Single Euro Payments Area (SEPA)

What is SEPA?

The Single Euro Payments Area (SEPA) is the area in which individuals and businesses can make and receive card and electronic payments in euro, across Europe, simply, cheaply and efficiently, regardless of their location. In other words it defines the creation of an integrated euro payments market, with a geographical scope that extends beyond the eurozone to encompass all EU Member States as well as Norway, Iceland, Liechtenstein, Switzerland and Monaco.

Following on from the introduction of euro notes and coins in 2002, it is viewed as a natural evolution of economic and monetary union, marking a further step towards the creation of a Single Market for Europe.

What are the benefits of SEPA?

SEPA aims to deliver a number of economic benefits and is intended to provide a catalyst for future evolution and innovation. The launch of new SEPA payment products and services will offer businesses and individuals more ways in which to pay in euro – such as credit transfers and direct debits - as well as ensuring more widespread usage of plastic cards.

It will assist pan-European trade and help UK businesses compete by making it simpler and cheaper to send or receive euro payments. Larger businesses will probably have the most to gain, as they will find it easier to operate on a pan-European basis and to rationalise their cash management and card acceptance arrangements.

From a consumer perspective, it will facilitate the transfer of funds between the UK and other SEPA countries for individuals who are working or studying abroad, or those who maintain an overseas property. People travelling within Europe on holiday or on business should see their UK-issued cards being even more widely accepted.

Who is responsible for the initiative?

The key players are the:

European Commission which is helping to remove barriers to the creation of SEPA by introducing the Payment Services Directive to harmonise the European legal environment through standardisation of information requirements and the rights and obligations of payment service providers and users;
European Central Bank which has provided guidance to the market by setting out its expectations regarding timescales and deliverables in a series of SEPA progress reports;
European Payments Council which is the decision-making and co-ordination body of the European banking industry in relation to payments, with the declared purpose of supporting and promoting 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 organised at a European level and through mechanisms established within national communities.

What will SEPA deliver?

SEPA requires the harmonisation of diverse national and cross-border euro payment systems, both at a technical level and in terms of customer services and procedures. To this end, the European Payments Council (EPC) has created a portfolio of SEPA Schemes, which it defines as sets of interbank “rules, practices and standards”, providing a common understanding of “how to move funds from account A to account B” using a SEPA payment instrument. These Schemes then form the basis around which banks (payment service providers) and payment institutions can develop competitive products and value-added services to offer to their customers.

The SEPA Credit Transfer Scheme was the first to be launched, on 28th January 2008. At the same time, the EPC introduced a new framework for plastic cards – the SEPA Cards Framework - ensuring that they are accepted in more places throughout the eurozone. The SEPA Direct Debit Schemes (Core and Business-to-Business), which will enable direct debits in euros to be transacted on a SEPA-wide basis, have also been developed. However, since these Schemes need the support of a uniform EU-wide legal framework, the launch has been aligned with the date by when all EU Member States must have adopted the EU Payment Services Directive into national law, i.e. 2nd November 2009.

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. To take advantage of these benefits both parties to the payment transaction (i.e. the payer and payee) must hold an account with an institution that has adhered to the relevant SEPA Scheme. It is expected that there will be a natural migration of national euro card and electronic payments to these new schemes and standards over time.

How are UK Payment Service Providers involved?

Although 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 payment industry is committed to making SEPA a reality.

A number of UK-based payment service providers (including many Payments Council Members) currently offer SEPA Credit Transfer products to their customers. These institutions account for in excess of 85% of the UK payments market by volume. Customers of these institutions are able to make SEPA Credit Transfers from their accounts in the UK on a SEPA-wide basis.

At this stage, we believe that the creation (or realisation) of SEPA will be invisible to the vast majority of UK customers making sterling payments, as the sterling Schemes will continue to operate alongside the SEPA versions. 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.

Payments Council’s Role

To ensure that UK customers’ needs are taken into account and that they are not disadvantaged, Payments Council and its Members are actively engaged in the work of the EPC. The UK EPC Group was created in 2002 to promote a joined up approach to the UK’s interface with the EPC on SEPA developments. The role of the group is to provide a forum for Payments Council Members to discuss and formulate views on proposals arising from SEPA, in consultation with interested stakeholders where appropriate, and to co-ordinate any collaborative actions arising.

Payments Council is also the UK’s National Adherence Support Organisation (NASO) whose role is to facilitate the adherence of UK-based payment service providers to the SEPA Credit Transfer Scheme and the SEPA Direct Debit Schemes. Any institution that meets the eligibility criteria set out in the Scheme Rulebooks can apply to become a SEPA Scheme Participant.

The SEPA Credit Transfer and SEPA Direct Debit Adherence packs, which include a Guide to the Adherence Process and a set of frequently asked questions, can be downloaded from the EPC’s website http://www.europeanpaymentscouncil.eu/index.cfm along with copies of the Scheme Rulebooks and other key documents. Completed documentation - comprising the signed original versions of the Adherence Agreement, Schedule and Legal Opinion(s) - can then be submitted to the EPC via the Payments Council. The EPC website also provides access to lists of Registered Participants in the Schemes, which the EPC periodically updates. Queries from UK payment service providers about the Scheme adherence process can be sent by email to NASO@paymentscouncil.org.uk.

Where can I find out more about SEPA?

The following EPC documents and website links provide more detail about SEPA. Customers interested in finding out about SEPA-related products and services should contact their bank or Payment Service Provider.

Featured EPC Documents
Making SEPA a Reality: The Definitive Guide to the Single Euro Payments Area

Shortcut to the SEPA Credit Transfer Scheme

Shortcut to the SEPA Direct Debit Scheme

Shortcut to the SEPA Data Format

SEPA Misunderstandings Clarified