THE LITHUANIAN SEPA MIGRATION PLAN. v.3.0

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1 THE LITHUANIAN SEPA MIGRATION PLAN v.3.0 Vilnius 2014

2 CONTENTS INTRODUCTION SEPA COORDINATION COMMITTEE LEGAL BACKGROUND CREDIT TRANSFERS DEBIT TRANSFERS INFRASTRUCTURE INFORMATION STANDARDS AND FORMATS GLOSSARY

3 INTRODUCTION The Single Euro Payments Area (SEPA) is the area where private customers, public authorities and other institutions can initiate and receive payments in euro whether between or within national boundaries under the same terms and conditions, rights and obligations, regardless of their location. SEPA basically changes the electronic payments in euro market in Europe, ensuring a higher level of services, more efficient products and less costly ways to make payments. Currently SEPA covers 34 countries: all of the European Union (EU) member states, plus Norway, Iceland, Lichtenstein, Switzerland, the Principality of Monaco and San Marino. Major requirements of the SEPA project are established in Regulation No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing the technical and business requirements for credit transfers and direct debits in euro and amending Regulation 924/2009 (hereinafter SEPA Regulation). However, the SEPA Regulation does not define specific payment schemes. They must be designed by the market participants themselves. The following schemes have been designed and are currently in operation: a SEPA Credit Transfer Scheme, a SEPA Core Direct Debit Scheme and a SEPA Business-to-Business Direct Debit Scheme. All of them are managed by the European Payments Council an organisation representing the European banking industry. It applies an annual scheme change management process during which it invites all parties concerned to submit proposals on scheme changing. 1 With the adoption of the euro in Lithuania in early 2015, from 2016 banks and other payment service providers will not be able to accept from customers payment instructions not in compliance with the requirements of the SEPA Regulation. For this reason, preparations to apply SEPA requirements are the responsibility of enterprises as well. In transitioning to standardised SEPA payment instruments credit transfers and direct debits the electronic payment rules, practice and formats will change. The least number of changes will have to be made by enterprises that make payments through internet banking. Other enterprises that send and receive payments in packages will have to review their internal processes and update their information systems. The aim of this document is to inform market participants about the progress made in the preparations for the SEPA project in Lithuania. This is the third version of the plan. The plan may be updated when the situation so requires and taking into account the project implementation progress, notes and suggestions by market participants. The document assumes that the euro will be adopted in Lithuania on 1 January lopment_sepa_customers 3

4 1. SEPA COORDINATION COMMITTEE The SEPA Coordination Committee (hereinafter Committee) has been operating in Lithuania since 2007 and addresses public communication and technical issues of migration to SEPA. In 2013 it was decided to expand the composition of the Committee (see Table 1), providing for the participation of credit unions, payment institutions and electronic money institutions registered in the Republic of Lithuania, clearing houses, Lithuanian Central Credit Union, and the Republic of Lithuania Ministry of Finance. The functions of the Committee are as follows: 1) work out a plan for legacy payment instruments to be replaced with the SEPA instruments in Lithuania and, within its competence, ensure compliance with this plan; 2) apply measures so that the SEPA payment instruments (credit transfers, direct debits, card payments, etc.) will be in accordance with the needs of the payment service users and be accessible; 3) to work out proposals to eliminate obstacles for efficient functioning of SEPA payment instruments and initiate their presentation to competent authorities; 4) maintain relations with representatives of the SEPA project management structure at the EU level and Lithuania s payment service users in regards to issues on SEPA payment instrument; 5) to coordinate a public communication campaign on the SEPA project and its implementation in Lithuania. In order to maintain a dialogue with the payment service users, the Committee since 2011 has been preparing meetings (SEPA forums) with payment service users and the organisations representing them. Table 1. Parties participating in the activities of the Committee Branch of BIGBANK AS AB Citadele bankas Danske Bank A/S Lithuania branch AB DNB bankas UAB EVP International AB bankas Finasta The Bank of Lithuania Association of Lithuanian Banks Central Credit Union of Lithuania Credit union association Lietuvos kreditas UAB Medicinos bankas Payment institutions association Nordea Bank AB Lithuania branch Pohjola Bank Plc Lithuania branch AB SEB bankas Svenska Handelsbanken AB Lithuania branch Swedbank AB AB Šiaulių bankas 4

