Single Euro Payments Area

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The Single Euro Payments Area and its 31 member states

The Single Euro Payments Area (SEPA) initiative for the European financial infrastructure involves the creation of a zone for the Euro in which all electronic payments are considered domestic, and where a difference between national and international payments does not exist. The project aims to improve the efficiency of international payments and also to develop common financial instruments, standards, procedures, and infrastructure to enable economies of scale. This should in turn reduce the overall cost to the European economy of moving capital around the region (estimated today as 2%-3% of total GDP[1]).

1 Overview
2 Key dates
3 External links

[edit] Overview

There are two major milestones for the establishment of SEPA:

Pan-European payment instruments for credit transfers, direct debits and debit cards, will be available from 1 January 2008, in addition to national ones
At the end of 2010, all present national payment infrastructures and payment processors should be in full competition to increase efficiency through consolidation and economies of scale.

The European Commission is establishing the legal foundation through the Payment Services Directive. The commercial and legal frameworks for payment instruments are being developed by the European Payments Council (EPC), made up of European banks, and are due to be finalised during 2006. The EPC is committed to delivering three pan-European payment instruments:

For credit transfers: ECT – Electronic Credit Transfer (also known as SCT - SEPA Credit Transfer)
For direct debits: SDD – SEPA Direct Debit
For cards: SEPA Cards Framework

To provide end-to-end straight through processing (STP) for SEPA-Clearing the EPC committed to delivering Technical Validation Subsets of ISO 20022. Whereas Bank to Bank messages (pacs)are mandatory for use Customer to Bank message types (pain) are strongly recomended. Because there was tolerance left for interpretation it is expected, that several pain-specifications will be published across SEPA-countries.

The Euro Banking Association (EBA) is introducing a Pan-European Automated Clearing House (PE-ACH), via its EBA CLEARING subsidiary. It will provide a clearing and settlement mechanism needed for banks to exchange SEPA credit transfers and direct debits. Both services are expected to be implemented in time for the launch of SEPA on January 1, 2008. Other organisations, such as existing national payment processors, have also announced their intentions to clear and settle SEPA payment instruments.

Businesses, merchants, consumers and governments are also interested in the development of SEPA; the European Associations of Corporate Treasurers (EACT), TWIST, the European Central Bank, the European Commission, the European Payments Council, EACHA, payments processors and pan-European banking associations (EBF, EACB, ESBG) are playing an active role in defining the services which SEPA will deliver.

SEPA impacts all banks operating in 31 countries — the 27 EU member states, the three European Economic Area countries (Liechtenstein, Iceland and Norway) and Switzerland. Its planned delivery date is 1st January 2008, when banks will start migrating customers over to the new payment instruments. By 2010, the majority should be on the SEPA framework. As a result, banks throughout the SEPA area (not just the Eurozone) will need to invest heavily in technology with the capacity to support SEPA payment instruments.

The European Commission is establishing additional legal foundation through a Payment Services Directive and the commercial and legal frameworks are being developed by the European Payments Council (EPC), made up of European banks, and due to be finalised during 2006.

The introduction of SEPA means that it will increase the intensity of competition amongst banks and corporates for customers across borders within Europe. It also provides a business opportunity for a range of other organisations, including payment processors such as Voca Limited and Equens, to help banks reduce costs and develop new payment services.

Multi-national businesses and banks have the opportunity to consolidate their payments processing onto common platforms across the Eurozone. They will benefit from substantial efficiencies by choosing among competing suppliers offering a range of solutions and operating across borders.

For consumers, the benefits of SEPA could mean cheaper, more efficient and faster payments transfer when moving Euro from one Eurozone country to another.

[edit] Key dates

1957	Treaty of Rome creates a European Community
1992	Maastricht Treaty creates the euro
1999	Introduction of the euro as an electronic currency, including introduction of the RTGS system TARGET for large-value transfers
2000	Lisbon Agenda. The meeting creates a European Financial Services Action Plan
2001	EC Regulation 2560/2001 harmonises fees for cross-border and domestic euro transactions
2002	Introduction of euro banknotes and coins
2003	First pan-European ACH (PE-ACH) goes live. EC Regulation 2560/2001 comes into force for euro transactions up to €12,500
2004	10 additional countries join EU
2006	EC Regulation 2560 cap increases Euro transactions up to €50,000
2008	SEPA pan-European payment instruments will become operational in parallel to domestic instruments
2010	SEPA payments will become the dominant form of electronic payments
2011	SEPA payments will replace all national payments in the eurozone