The Single Euro Payments Area (SEPA) initiative for the European financial infrastructure involves the creation of a zone for the euro or any currency whose member state wishes to notify participation,[1] e.g. the Swedish krona[2], in which all electronic payments are considered domestic, and where a difference between national and intra-European cross border payments does not exist. The project aims to improve the efficiency of cross border payments and turn the fragmented national markets for euro payments into a single domestic one: SEPA will enable customers to make cashless euro payments to anyone located anywhere in the area using only a single bank account and a single set of payment instruments.[3] The project includes the development of 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).[4]
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There are two major milestones for the establishment of SEPA:
For Direct debits, the first milestone has been missed due to delay in the implementation of enabling legislation, the Payment Services Directive (PSD), in the European Parliament. Direct debits became available in November 2009. This has put severe pressure on the second milestone.[5]
The European Commission has established the legal foundation through the Payments Services Directive (PSD). The commercial and technical frameworks for payment instruments are being developed by the European Payments Council (EPC), made up of European banks, and are mostly finalised as of July 2007. The EPC is committed to delivering three pan-European payment instruments:
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 not; they are strongly recommended however. Because there was tolerance left for interpretation, it is expected that several pain-specifications will be published across SEPA-countries.
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, the European Automated Clearing House Association (EACHA), payments processors and pan-European banking associations (European Banking Federation, EBF; European Association of Co-operative Banks, EACB; European Savings Banks Group, ESBG) are playing an active role in defining the services which SEPA will deliver.
Since January 2008, banks are 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.
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.
The introduction of SEPA will increase the intensity of competition among banks and corporates for customers across borders within Europe. For consumers and organizations, SEPA could mean cheaper, more efficient and faster payments transfer when moving Euro from one Eurozone country to another.
SEPA consists of 32 countries[1]:
Usually, all parts of the countries are part of SEPA regardless of whether the country parts are part of the European Union or not. The following countries have dependent territories which are not part of SEPA:
A few countries and areas using the euro are not included:
SEPA is an initiative of the European Payments Council. It is supported by the European Central Bank and the European Commission, the latter strongly involved via the Payment Services Directive.
There is a common misconception that all credit transfers in the SEPA are free to the consumer, either by scheme rules or national transposition of the Payments Services Directives. There is another common misconception that the European Parliament mandated that a bank must charge the same amount for SEPA credit transfers (which may be cross border) as they charge for domestic credit transfers in euros.[7] However, the European Parliament merely mandated that a bank charge the same amount for international euro transfers within the European Economic Area as they charge for domestic credit transfers in euros. The European Economic Area is different from the SEPA area (the most significant difference being the inclusion of Switzerland in the latter but not in the former). Furthermore, the rule of the same price applies even if the transaction is sent as a regular international transaction instead of being sent as an SEPA transaction (common before 2008 or if any involved bank doesn't yet support SEPA transactions). Banks and payment institutions still have the option of charging a credit transfer fee of their choice, as long as it is charged uniformly to all EEA participants, banks or payment institutions, domestic or foreign.[8] This is specifically relevant for countries that do not use the euro, as domestic transfers in euro by consumers are uncommon there, so inflated fees might be charged.
The main objectives of SEPA are:
| 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 |
| 2006 | EC Regulation 2560 cap increases Euro transactions up to €50,000 |
| 2008 | SEPA pan-European payment instruments become operational in parallel to domestic instruments on 28 January.[9] |
| 2009 | PSD – Payment Services Directive (PSD) to be implemented in national laws by November |
| 2010 | SEPA payments will become the dominant form of electronic payments |
| 2011 | SEPA payments will replace all national payments in the Eurozone |
Official progress report in published here http://www.ecb.europa.eu/paym/sepa/about/indicators/html/index.en.html In November 2008, the European Central Bank published its 6th progress report on SEPA (see links below)
In barely disguised diplomatic language, the ECB expressed frustration at the lack of clarity on many aspects of the SEPA, and implored the banks, regulators, and the software industry to get on with the job. It has set out ten questions for which it wants answers, and has set out a timetable for those answers. The questions mainly require clear and unambiguous decisions at European level, but given the multi-national nature of SEPA, the collective answer requires national commitment in each country.
The main ECB criticism is of the SEPA governance process, which is poorly resourced, lacking in clarity, and failing to involve a sufficiently wide range of interested parties.
The European Central Bank regards SEPA as an essential element to advance the usability and maturity of the Euro currency. SEPA went live in Jan 2008, but as of late 2010, only 13.9% of credit transfers within Europe are executed according to SEPA standards.
The main points presented in the 39-page report are:
In this situation, the ECB has set out 10 issues which it wants to see resolved, and has set deadlines by which it wants to see clear responses.
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