What is SEPA?
The Single Euro Payments Area (SEPA) is the
area in which individuals and businesses will be able to make and receive card
and electronic payments in euro, across Europe, simply, cheaply and efficiently,
regardless of their location.
Following the introduction of the euro notes and coins in 2002, SEPA is a
natural evolution of economic and monetary union and marks a further step
towards the creation of a single market for Europe.
What are the benefits of SEPA?
SEPA is aiming to deliver
a number of economic benefits and is intended to provide a catalyst for future
evolution and innovation. It will facilitate pan-European trade and will help UK
businesses compete by making it easier and cheaper to make or receive euro
The launch of new SEPA payment products and services will offer businesses
and individuals more ways in which to pay in euro—credit transfers and direct
debits as well as ensuring more widespread usage of plastic cards.
The key benefits of the SEPA Schemes are that they provide customers with
common rules, predictable maximum time cycles for both one-off and recurrent
transactions and certainty that payments will be received without fees deducted
from the principal sum.
When will SEPA happen and what will it involve?
requires the harmonization of diverse national and cross-border euro payment
systems, both at a technical level but also in terms of customer services and
procedures. When it goes live on January 28, 2008, the main offering will be the
SEPA Credit Transfer Scheme, which will enable basic, non-urgent euro credit
transfers across the EU, the European Economic Area countries (Iceland,
Liechtenstein and Norway) and Switzerland. It will also provide a new framework
for plastic cards ensuring that they are accepted in more places throughout the
A SEPA Direct Debit Scheme, which will enable direct debits in euros on a
SEPA-wide basis, is also being developed. However, this relies on the adoption
of the EU Payment Services Directive, delays of which have pushed back the
launch date to late 2009, by when it is hoped EU Member States will have
transposed the Directive into their domestic law.
It is expected that after SEPA payment instruments start to be introduced in
2008 there will be a natural migration of national euro card and electronic
payments to these new schemes and standards, with the switch over reaching a
critical mass by the end of 2010.
Who is responsible for the initiative?
Commission and the European Central Bank, with the support of the European
Payments Council (EPC), have championed the SEPA programme. The EPC is the
decision-making and co-ordination body of the European banking industry in
relation to payments, whose declared purpose is to support and promote the
creation of SEPA. It is composed of banks and banking associations from across
Europe. Consultation with end users and suppliers takes place via stakeholder
forums organized at European level and through mechanisms established within
How are UK banks involved?
While the UK is a non-euro
country and the number of cross-border euro payments to and from the UK is
comparatively small, the UK banking industry is committed to making SEPA a
reality. We expect that a number of UK-based banks will be ready for the 2008
launch of SEPA Credit Transfers.
These banks account for a UK payment market share in excess of 80%. Beginning
in January, customers of these institutions will be able to make SEPA Credit
Transfers from their euro-based accounts in the UK to anywhere within the SEPA
region. In 2007 the focus for UK banks will be to finish building their new IT
systems and to start testing in preparation for the launch.
At this stage, we believe that the creation of SEPA will not be visible to
the vast majority of UK customers making sterling payments, as the sterling
Schemes will continue to operate alongside SEPA. However, UK-based businesses
and individuals who make or receive payments in euros will be affected by SEPA
as its geographical scope extends beyond the eurozone.
Source: Business Credit News UK