5 2. LEGAL BACKGROUND The SEPA project does not change the provisions established in the Republic of Lithuania Law on Payments; however, in transitioning to payments in euro, the following EU regulations gain more significance: Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001 (with later amendments). The provisions of this Regulation establish the rules for cross-border payments in euro, ensuring that cross-border payments will cost the same for payment service users as corresponding national payments in euro of the same value. Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009 (SEPA Regulation). 2 The SEPA Regulation establishes the following requirements: a payment account identifier must be provided in IBAN format in performing both national and cross-border payments. In Lithuania, all payment accounts with banks have since 2004 been identified by an IBAN number. 3 Some payment service providers (e.g. some credit unions or e-money institutions) can have accounts that are not provided in IBAN format. If such accounts will not be identified by IBAN once the dates established in the SEPA Regulation come into effect, it will not be possible to use them for credit transfers or direct debit transactions; after 1 February 2016 payment service providers will not be able to require that payment service users indicate BIC code when initiating a cross-border transaction; enterprises, excluding microenterprises, will have to use ISO XML messages when they send or receive payment orders bundled together for transmission; the remittance data field must allow for 140 characters; remittance reference information and all the other data elements must be passed in full and without alteration between payment service providers in the payment chain; once the required data is available in electronic form payment transactions must allow for a fully automated, electronic processing in all process stages throughout the payment chain (end-to-end straight through processing), enabling the entire payment process to be conducted electronically without the need for re-keying or manual intervention; payment schemes must set no minimum threshold for the amount of the payment transaction allowing for credit transfers and direct debits but are not required to process payment transactions with zero amount; payment schemes are not obliged to carry out credit transfers and direct debits exceeding the amount of EUR 999,999, Th SEPA Regulation also specifies what minimum data must be provided by payment service users to payment service providers when initiating a payment transaction and what data the payment service users must receive once the transaction is settled. The Member States can establish a longer transitional period for implementing some of the requirements of the SEPA Migration Regulation, but by 1 February The IBAN format for Lithuania looks as follows: LTKK BBBBB SSSSSSSSSSS, where LT country code, KK control code, BBBBB bank identifier, SSSSSSSSSSS account number. Example of Lithuanian IBAN: LT The length of the IBAN in different countries may differ. A detailed description of the structure for IBAN in different countries is provided in English at 5

6 2016 at the latest. In Lithuania the SEPA requirements will have to come into effect on 1 January The choice of the other Member States regarding the transitional period is available on the website of the European Commission. 4 Payers, initiating credit transfers should take note of the provision of the SEPA Regulation which entitles a beneficiary to specifying a payment account in any Member State, if this account is reachable for SEPA credit transfers. Most payment accounts in Lithuania would become reachable for SEPA credit transfers already from 2015, i.e. the euro adoption date. Holders of these accounts would be able to specify accounts in Lithuania for receiving funds from payers in other Member States (e.g. state institutions, employers, etc.). In addition, Lithuanian citizens would be able to specify their accounts held in other Member States for payers in Lithuania (e.g. the pension payable by the State Social Insurance Fund could be transferred to another Member State). In the SEPA Regulation, payment service providers are obligated with ensuring high security of payers accounts by providing a possibility for the payers themselves to set a number of parameters related to the debiting of funds under direct debit transactions (e.g. limit a direct debit collection to a certain amount or periodicity or both, establish a list of authorised beneficiaries). In each Member State a competent institution is appointed that is responsible for ensuring compliance with the SEPA Regulation, and upon identification of an infringement impose sanctions. In Lithuania, the competent authority is the Bank of Lithuania. However, some changes in the Lithuanian legal environment will be necessary. The smooth preparations of Lithuania s payment market to operate in the SEPA environment is related to the harmonization on time of the Republic of Lithuania s legislation to the SEPA Regulation and the requirements of the payment schemes in line with the requirements of the SEPA Regulation. It is expected that the Republic of Lithuania s legislation, regulating the payment instruments incompatible with the SEPA requirements, will be changed as quickly as possible. The parties participating in the activities of the Committee encourage the corresponding state institutions to as quickly as possible prepare and approve the amendments to the Republic of Lithuania Law on Settlements for Agricultural Production, as well as perform the changes to the regulation of funds write-down according to executive documents and install a new Funds Limitation Information System (PLAIS)

