The Single Euro Payments Area (SEPA) is an initiative from the European Community, following the Lisbon summit in March 2000, where EU members laid the foundations of the Single European Financial Market. The SEPA project aims at creating a single area where all economic agents can send and receive Euro payments under the same rights and obligations. It specifically serves the Regulation No 2560/2001 adopted by the European Parliament and Council in 2001, introducing the principle of equal charges for cross-border and national payments.
In order to achieve the SEPA, the European banking industry came together in 2002 to establish the European Parliament and Council (EPC) as its decision making and coordination body in relation to payments. This self-regulated institution develops the payment schemes and frameworks necessary to realize the SEPA. The Payment Services Directive (PSD) published by the European Commission on the 5th December 2007, finally provides the necessary legal basis for its creation.
The Single Euro Payments Area encompasses 31 countries: the member states of the European Union, Iceland, Liechtenstein, Norway and Switzerland. A SEPA transaction is originated from and routed to bank accounts located within the SEPA area and complies with the rules and standards described in the EPC Rulebooks and Implementation Guidelines.
These Rulebooks define interbank rules and standards for Credit Transfers (SCT scheme), Direct Debits (SDD schemes) and provide the framework for card payments (SEPA Card Framework), including high-level principles for banks, card schemes and card service providers.
National schemes, in relation to the core instruments (Credit Transfers, Direct Debits and card payments) will gradually be phased out and be replaced by SEPA schemes. Every citizen, merchant, public administration and corporate as well as payment processors and payment service providers will consequently be impacted by SEPA.
CORE infrastructure has been built using XML native format to be fully compliant with SEPA standards and UNIFI (ISO 20022). This configuration provides the flexibility required to handle not only SEPA payment instruments but all sorts of domestic formats as well.
CORE can process both SEPA payments and multi-country national payments. Today, CORE processes seamlessly and in Real-Time the SEPA and French domestic payments through one single hub. The choice to consolidate all types of payments through one single infrastructure facilitates liquidity management and reduces impacts on banks’ infrastructures in the migration to SEPA.
The global framework for processing relies on principles common to all SEPA services, in regards to:
- Clearing and settlement: Balances are calculated on a multilateral basis; settlements occur through TARGET2
- Processing: SCT, SDD and Return messages are sent separately, using different files
- Formats: SEPA data format is based on the global UNIFI (ISO 20022) XML message standard
- Transport: Data is handled with no alteration from end to end
- Routing: Use of BIC codes for both SCT (Creditor agent) and SDD (Debtor agent)
- Controls: Controls are performed on messages and transactions to ensure data coherence and compliance with SEPA requirements
CORE performs several layers of controls enhancing the STP processing and allowing Participants to receive payment instructions with less need for exception handling. The controls are either generic and common to all types of payment instruments or specific to SEPA transactions.
Generic controls apply to files (syntax, duplicates, signature, clearing and settlement dates, category…) and to transactions (syntax, type, currency, settlement date...). SEPA-specific controls have been designed with the aim of ensuring validity and coherence:
- of files, for compliance with the rules listed within the Implementation Guidelines
- of transactions, to provide the information required for routing and clearing.
In case mandatory information are missing or too many discrepancies occur, CORE would send back the entire file to the originating Participant. In the case of individual erroneous transactions being rejected, CORE would isolate the invalid payment instructions from the original file and send them back along with a Payment Status Report detailing reasons for rejection. The rest of the file would remain viable for processing and settlement.
STET delivers processing, clearing and infrastructure services to banks and other payment service providers in Europe, for both national and cross-border payments, and for all types of instruments including SEPA.
As a founding member of the European Automated Clearing House Association (EACHA), STET is actively involved in the association and plays a significant part in the promotion and roll-out of SEPA. EACHA was created in September 2006 by 20 Automated Clearing Houses and retail payment processors which formed themselves into this association in order to contribute to SEPA discussions and implementation projects.
EACHA especially developed the interoperability framework designed to facilitate reach between infrastructures carrying out payment processing, clearing and settlement.
Interoperability allows any payment service provider and payment processor to use the same technical conventions to send or receive payments from any other party. The Interoperability framework developed by EACHA supports the SEPA project in achieving a common area where straight-through-processing is maximised, payment processors can reach new markets and payment service providers can connect to different partners.
STET has developed and now operates the CORE system, a next generation straight-through payments system offering transaction exchange and processing as well as bilateral and multilateral clearing and settlement. Since it went live in January 2008, all French national payments have been migrated to CORE, representing an annual volume of 12.7 billion transactions and an annual value of 5.2 trillion Euros, making STET the leading CSM in Europe.
