About SEPA
What is SEPA (Single Euro Payments Area)?
SEPA is the next step towards European integration, which aims to make all electronic cross-border payments in euro between the participating countries as easy, inexpensive and secure as 'national' payments within one member state are today. In the new SEPA world a customer can make electronic payments to any beneficiary located anywhere in the euro area using a single bank account and a single set of payment instructions. SEPA enhances competition between national payment environments by opening up markets to providers and ensuring equal opportunities. It brings with it higher service levels, more efficient products and cheaper alternatives for making payments across national boundaries.
Where did this initiative originate from?
SEPA is the largest payments initiative ever undertaken within Europe. It has been championed by the European Commission (EC) as well as the European Central Bank (ECB), working with the Euro system and with the support of the European Payments Council (EPC). A successful implementation requires commitment from all parties involved, including users of payment services and supportive public authorities.
Explain the Legal Framework surrounding SEPA?
On 1st December 2005, the European Commission presented its proposal for a Directive of the European Parliament and of the Council on payment services in the internal market. This Directive ensures that the same legal framework applies to all payments made within Europe. The Payment Services Directive (PSD) establishes the necessary legal framework for SEPA payments, and also applies to existing national payment products.
On 25th April 2007, the European Parliament adopted the proposal for the Payment Services Directive (PSD) for which the ECOFIN Council had already agreed a general approach at its meeting on 27 March 2007, and which has been adopted by the EU Council.
What payment facilities are covered under SEPA?
There are four payment elements involved in SEPA:
- SEPA Credit Transfer Scheme
- SEPA Direct Debit Scheme
- SEPA Cards Framework
- SEPA Cash
The EPC has put in place simplified sets of rules, technical standards and business practices surrounding the four payment elements mentioned above, to be adopted by all participating countries.
SEPALink™ facilitates The SEPA Credit Transfer Scheme and SEPA Direct Debit Scheme
What is the SEPA Credit Transfer Scheme (SCT)?
SEPA Credit Transfer Scheme (SCT):
The SCT scheme is an interbank payment scheme defining a common set of rules and standard procedures for credit transfers in euro. The scheme ensures a common level of service within the participating countries. All participating financial institutions must provide the service in a specified timeframe, with the maximum settlement time being three business days. They also must be capable of reaching any customer.
What is the SEPA Direct Debit Scheme (SDD)?
SEPA Direct Debit Scheme (SDD):
The SDD scheme is an interbank payment scheme defining a common set of rules and standard procedures for direct debits in euro. The scheme ensures a common level of service within the participating countries. All participating financial institutions must provide the service in a specified timeframe — settlement time is five business days for the first payment, and two business days for recurring payments.
Financial Institutions must also provide SEPA-wide reachability, meaning that direct debits can be made from any domestic account to any receiver within the participating countries. The new SDD scheme has the advantage of covering both recurring and once-off payments in euro.
Who are the beneficiaries of SEPA?
Benefits for consumers:
The consumer will be the major beneficiary of the SEPA, which will offer greater choice of service, competition and flexibility. A consumer wishing to pay for services attained within any of the European countries involved in SEPA may now do so using one domestic account, eliminating the need to open a separate overseas account. It also means that people who live, work or study outside their own country may use their account in their home country to complete all their transactions. Customers can use the same payment card for all euro payments within the participating countries, making the use of cards more efficient.
Benefits for merchants:
In the SEPA world all acquiring banks will have the facility to process all SEPA-compliant card payments, including cross-border. This will allow the merchant to choose any acquirer bank within the euro area to process their card payments, increasing competition and driving down costs. The merchant will also benefit from a wider choice of terminal providers in the marketplace, making it possible to accept a wider range of cards with a single terminal at point-of-sale.
Benefits for companies:
SEPA will help companies simplify their management of payments. Companies will be able to make all euro transactions, domestic or cross-border, from one bank account, using SEPA payment instruments. All incoming and outgoing payments will be in the same format, making handling of such payments much easier, quicker and cost-effective. Companies will also benefit from the standardised system as it will open up the market to value-added services such as standard e-invoicing and e-reconciliation, suitable for the full SEPA marketplace.
Benefits for infrastructure providers:
Infrastructure providers will no longer be bound by national borders and will be entitled to offer their services supporting the SEPA payment instruments throughout the euro area, increasing the size of their marketplace, and allowing them compete freely. Card processors will be able to serve different card schemes and acquirers throughout the SEPA area.
Benefits for banks:
As banks can now offer their services cross-border within the euro area, they will benefit from the expansion of their market. Banks will be able to compete for business, both corporate and consumer, within the participating countries; they may also offer customers value-added services to attract a larger share of the market.