7 3. CREDIT TRANSFERS 3.1. Current situation Credit transfers, initiated at banks and other credit institutions, are one of the most popular noncash payment instruments in Lithuania, which accounts for approximately 35 per cent of the total number of non-cash payments. 5 The major share of such payments (87%) is initiated electronically, i.e. through internet banking systems and smart phone apps. In 2013, almost 1.3 million credit transfers in euro were initiated in Lithuania, about 76 per cent of them were SEPA credit transfers. A major share of credit transfers (in 2013 about 118 million) were initiated in litas and within one year from euro adoption will have to be replaced by SEPA credit transfers SEPA credit transfers The SEPA credit transfers scheme began to operate on 28 January The SEPA credit transfers scheme, according to April 2014 data, has been joined by five commercial banks having a license from the Bank of Lithuania 6, all branches of foreign banks operating in the retail payments market and the Bank of Lithuania. The general rules, procedures and data fields for credit transfers in euro, in compliance with the SEPA Regulations, are defined in the SEPA credit transfers scheme. A payer, using one payment account, may initiate credit transfers in euro to any of the 34 countries belonging to the SEPA area under the same conditions. This way, enterprises (payers and payees) can simplify the administration of payments, improve the management of funds, automate and standardise all internal processes, decrease the costs of information systems support and utilise other services providing value added (e.g. e-invoicing) Requirements and terms related to SEPA credit transfers The technical and business requirements have been established in the SEPA Regulation to credit transfers and direct debit operations in euro performed in EEA countries. In Lithuania these requirements will have to be applied no later than by 1 January The terms for the execution of relevant requirements, related to SEPA credit transfers, for payment service users are provided in Table 2. Table 2. Terms for the implementation of the SEPA Regulation requirements in Lithuania Requirements for the SEPA credit transfers Relevant for whom Term Payer and payee s account indicated in IBAN format Natural and legal persons 1 January 2016 The payer is not required to indicate the payee s payment service provider s BIC code in domestic SEPA credit transfers The payer is not required to indicate the payee s payment service provider s BIC code in cross-border SEPA credit transfers Natural and legal persons 1 January 2016 Natural and legal persons 1 February per cent is made up of card payments, 15 per cent transfers initiated at payment institutions, 5 per cent other payment instruments (direct debit, electronic money, cheques). 6 UAB Medicinos bankas, AB bankas FINASTA and credit unions have not joined the SEPA credit transfers scheme yet. 7

