Standard specifications and assets

In many European payment systems, card-originated transactions are cleared similarly to credit transfers and direct debits within an ACH infrastructure. The SEPA definition of credit transfers (SCT) and direct debits (SDD) enables mass volume clearing of card-originated transactions within the SEPA Payments infrastructure. The Berlin Group has developed a SEPA Card Clearing (SCC) Framework that provides a simple message extension to the SEPA Direct Debit definition, adding card-originated data to ISO20022 payment messages. The message extension mechanism has been available since the ISO20022:2013 release (enabling ‘Supplementary Data Fields’) and allows specific user communities to offer a functional expansion by providing supplementary data in a message without affecting the main ISO20022 messages. As a result, users who do not need the supplementary data are not impacted. Therefore, this important evolution of the ISO20022 standard enables individual user communities to generate synergies at the standards and infrastructure levels and define the use of additional data without impacting existing ISO20022 payment functionalities (these data are only relevant to end users, not to the ACH or other parties in the process chain). This solution separates payment message development and release management from application data in the supplementary data fields, resulting in two distinct XML schemas. Any changes or additions to a community’s specifics can be made without affecting the master message or other supplementary data extensions, and thus without impacting other communities of users. The ISO20022 message extension is structured as an ISO20022-compliant XML subschema that can be linked into the payment XML schemata and offers full, straightforward XML parsing and processing.

The SCC Framework enables full Straight Through Processing (STP) for card clearing by using the same processes and formats across different banks and between banks and Clearing & Settlement Mechanisms (CSMs), as are already available for SDD. Banks can then switch easily between different market solutions for clearing, whether a European ACH solution or a bilateral clearing solution between banks. The SCC Framework does not mandate a specific CSM solution for clearing and settlement. In theory, clearing and settlement could also take place via card processors and their settlement banks. However, the SCC Framework enables reuse of the cost-efficient SDD infrastructure for conventional payments. Prices for SCC-based card clearing services are comparable to those for the SEPA Direct Debit scheme, which is why SDD CSM solutions are currently in use.

With the SCC Framework, the Berlin Group offers a clear opportunity to leverage investments in ISO20022 payment infrastructures. The ISO Payments SEG owns governance and change management for the main payment message, while the Berlin Group owns the SCC Framework extension. As owners (at the ISO level) of the SCC Framework extension, the Berlin Group will continuously work to support all card-related services within the supplementary data field approach for payment messages.

The Berlin Group SCC Framework has been detailed in

• an Operational Rules document for the interbank sphere including Clearing & Settlement Mechanisms (CSM) with a detailed process flow definition and exception processing for the clearing of card transactions, and
• detailed Implementation Guidelines with ISO20022 format descriptions for Payment Instructions, Payment Clearing & Settlement Messages and corresponding R-Transactions.
• ISO20022 PaymentSupplementaryData (PaymentSD17V1)
• ISO20022 Cards Supplementary Data Message Definition Report / ISO20022 XML Schema Definition (available upon request)

As part of the SCC Framework, each scheme defines its own Implementation Guideline, which specifies a functional subset and scheme-specific requirements for setting specific ID fields or codes within the message.

In the clearing process, the SCC extension field transports card transaction-related data from the Acquirer to the Issuer. The SCC extension field data are used for the end-to-end clearing (incl. booking and reconciliation) of the card-based transaction and for downstream processes like, e.g. reporting via the cardholder account statement or for dispute management (the SCC Framework offers all required data for scheme reporting, via the ISO20022 camt-messages and reports, and supports full exception/dispute handling via the Return and Reversal messages). As such, the SCC extension field data are relevant end-to-end and fully transparent to intermediate CSM mechanisms (once SCC is implemented on the central ACH services for one card scheme, no further ACH effort is required to support clearing and settlement for other card schemes). The data element entries in the SCC card extension describe card data, the card acceptance environment, and additional dynamic transaction data, such as tip amount, card-related fees, and EMV-related data. These entries are taken from existing card-related data elements in the ISO20022 dictionary.

You can download all ISO20022 SEPA Card Clearing documents here.

