format Sending one format Receiving one format

Company's transaction banks in Europe

Shared Service Center

Bank A

Bank B

Bank C

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Three SEPA pillars

III. How and who?

Regulator:

Payment Services Directive provides the legal foundation for SEPA (including domestic payments)

Banks’ supervisor:sets requirements,

timelines & monitors progress

Represents banking

community: coordinates the

realisation of SEPA

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IV. The three PSD pillars

Enhanced competition

by opening up markets to new players Access to market

Payment institutions Prudential rulesfor authorisation

(FATF VI)

Increased transparency

throughharmonised information

requirements

Improve consumerprotection and

Choice

Standardised rights and

obligations for providers and

usersClarity,

harmonisation and

legal certainty

MORE COMPETITION !!!

+ +

=

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V. PSD and SEPA scopes

C.o.B. rules PSD SEPA

Geographical EU + EEA (30) EU+EEA+

Switzerland

Currencies Euro + currency of Member State

Euro

Stakeholders Any PSP under Art. 1 Banks

Space PSP - PSU Interbank

Services Payment services (annex) CT, DD,cards

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First PSDTG (6/2/2008)

•Territorial scope: non-EU PSP’s and their branches within the EU

Member States’ commitment to adopt necessary measures to

implement the PSD well before 1st November 2009!!!

Title I

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Second PSDTG (16/4/2008)

•Payment account run by a payment institution versus deposit

Member States’ commitment to adopt necessary measures to

implement the PSD well before 1st November 2009!!!

Title II

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VI. Conclusions

PSD: highly important piece of EU legislation: provides legal foundation for SEPA

Increases competition and protects users Need to ensure consistent implementation by Member States : May-

November, 4 more PSDTG, Titles III-VI Publicly available website for Q&Ahttp://ec.europa.eu/internal_market/payments/framework/transposition_en.htm

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Further information

European CommissionInternal Market and Services DGFinancial Institutions Retail Issues, Consumer Policy and Payment Systems

Javier PALMERO ZURDOTel: (32 2) 296.36.70E-mail:Javier.Palmero-Zurdo@ec.europa.eu

Daniela UMSTÄTTERTel: (32 2) 298.03.90E-mail:Daniela.Umstaetter@ec.europa.eu