8 Use of the ISO XML standard in the client s interface with the payment service provider (customer bank and bank customer), when credit transfers are bundled together for transmission Legal persons, except for micro-enterprises Natural persons and micro-enterprises have the right to choose such a interface. 1 January 2016 According to the SEPA Regulation, the payer and payee s account is identified by the IBAN (International Bank Account Number). In Lithuania, the IBAN account format is widely used since For this reason there is no need to change the numbers of the payment accounts and this significantly facilitates the preparations for the provision and use of SEPA credit transfer services in Lithuania. Payment service providers, in performing credit transfers, who identify customer accounts not by the IBAN standard, will have to change the account numbers by 1 January The SEPA Regulation establishes the term from which the payer will no longer have to indicate the BIC code 7 of the payee s payment service provider, i.e. from 1 January 2016 in initiating domestic and from 1 February 2016 cross-border SEPA credit transfers. Currently in Lithuania it is usually not necessary for the payer to indicate the BIC code in making domestic credit transfers in the local currency, but BIC has to be indicated for cross-border payments. Enterprises that initiate a large number of credit transfers present to payment service providers such transfers as structured data files and also receive an account statement in the form of such files. The structured data files are considered as bundled together for transmission in the SEPA Regulation, they will have to be submitted through messages in accordance to the ISO XML standard. This requirement will have to be implemented no later than by 1 January It is not mandatory for consumers and micro-enterprises. 8 The terms for the implementation of the requirements of the SEPA Regulations are to be applied to all payment service providers operating in Lithuania; however, individual payment service providers may submit proposals for earlier deadlines for the implementation of these requirements Scope of the requirements related to SEPA credit transfers The following groups of credit transfers that the SEPA project covers (will cover) are singled out: credit transfers in euro to other SEPA countries; domestic credit transfers in euro; domestic credit transfers in litas. Period: 1 January 31 December 2015 Submission and receipt of credit transfers in euro to other SEPA countries will remain unchanged. Credit transfers will be presented as SEPA credit transfers or as cross-border (non-sepa) credit transfers. With the adoption of the euro in Lithuania, domestic transfers in litas will become credit transfers in euro. Domestic credit transfers in euro will be performed by the Bank of Lithuania s payment system 7 BIC (Business Identifier Code) is issued by the SWIFT organisation according to the ISO 9362 standard. 8 The concept micro-enterprise is defined in the Republic of Lithuania Law on the Development of Small- and Medium-Sized Enterprises. 8

9 LITAS-MMS, customised for payments in euro, or they will be performed as SEPA credit transfers, if the payer and payee s payment service providers will be prepared to deal with large quantities of SEPA credit transfers. Customers will be able to submit and receive credit transfers in euro, in the form of structured data files in the LITAS ESIS format or ISO XML standard format. This will depend on the preparedness of the payment service provider and the customer. Customers will have the opportunity to gradually adapt to the innovations, especially to the technical SEPA formats, used in the interlinking of payment service providers and payment service users. For this payment service providers may propose conversion between LITAS ESIS and ISO messaging formats. Period: from 1 January Domestic and cross-border credit transfers in euro to other euro area countries will be done as SEPA credit transfers. Enterprises, excluding micro-enterprises, will be able to submit and receive structured data files only in the ISO XML standard format. For customer convenience, the ISO message pain format will be applied to not only SEPA credit transfers, but also credit transfers in euro to non-euro area EU states when the payment service provider operating there is not reachable for the SEPA credit transfer scheme 9, credit transfers in euro to non-eea countries and credit transfers in foreign currency Processing of executive documents An executive document is a legal document which is the basis for (civil) proceedings enforcement actions. Usually such documents are used by public sector institutions (State Tax Inspectorate, Board of the State Social Insurance Fund, Customs Authority) and other authorised subjects (e.g. bailiffs) for pecuniary recoveries. Currently the executive documents are processed using special debit payment orders, however the direct debit schemes prepared by the European Payments Council (EPC) are not suitable for this. Due to this, the continuity of document processing will be ensured using SEPA credit transfers and utilising the Funds Limitation Information System (PLAIS). 9 Payment service providers in non-euro area EU states, performing credit transfers in euro, will be required to move to the SEPA credit transfers scheme by 31 October