The SEPA Card Clearing Framework is aligned with:

• Eurosystem demand for reuse of SCT/SDD standards and infrastructures in card processing
• Standardised (ISO20022) UNIFI Messages according to ISO20022:2013
• EPC SEPA Direct Debit Core Rulebook
• EPC SEPA Direct Debit Core Scheme Inter-Bank Implementation Guidelines
• EPC SEPA Cards Framework
• EPC SEPA Cards Standardisation Volume
• EU Payment Services Directive
• TARGET2 as the common settlement platform (after netting by the ACHs)

The benefits of the SEPA Card Clearing Framework for Debtors and Creditors can be characterised as:

• Processes are highly automated and cost-effective in clear, transparent and reliable processing cycles
• Enables the proper management of liabilities and risks
• A simple and cost-efficient way to collect funds
• The opportunity to optimise cash flow and treasury management
• Fully automated reconciliation of payments
• The ability to automate exception handling
• Full STP of all transactions, including Rejects, Returns, Refunds and Reversals
• Ease of implementation
• Highly efficient: pricing comparable to SDD-levels
• Interoperability that unbundles card payment schemes from processing
• Leveraging Payment Business Models instead of Card Payment Business Models
• Increases competition: banks have the option to participate in any CSM(s) of their choice
• Based on open standards, publicly available, royalty-free
• Strong coverage of card services, functions and acceptance environments
• Reusage of SEPA formats, data models, processes and infrastructures
• European reachability independent of the underlying card scheme
• Support of many different clearing scenarios: bilateral, multilateral, intra- or inter-community

SCC-based card clearing can be aligned with any authorisation specification that is based on the ISO20022 CAPE (CArd Payment Exchanges) definitions since the basis for the description of the SCC data elements has been the Acceptor to Acquirer messages as defined in ISO20022 CAPE version 2.0. The EPC Volume Book 3 provides a cross-reference mapping between data elements used in CAPE, SCC, EMV and the different versions of ISO 8583.

SCC-based card clearing has seen strong adoption by large European ACHs that offer services in the European market, especially for large pan-European banks. The German market for ACHs/CSMs, payment engines, core banking systems, ATM providers, POS acquirers, and network providers has fully migrated to SCC-based card clearing for the girocard scheme, and since Q4 2015, more than 4 bn card-originated transactions have been cleared annually via SCC. These transactions originate from Germany and other countries abroad, where banks have begun implementing SCC when connecting to SCC ACHs.

As a reference, from 2013 to 2015, the German girocard scheme implemented SCC-based card clearing in a joint effort by ACHs/CSMs, payment engines, core banking systems, ATM providers, and POS Acquirers. The project involved around 40 payment initiation institutions and 20 payment receiving institutions, with the latter being banks or banking computing centres.

Defining the scheme-specific Implementation Guidelines required 2 man-years of work over 1 year (primarily a coordination effort among all participants on the technical details). Banks and ACHs needed 6 months to implement the SCC service (which included detailed internal technical definitions). Within banks, the following IT systems had to be adapted for SCC:

• Authorisation process: The disposition interfaces from card authorisation systems towards the account management systems had to be migrated
• Clearing systems incl. ACH: New SEPA clearing services had to be introduced. The major delta to existing SEPA services was the D-0 settlement and the transport of the supplementary data in the extension field
• Back-office systems banks: Dispute and internal information systems had to be adapted for new formats, codes and processes
• Customer interface: The account statements had to be adapted to SEPA-style for cards
• Corporations that initiate payments had to migrate their e-banking clients, and banks the corresponding e-banking server software

​No changes were needed to Payment authorisation processes. These processes were reused from the SEPA processes.

Testing (including end-to-end testing) took 6 months, and the pilot and rollout phase lasted 9 months.

The synergies from the implemented SDD service were estimated at 60%-80%, depending on the role of the corresponding bank.

The major success factors of the project were:

• Central coordination: A central Project Office coordinated all Taskforces, served as the Steering Committee secretariat, and acted as the general point of contact for all project participants’ issues and questions.
• Setup of end-to-end test infrastructure: A thorough end-to-end test with all major participants during the testing phase led to a flawless piloting phase. Furthermore, the test infrastructure remained available during rollout for institutions with late development and for re-tests, enabling agile project management.
• Steering volumes through a coordinated rollout: A 6-week pilot and slow volumes during the first months of the rollout enabled implementation of changes after the first lessons were learned. Banks needed changes to cardholder account statements and dispute process management.
• Coordination of card and payment business lines within the banks: Implementing SCC required card and payment know-how within the banks. The banks coordinated these two business lines internally.

These success factors ultimately enabled the banks to meet the challenge of migrating business processes with high STP rates from legacy systems to a modern IT infrastructure in a short period.

• 20170406 – Informative presentation on origins and benefits of SEPA Card Clearing.ppsx
• 20160318 – Overview of SEPA Card Clearing migration project in Germany.pdf
• 20141015 – Journal of Payments Strategy & Systems Vol8Nr4 SEPA Card Clearing.pdf
• 20131001 – ISO20022 Newsletter Fall 2013.pdf

You can download all ISO20022 SEPA Card Clearing documents here.