The European Union (EU) is set to revise the Single Euro Payments Area (SEPA) governance arrangements by replacing the informal SEPA Council with the European Retail Payments Board (ERPB) and by adjusting the role of the European Payments Council (EPC), claims Policy and Regulatory Report (PaRR) intelligence, which cites draft European Commission (EC) documents as its source.
According to PaRR, which cites a source familiar with the matter, the EC is in the process of finalising the proposal for a directive on payment services in the EU’s internal market and is expected to publish it before the summer break. The Council was originally established to give payments users a stronger voice and force banks and others to speed up the SEPA project, while the bank-led EPC devised the formats that payment providers could follow in an attempt to ensure standardisation.
The SEPA project was launched to harmonise the payments market and create common procedures and standards for payments across Europe. The underlying rationale for undertaking the SEPA project has been a homogenous system with no distinction between cross-border and domestic electronic retail payments within and between different EU countries. It covers countries both within the euro, which must comply by 1 February 2014, and outside of the euro such as the UK, which have until 2016, but in reality will aim for the earlier migration deadline. The concept emerged well a decade ago, when the banking industry established the EPC, which to date has played a vital role in defining and developing business rules and standards for retail payments.
But, says PaRR, this “self-regulatory approach nevertheless found its limits,” according to the EC draft staff working document on review of SEPA governance arrangements. Because of changes in the industry, such as new means of payment via the internet/PayPal and mobile devices, there are more stakeholders in addition to traditional banks and it was felt their voice was perhaps not being heard strongly enough. Telecommunications operators and end-users have been increasingly vocal that their views should also be reflected in shaping SEPA.
To improve stakeholder involvement in the governance of SEPA at the EU level, the ad-hoc governing body - the SEPA Council - was established in the spring of 2010 for an initial period of three years. The Council consists of high-level representatives from the payment market’s demand side, including small and large companies, retailers, consumers and public administrations, as well as from the supply side - banks and payment institutions. National central banks of EU member states are also represented on the Council.
The body has had a handful of meetings to discuss various topics related to retail payments. But industry, especially small and medium-sized enterprises (SMEs) and retailers, as well as some large corporate and public sector payment users, have since lobbied for more extensive involvement.
European Retail Payments Board (ERPB)
In the draft proposal, the EC suggests creating an ERPB. In the new, more formal, governing body, each relevant stakeholder group from both demand and supply sides of the market would have at least one representative. The EC and the European Central Bank (ECB) would nominate the chairs of the board.
Central banks of EU member states could participate in the ERPB as observers. Industry associations will be able to suggest their nominees, who, as well as the observers, would have to be appointed by the chair for a period of three years. The composition of the board would be reviewed every two years, however, and more observers could be admitted, according to the draft document.
The proposal also foresees the possibility of an additional ‘multi-stakeholder group’ that could be established as the board’s sub-committee “for a limited period of time for specific clearly defined tasks of strictly executive nature and entailing technical work only.”
The ERPB would make its decisions on a consensual basis. Its objective centres on ensuring a level playing field for all market players in the retail payments business in Europe. The mandate ranges from identifying obstacles to SEPA-compliant credit transfers (SCTs), direct debits (SDDs), card, internet and mobile m-payments, through to putting together strategies to overcome any such hurdles in order to foster innovation and competition in the European retail payments market.
The board will be accountable to the EC, the European Parliament (EP) and the Council of Ministers, as well as the European Economic and Social Committee. The draft directive requires the board to report evaluation report on its efficiency and functioning. In the draft staff working paper, the EC suggests that the ERPB would provide an annual report on its activities to the EC, ECB, EP and the ECOFIN Council “to enhance its transparency and accountability.”
While admitting that the EPC is a private body that decides autonomously on its set-up and priorities in the field of retail payments, the EC suggests that it should also consider broadening its membership to ensure a better representation of the overall payment industry.
The EPC, which has been at loggerheads with regulators and politicians in the past, is expected to remain responsible for the maintenance and management of its existing common SEPA credit transfer (SCT) and SEPA direct debits (SDD) schemes.