CORE has been designed on a modular service-oriented architecture (SOA) to provide extensive adaptability and scalability in supporting the business volumes and growth of all European stakeholders migrating to SEPA.
STET provides traceability on real-time basis through secure automated channels and customised web services (STET Activity Tracker). In addition, CORE produces different reports enhancing the management of information and enabling data reconciliation such as:
- Detailed statements with settlement details automatically delivered once operations are netted and prior to settlement.
- Daily statements providing account balances at closing for the reconciliation on Participant’s side.
- Monthly analytical statistics
Each Direct Participant also has a real-time access to the monitoring services to track incoming/outgoing data exchanges. Additionally, each Participant can opt to retrieve its outgoing files on request or decide to automatically receive them as a network “PUSH”.
Finally, our dedicated back-office teams can provide other statistical information upon request through CORE’s information storage facilities.
STET is notified under the Settlement Finality Directive (SFD) which aims at minimising systemic risk and ensuring the stability of payment and securities settlement systems. It ensures that transfer orders entered into these systems cannot be revoked or otherwise invalidated, even when a participant of the system becomes insolvent.
In addition, CORE is a Systematically Important Retail Payment System (SIRPS), complying with the ten core principles published by the Committee on Payment and Settlement Systems (CPSS).
CORE ensures data protection and detects any potential modification of transactions either accidental or intentional. In addition, securing of data prevents anyone from reading or modifying the content of transactions during their processing by CORE.
CORE is a highly reliable and efficient system. Performance benchmarks and operational monitoring since inception have confirmed its exceptional speed and resilience.
STET has experienced a successful launch of the SCT scheme in 2008 and the SDD schemes (Core and B2B) in 2010. Since the launch of the services, STET has enjoyed trouble-free operation and has been able to incorporate all the new technical developments with no difficulty or impact to its Participants.
As one of the key players of the European payment industry, STET pursues its proactive involvement in SEPA’s developments and updates.
STET has a dedicated back-office support team to respond to technical and functional queries and to provide on-demand analytical and statistical information.
Any SEPA compliant bank must be able to reach and to be reached by all banks in order to send and receive payments. The SEPA-wide reachability is a key feature of the payment schemes as defined in the Resolution on reachability EPC 146/6.
The Interoperability between CSMs facilitates the implementation of this imperative so banks can connect to a single infrastructure with interoperable partners without having to join several existing CSMs hence maximising efficiency and limiting risks.
Full Interoperability capabilities can be achieved by connecting to:
- STEP2, (according to its Interoperability model) in order to reach EBA members.
- Members of the EACHA based on their common technical Interoperability framework and bi-lateral agreements.
Settlements between CSMs are processed through TARGET2 in line with the EACHA’s Interoperability Framework.
STET’sSEPA services follow the recommendations for best practices described in the CMS Market Practices document.
STET offers through a single membership, to send all national and SEPA formatted transactions through a single hub, via a single window any time during the day, simplifying the client’s operations.
STET is a payment processor able to support the ambitions and developments of its clientele by servicing several communities on a state-of-the-art platform, and by connecting with other CSMs it may provide a full access to its clients.
The underlying payment messages are always compliant with the EPC Implementation Guidelines, thereafter CSMs can apply different bulking rules for the presentation of the files to be exchanged.
CORE offers the flexibility to accept files formatted according to its own bulking rules while supporting also a number of other file formats used by other prominent CSMs in Europe.
The CORE System
In addition to controls mandated by the EPC SCT Implementation Guidelines and the CORE-specific technical controls, CORE can verify that a Return message corresponds to a previously-processed SCT and that no other Return or Recall message has already been processed for the original transaction.
CORE has also been designed to allow sufficient flexibility in offering SCT services tailored according to the business and technical requirements of the Participants such as:
- Participants can send SCT files on date D up to the settlement cut-off for settlement on the same day
- Additional Optional Services related to the SCT scheme can be supported within the framework defined by the EPC
- CORE can accommodate optional customised controls such as checks on IBAN or the value of Return messages.
CORE currently handles several types of payment instruments including cards and ATMs transactions, Credit Transfers, Direct Debits and cheques.
For SEPA instruments, CORE offers 3 services: SEPA Credit Transfers (SCT), Core Direct Debits (SDD Core), and B2B Direct Debits (SDD B2B). As part of the SEPA services, CORE is fully compliant with the latest version of the rules and standards defined by the EPC Rulebooks.
