Integration of the Single Euro Payments Area (October 8, 2013)

Since the introduction of the Euro in 1999, EU Institutions have focused on integrating the Euro payments market. EU legislation (Directive No 2007/64/EC on payment services in the internal market and on the application of Regulation (EC) No 924/2009 on cross-border payments in the Community and Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the community and repealing Regulation (EC) No 2560/2001) created a framework for the Single Euro Payments Regulation Area (SEPA), and by amendments (Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in Euro and amending Regulation (EC) No 924/2009) adopted in February 2012, set mandatory deadlines for migration to the SEPA system (SEPA Framework).

All Euro area countries must comply with the SEPA Framework by February 1, 2014.  Any other countries that are part of SEPA must comply with the SEPA Framework by October 31, 2016. However, the SEPA Framework permits postponement of some requirements.

SEPA encompasses countries with the Euro as their official currency (Euro area), all other EU member states, and the following Non-EU countries: Iceland, Liechtenstein, Monaco, Norway and Switzerland. SEPA affects Payment Service Providers (PSP), businesses and consumers differently in the following ways:

SEPA credit transfer (SCT): SCT transfers denominated in Euro, within SEPA countries, must take place within one business day of being generated. The sender’s PSP is obliged to transfer the full amount of the payment transaction and may not deduct any charges. Charges must be equal for domestic and cross-border payments up to € 50K.

SEPA direct debits (SDD): SDD are cross-border direct debits and other regular payments between any two bank accounts located in SEPA countries. SDD are available for operations between consumers and businesses (SDD Core) and between businesses (SDD B2B). SDD applies to accounts in Euro as well as in other SEPA currencies.  However, the transfer must be executed in Euro.

IBAN only: Businesses in SEPA countries must use IBAN as the only account identifier for all payments (domestic and cross-border). Consumers can use domestic bank account identifiers if PSP converts them to an IBAN format. Nonetheless, from February 1, 2016 consumers are obliged to use IBAN without conversion.

New messaging standards: Businesses must harmonize their internal systems in order to support SEPA traffic.

Single bank account: Since domestic and cross border payments can be handled from one bank account under the same conditions, businesses and consumers will save costs and optimize cash flow.

Competition in banking market: Improvement of banking services and reduction of banking fees within SEPA is expected, since one bank account across the SEPA might be sufficient.

Please note that this is not a complete list of developments and requirements arising from the SEPA Framework. We are happy to provide you with more details upon request.