Expert on PSD: interview week end #3 Catherine Gondelmann Bredin from Explain

Question 1/5: PSD -Payment Service Directive- is coming soon! Catherine Gondelmann you are an expert on this topic (Explain) what are on "executive summary" the main purposes and the schedule (especially for France)?

There was a time when having national payment systems playing with national rules was relevant. The European legislators, I mean the European Commission and the Eurosystem (European Central Bank and the National Central Banks), think it is now pertinent to have payment systems working in the same conditions all over Europe. The first thing which is required to do so is a legal harmonisation. The PSD intends to bring the legal framework which will give, for instance, the same rights and obligations to a payer in France or a payer in Slovakia as well as to their respective banks. That is what we could call “gumming the border effect”.
The Member states and indeed France are working hard to transpose the PSD which will enter into force on 1st November 09. I am eager to get the final text of the French transposition expected end of second quarter 09.

Question 2/5: It seems to be a major change: do you think there is a "before PSD" and an "after PSD"?

I think the 1st November 09 is a very important date; it is a sort of “legal big bang”. Yes, there will be a “BEFORE PSD” and an “AFTER PSD”. I do not think we really realize the impact it will have not only on banks but on their customers. During the trainings on PSD and on SDD I give, I can see how people react to the changes. For example, the vocabulary introduced by the PSD is a major change. While you are used in your local legal wording to words such as “merchants”, “creditors” or “beneficiaries”, you have now to get used to the unique concept of “payee”. Similarly, for cardholders or debtors, the PSD proposes “payer”. At first sight it may look simpler but it means changes.

Question 3/5: A recent article from pse consulting: “Why is the PSD being delayed?” is alarming. Do you think the French actors are late? If yes, why according to you?

I have read this recent article, I had also read the first one of June 2008 where institutions across EU were questioned about their ability to be PSD compliant on time. It is not referred to France in this article but to different sizes of banks or PSP (“Payment Service Providers” as named by the PSD). I do not see why the outcome of the survey would not apply to France. Even if it is possible (and highly recommended) to work with the current PSD text, there is room for interpretation and as long as the final transposition text is not issued, it is difficult for a PSP to send a revised payment service agreement to its existing clients (payers or payees!) or to writing a new one for the future ones. Furthermore, the smaller the bank is, the less resource it has to work on different version of the text.

Question 4/5: Do you think that the PSD impact is transverse i.e. legal, technical and organisational and not only a simple commercial contract to change?

Certainly yes, let us take the example of the “execution time” for credit transfers:
Ø Legally it must be specified in the credit transfer agreement; it is a sort of guarantee given by the bank to the payer that the funds will reach the payee in a given time (OK for the purists, I correct: the execution time finishes when the funds are credited on the payee’s bank account). Suppose your kid is abroad and urgently needs money ….. Won’t you be more than interested in the moment he or she will receive the funds? Your bank is now bound by the PSD to tell you “before” the execution of the credit transfer how long it will take and how much it will cost you including the currency conversion if any.
Ø Technically, the execution time must be no longer than one day by 2012 where for certain cross border-transfers it may take several days today. The impact will be on all the “interbank” links of the payment chain: from the bank of the payer to the bank of the payee.
Ø And finally organisationally, because back offices will have to know how to inquire about what happened if this execution time has not been respected. … “Why has my kid not yet received the funds as you told me?

I am not saying it is awfully complex but it needs to be coordinated. Those changes can be an opportunity for banks to revise they commercial payment services offers in order to transform what they see as a constraint into an opportunity such has offering an even shorter execution time.

Question 5/5: What about SDD?

Here is another story and welcome if you want another interview! However let me just point out something. The PSD introduces contestation delays of 8 weeks and 13 months after the debit date depending on whether the payer has or not given its consent to pay. Those delays apply to the national direct debits schemes as well as to the SDD SEPA Direct Debit. As we say from the Roman “rendons à César ce qui est à César”. Those delays and their application are rising concern among creditors, they come from the PSD and not from the SEPA Direct Debit which is only PSD compliant.

Who is EXPLAIN?

Explain is a French business corporation (S.A.R.L.) created by Catherine Gondelmann Bredin who gained her expertise in working since its inception on the SEPA Direct Debit with French and European banks. She has also contributed as a payment expert with the legal advisors to the analysis of issues related to the PSD - Directive on payment services (2007-64 CE)-. This dual expertise allows her to set the SDD not only in its banking but also legal understanding.

Engineer by training, her career took place in 3 phases:
- Consultant coordinating large banking projects
- Detached National Expert in the payment unit of the European Commission's DG Internal Market
- Representative of a major French bank within the banking community: first as an international card expert and lately as a SEPA Direct Debit and PSD expert.

What can you expect from EXPLAIN?
Explains goal is to support in a concrete way the understanding of the SDD operation from a business point of view either through appropriate training or by consulting missions. Explains proposal is designed to enable human resources involved in the SDD project or in the migration one to understand the challenges of change and acquire the necessary knowledge to achieve their assignment. EXPLAIN intends to support even "coach" SDD officers in charge who are faced with all kinds of resistance to change.
EXPLAIN may intervene in all SEPA countries, in English and French.
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