CORE provides bilateral and multilateral clearing and settlement services allowing, among others:
- Participants to send files on a continuous basis, throughout the day and the week (continuous settlement)
- Participants to receive files after settlement (delivery against settlement)
- Incoming transactions to be processed and routed to destination on real-time basis.
- The emission of different payment reconciliation reports.
- Settlement via TARGET2 through any of the participating central banks.
- The use of multiple intraday settlement cycles.
Our shareable payments platform has been designed to support several communities at once using common services while also meeting specific requirements when needed. Our processing, clearing and settlement options contribute to the facilitation and maximisation of liquidity as well as improved risk management.
CORE performs generic controls common to other payment instruments as well as additional controls on SDD Core and SDD B2B messages as specified in the EPC Implementation Guidelines. It particular, CORE can check the validity of dates and periods for processing SDDs and their corresponding R-messages.
CORE can accommodate optional customised controls such as checks on IBAN, the value of R-messages and mandates.
As for SCT, may the need arise from a community, CORE would be able to accommodate any necessary AOS within the ad-hoc framework defined by the EPC.
A set of R-messages are defined by the EPC and are available to banks in order to address a contestation, both before and after settlement. The delays for sending R-messages vary in respect to their nature, the claim, the scheme and whether they relate to authorised operations or not.
CORE supports all the R-messages defined for both the Core and B2B SDD schemes.
The issuing Participant may send a Request for Cancellation on settlement day up to the agreed sending cut-off time for the message type.
As a Direct Participant:
An applicant to the status of Direct Participant to the STET CORE system shall:
- Be established as a credit institution, organization or company pursuant to article L.518-1 of Financial and Monetary Code, headquartered in France; or as an organization with a comparable status, headquartered in the European Economic Zone or in Monaco;
- Pass all functional, organizational and technical tests required by STET;
- Benefit from a short-term and long-term “investment grade” rating from a financial analysis, credit and risk rating agency such as Moody’s, Standard & Poors, or Fitch;
- Be established as a direct participant to at least one exchange community;
- Not be submitted to any type of ongoing procedures likely to burden its financial or operational situation or its capacity to fulfill its obligations as stated in the CORE Payment system convention.
As an Indirect Participant:
Credit institutions, organizations or companies pursuant to article L.518-1 of Financial and Monetary Code, or postal or telecommunications offices pursuant of articles L.745-7-1 and L.755-7-1 of Financial and Monetary Code, headquartered in France; or an organization with a comparable status headquartered in the European Economic Zone or in Monaco are eligible to take part indirectly to CORE system under the following conditions. The applicant shall:
Be exchanging payment orders with participants to exchange communities using the CORE system in compliance with applicable banking rules;
Not be submitted to any type of ongoing procedures likely to burden its financial or operational situation or its capacity to fulfill its obligations as stated in the CORE Payment system convention;
Ensure the fulfillment of its obligations resulting from the CORE Payment system convention as it should not be impeded by any legal, regulatory, statutory dispositions applicable or by any previous agreement;
Take stock and commit itself to honor obligations related to current data protection, prevention of money laundering and other frauds, as well as prevention of terrorism financing laws ;
Commit itself to respect these membership criteria at all times and to immediately notify STET in case of changes in its situation, which could prevent it from fulfilling its obligations as an Indirect Participant to the CORE system.
For an applicant constituted outside of the European Economic Zone or Monaco, the applicant shall provide a Legal advice compliant with STET terms of reference, as well as formal answers to questions addressed by STET to the applicant.
STET provides its clients with flexible access solutions to CORE that are as seamless as possible in their integration to existing network interfaces.
Flexibility is offered in the network choice by the availability of SWIFTNet connections, a secure proprietary VPN network and a secure IP-protocol interface.
Choice is equally offered in file formats by accepting a range of market-established formats as well as offering specific conversions as a value-added service to reduce impacts at the minimum for participating banks.
Banks can join CORE at their convenience.
Once terms of joining have been agreed, STET runs monthly joining windows for connection and testing by the new Participants
Yes, banks can choose to subscribe to one or more CORE processing services. . For example, a bank can decide to join the SCT service only or to join both the SCT and SDD services at the same time. For the latter, further choices exist as to whether to join the Core and/or B2B SDDs services as well.
STET is committed to ensure full deployment of its services within eight weeks. As the first milestone in the connection of a new Participant to the system, our dedicated teams will make the necessary configuration settings prior to the testing phase, ensuring that banks can commence testing activities shortly thereafter. The whole phase should normally not exceed six weeks.
Indirect Participants can choose to establish different partnerships with Direct Participants for each processing service that they decide to join.