10 4. DEBIT TRANSFERS 4.1. Current situation In Lithuania, credit institutions offer three debit transfer services: direct debit, debit payments, and debit payments for agricultural production. All these services have one feature in common the payee (usually a company) upon the consent of the payer initiates one-off or recurrent debiting of funds from the payer s account. It should be noted that in the Law on Payments of the Republic of Lithuania these services are referred to as direct debit. When the term direct debit is used in this document in the narrower sense, it will be put in italics. In , the number of direct debit operations increased by an average of 26 per cent over the year. Later the direct debit market developed less rapidly (approximately 12% over every year); however this did not cover the downturn after the termination of the operation of AB bankas Snoras. In 2013, the total number of direct debit transfers amounted to 14 million operations, which accounted for 4 per cent of the number of non-cash operations. The bulk (approx. 99 %) of direct debit operations is carried out where the debtor and the creditor hold accounts with the same bank and only 1 per cent of debit operations represent interbank payments, which are effected via the Bank of Lithuania s payment system LITAS-MMS. Direct Debit Direct debit transactions are executed only within the bank, i. e. the payer and payee hold accounts with the same bank. Payers may submit a direct debit mandate to their bank or directly to the creditor. These entities take responsibility for holding the mandate. The major payees of direct debit are companies rendering telecommunication, lease, insurance, press subscription, security and utility services. This service most often is used to collect funds from individuals, although it may also be used for collecting funds from legal entities. It should be noted that the direct debit service is rendered under a nonstandardised scheme. Individual banks may alter the scheme features without other banks consent. However, major features of the direct debit service and elements of customer-bank interfaces historically are much alike. Debit payment instructions Debit payment instructions can be internal and interbank. The payer must provide to its bank a mandate for debiting the funds, and the bank is responsible for storing the mandate. This service is designed for collecting funds from legal entities. Due to lower automation level it is normally used when the payee initiates a relatively small number of such payments. Debit payment instructions for agricultural production This is a specific debit transfer service, the emergence of which has resulted from the Law on Settlements for Agricultural Production of the Republic of Lithuania. The main differences between this service and debit payment instructions is the possibility to make partial debits of funds, the obligation of banks to accept and keep for unlimited time debit payment instructions received, irrespective of whether there are sufficient funds on the payer s account at the time or not. Such debit payment instructions can be internal and interbank. In the Republic of Lithuania Law on Settlements for Agricultural Production the right of the use of this by economic entities engaged in the production and processing of agricultural products is provided. Over the year, the number of such operations does not exceed 100 thousand. Debit 10

11 payment instructions in paying for agricultural production are mostly used by large processing companies SEPA Direct Debit SEPA Direct Debit (SDD) is a payment instrument that can be used SEPA-wide to make payments via direct debit in euro. The SDD Scheme establishes the rules and processes for direct debit transfers, the overall service level and the time limit for the payment service providers participating in the scheme to fulfil their functions. SDD transfers are possible internally within the payment service provider or between two different payment service providers, if both are providers of SEPA Direct Debit services. SDD transfers shall be initiated by the payee through its bank after an agreement made between the payee and payer regarding this mode of settlement. SDD transfers are for performing regular payments; however, this scheme pay be used in performing one-off payments. Payees will have a chance to operate their business more efficiently by using a single payment account for collecting funds domestically and in other SEPA countries, applying the same data transmission format (ISO standard XML messages). For payers the SDD Scheme will provide flexibility and comprehensive protection in managing funds. For example, it offers convenience for persons residing and studying in foreign countries to pay for their studies, insurance, telecommunication, and utility services, performing the payment from their home-country payment account.. The payers will know exactly when the payees will receive the funds. The SEPA Regulation also obligates the payment service providers to provide the possibility for the payers themselves to set a number of parameters related to the debiting of funds under direct debit transactions (e.g. limit a direct debit collection to a certain amount or periodicity or both, establish a list of authorised beneficiaries). The EPC approved two SEPA direct debit schemes SEPA Core Direct Debit Scheme and SEPA Business-to-Business Direct Debit Scheme. The SDD Core scheme participants and transactions among them are presented in Chart 1. Chart 1. SDD Core scheme Debtor Fig. 1. SDD Scheme Mandates Creditor Agrees on SDD service Clearing and Settlement Mechanisms Agrees on SDD service Debtor Bank Using Using Creditor Bank Adhere to SDD Scheme Adhere to 11

12 Payment service providers, operating according to the SDD scheme may perform two types of functions: The function of the payer s payment service provider: when a payment service provider makes with the payer an agreement on opening a payment account for debiting funds under the rules and conditions set by the SDD Scheme. According to the agreement, each direct debit payment initiated by the payee is executed by debiting the payer s account; The function of the payee s payment service provider: a payment service provider makes with the payee an agreement on opening a payment account and on the basis of this agreement receives the payee s instructions to execute a direct debit payment by submitting them to the payer s payment service provider under the rules and conditions of the SDD Scheme SEPA Direct Debit mandates According to the SDD scheme, only payees will be able to receive payer mandates. In addition, they will be responsible for holding mandates and changing data in them on the payer s initiative. EPC worked out a recommended form for a SDD mandate. It may be simplified further depending on the payee s business. All the information about the SDD mandate fields and their translation into Lithuanian are available on the EPC website. 10 Previously issued payers mandates will continue to be used in the main SDD scheme and there will be no need to change them with the new SDD mandates. The storage of existing mandates (in case they are held by other persons than payees) will have to be agreed between banks and payees. It should be noted, that additional required fields are used in SDD mandates: a unique mandate reference and creditor identifier. Currently, the structure of the mandate reference in use does not meet the SDD requirements and thereby will have to be updated during the migration to the SDD service SEPA Direct Debit Creditor Identifier Each SDD payee must have a creditor identifier for identifying the payee in SDD schemes. The structure of the SDD creditor identifier is as follows (Chart 2): the creditor identifier is 16 digits in length: 1 2 country code, 3 4 control digits, calculated according to the ISO 7064 standard, 5 7 the Creditor Business Code (a freely used code to denote individual business areas). In case the payee provides only one type of service, the three characters entered here are the letters ZZZ. The characters in 8 16 : o for legal persons code of the legal person (9 digits); o natural persons 9-character number: 8 symbol P, identifying that the creditor identifier belongs to a natural person, 9 16 starting with are numbered in consecutive ascending order for each entity

13 Chart 2. Structure of creditor identifier LT11ZZZ National component Service code Control numbers Country code (ISO) Payees, planning to use the SEPA direct debit services, for the issue of a creditor identifier are recommended to contact their payment service provider. In Lithuania, issued creditor identifiers will be announced on the SEPA internet website (sepa.lt) Electronic invoice The payment service providers currently operating in Lithuania are considering the opportunity to offer the service based on electronic invoices. In part it could replace the current direct debit services. This modern means of payment provides the opportunity for the payers to conveniently become acquainted with the payee s invoice for purchased products or provided services and make a payment. Payees will be able to submit to the payers invoices electronically, and they may be paid for by a SEPA credit transfer. This service would allow for an automatised drawing of accounts and payment process, help avoid errors in making payments, provide the payer with additional payment opportunities, such as settling an invoice on a determined day of the month Migration to SEPA Given the direct debit services currently offered in Lithuania and their functionality, the following table presents their possible replacement with SEPA services. Table 3. Replacing debit services with SEPA services in Lithuania The currently available service Direct Debit Debit payment instructions Debit payment instructions for agricultural production SEPA service SEPA Core Direct Debit Scheme SCT-based e-invoicing solution SEPA Direct Debit (core scheme or business-to-business scheme) SCT-based e-invoicing solution SEPA Direct Debit (core scheme or business-to-business scheme) SCT-based e-invoicing solution Payment service providers operating in Lithuania, in consulting with customers, individually decide on the extent of development of SDD schemes in Lithuania. We can not rule out the possibility that some payment service providers, instead of SDD schemes, prioritise the development of SCT-based e-invoicing solution. 13

14 In the SEPA Regulation, banks and other payment service providers are obligated to use payment schemes agreed on at the EU level. In the schemes prepared by EPC, the obligation of the payer s bank to accept and for an unlimited time store direct debit instructions, when there are insufficient funds in the payers account, is not provided. For this reason, amendments to the Republic of Lithuania Law on Settlements for Agricultural Production are being prepared. They would eliminate the incompatibility of EU and Republic of Lithuania legislation. 5. INFRASTRUCTURE Currently two retail payment systems operate in Lithuania. The system LITAS-MMS of the Bank of Lithuania and the system KUBAS 11 of the Central Credit Union of Lithuania. By the number and value of operations performed KUBAS accounts for a small non-cash payment market share and thereby is not discussed in this document. After the euro adoption, credit institutions will be able to perform retail payments in euro through LITAS-MMS, customised for payments in euro, or through any other clearing house operating in the euro area. LITAS-MMS payment instructions that currently are in a format that does not comply with SEPA requirements, will be dealt with by the end of 2015, i.e. while it is permitted by the provisions of the SEPA Regulation. The payments of enterprises that are prepared to apply the SEPA requirements earlier can be done through other clearing houses from as early as the beginning of This will create conditions for smooth transition of enterprises to the SEPA payment instruments. In 2014, after consultations with market participants, the Bank of Lithuania will decide whether LITAS-MMS will be applied to SEPA requirements after The LITAS-MMS sub-system KART, which is currently used in processing executive documents, by 1 January 2016 will be adapted for sending information between payment service providers and the Funds Limitation Information System (CLIS). The project for implementing this system, which aims to ensure the continuity of the processing of executive documents in the SEPA environment from 1 January 2016, is enacted by the Republic of Lithuania Ministry of Justice. 11 The KUBAS system is used by credit unions members of the Central Credit Union of Lithuanian. 14

15 6. INFORMATION STANDARDS AND FORMATS 6.1. Current situation Historically, a text file-based format is used for data exchange in Lithuania. The first attempts to standardise the customer-bank interface in Lithuania were made in January 2004 after the LITAS ESIS data exchange format was created. Today, this format has been widely used by the Lithuanian e-banking systems. The following data structures have been defined for the purpose of this format: statement of account; credit transfer order; debit transfer order; cross-border payment order. Some payment service providers use other formats for services as well, which are not covered by LITAS ESIS (direct debit, giro payments, the general pay-book, payment of wages and different benefits, etc.). These formats are based on a bilateral customer-payment service provider agreement, and are highly diverse. Customers of e-banking systems use basically the same printed forms for credit transfers. The SEPA Regulation establishes that enterprises, excluding micro-enterprises, have to use the ISO XML messages when they send or receive payment orders bundled together for transmission. LITAS ESIS structured text file and is incompatible with the ISO XML standard. To get access to the SEPA services, payment service providers and their customers will have to move to ISO XML messages designed for payment orders and account information SEPA formats The International Organization for Standardization has developed a universal financial industry message standard ISO It is used in creating XML messages in a certain format. The major benefit of the XML is the possibility to add new type elements without violating the document structure and interfering with the work of programs that recognise only an old type XML format. The EPC has set general principles for making all euro payment processing automated, as well as business requirements, i.e. the data to be exchanged by financial intermediaries. These data are specified in the SEPA credit transfer and SEPA direct debit rulebooks. In addition, the EPC has worked out the SEPA implementation guidelines and described the use of messaging standards Migration to SEPA To offer their customers an opportunity to make settlements in SEPA environment, payment service providers operating in Lithuania will have to switch to the ISO XML standard. The preparation dates for payment service providers may be different, but no later than by 1 January Payment service providers will have to review the links between the electronic banking systems in use, applying the SEPA requirements to them (e.g. need for additional fields, field length match, control of the input of necessary information, etc.). In addition, paper-based forms used for credit transfers currently will be replaced to ensure the possibility to enter both mandatory and additional information for SEPA credit transfers. Period: 1 January 31 December 2015 Payment service providers plan to support the LITAS ESIS format, install and maintain in parallel the ISO XML standard. The LITAS ESIS format may be changed, informing appropriately 15

16 beforehand the customers. In the files of payments presented in the LITAS ESIS format all domestic (credit) transfers in euro will have to be submitted in a *.mokesis file. For specific services (giro payments, the general pay-book, utility payments, list payments, direct debit service and others), payment service providers will retain the formats in use and amend them in accordance with agreements with customers. In seeking compatibility, the Committee prepared and regularly updates the rules for the use of ISO XML standard messages. These rules indicate the structure of the format to be applied by highlighting the mandatory and optional elements of the services used in it and information reconciliation algorithms, as well as samples of the messages. In Lithuania, end-users still are not very experienced in using the ISO XML instrument for customer-bank mutual communication. End-users are encouraged to properly plan the transition to the ISO XML standards and, to the extent possible, prepare for this ahead of time. From 2016, banks and other payment service providers will not be able to accept from corporates payment instructions that do not comply with the requirements of the SEPA Regulation. Payment service providers will actively notify end-users and administrators of their book-keeping and financial accounting systems on the new requirements. The preparations of customers ahead of time will help ensure smooth and seamless execution of daily banking operations. Period: from 1 January Following the requirements of the SEPA Regulation, as of 1 January 2016, payment service providers will support only the ISO XML standard. Information on the links between the LITAS ESIS format and ISO XML standard files are presented in Table 4. Table 4. Links between the LITAS ESIS and ISO standard files Name of the service Credit transfers LITAS ESIS files *.mokesis *.taresis ISO XML files Pain initiate credit transfers Pain mokėjimo statusas inicijuotiems kredito pervedimams Debit transfers *.debesis There is is no counterpart of ISO Further use of the LITAS ESIS data file *.debesis is ensured by the Funds Limitation Information System. Statement account Information notices of *.acc CAMT CAMT CAMT CAMT

17 7. GLOSSARY BIC TERMS AND ABBREVIATIONS E-banking system EPC IBAN Format Creditor identifier ISO LITAS ESIS LITAS-MMS PLAIS Message SEPA Credit Transfer Scheme SEPA Direct Debit Scheme (SDD Scheme) Debtor Bank under SEPA Direct Debit Scheme Creditor Bank under SEPA Direct Debit Scheme Standard XML DEFINITIONS Business Identifier Code A credit institution s system for the delivery of remote banking services through modern electronic communication means that ensure such services as customer identification, execution of customer s instruction or other operation European Payments Council A payment account number, unambiguously identifying an individual account in a special financial institution of a special country (ISO 13616) Data structure built based on a certain feature or standard A code issued to every payee (usually in its country of registration) and designed for the payee identification in the SEPA Direct Debit Scheme. The issue of the Creditor Identifier is the responsibility of the payee s bank. International Organization for Standardisation Data exchange format (structure) used between the book-keeping and financial accountability system of a company and e-banking system of a credit institution. LITAS ESIS contains descriptions of a statement of account, credit transfer order, debit transfer order, and cross-border payment order. The format was approved by the Association of Lithuanian Banks in 2004 and available at The retail payment system of the Bank of Lithuania designed for settlements in litas Funds Limitation Information System, for processing executive documents An aggregate of characters bearing any information. The list of messages used in ISO is available at The scheme for credit transfers executable in the SEPA environment, according to the definition in the SEPA Credit Transfer Scheme Rulebooks A payment instrument that can be used SEPA-wide to make payments via direct debit in euro, as defined in the rules of the SEPA Direct Debit Scheme A payment service provider that concludes an agreement with the payer on opening a payment account to be used for debiting funds under the scheme rules and conditions A payment service provider that concludes with the payee a payment account opening agreement based on which it receives the payee s instructions to collect funds provided to the debtor s bank under the scheme rules and conditions A document setting the requirements for norms, rules and methods, concepts, symbols and other objects General purpose descriptive mark-up language for data structures and their content. The major purpose of the XML language is to facilitate the data exchange between different type systems mainly connected via internet. 17