Today the Single Euro Payments Area (SEPA) becomes a reality, enabling credit transfers throughout the SEPA region. Consumers and companies will be able to make cross border payments in euros as easily as making payments within their home country. Card payments have been in effect since January 1st and debit transfers are slated for November 2009.
According to the European Commission:
Once the single euro payments area (SEPA) is a reality, citizens
will be able to make payments and cash withdrawals in euros throughout
the SEPA area with the same ease and convenience as in their home
country. For example, once fully implemented, SEPA will make direct
debit, which now only functions within national boundaries, a fact at
pan-European level too.
SEPA will also bring more competition into the market, thus bringing
a better service at better prices to consumers and businesses alike.
SEPA is therefore a hugely important initiative. Its impact on European
markets, not only on financial services markets but also on the
internal market as a whole, will be enormous. That's why it is so
important to get SEPA right the first time. Delivering SEPA has
required a huge amount of work over the past few years and the industry
has made great progress making sure that this ambitious initiative
achieves its objectives.
Benefits for Businesses:
- Prepare payments in a single format, instead of separate formats for each country.
- Eventually a company could have a single euro account for all
payments and collections, thereby reducing the number of banking
relationships it maintains in Europe.
- Standardization of payment information (remittance data) will enable the automation of what are now manual business processes.
But there are major obstacles before businesses can begin to enjoy the benefits of SEPA:
[excerpted from Bank Systems & Technology] A lack of communication around the single euro payments area (SEPA)
between banks and corporate clients will continue to hamper adoption
around the European payments initiative, according to a whitepaper by B.I.S.S. Research (London). Because corporates have not prepared their systems or altered their processes SEPA is not likely to gain much volume on its live date on January 28.
This lack of preparedness, however, was primarily caused by banks'
failure to offer their corporate customers their SEPA solutions and
even notify them of the nature of their modified commercial pricing.
Consequently, corporates have been unable to move toward SEPA usage.
This situation was created because corporates were left out
during the initial stages of the production of the Payments Services
Directive (PSD) and the resulting SEPA solution. Research carried out
by B.I.S.S. found that an overwhelming majority of corporate treasurers
support SEPA. However, they are not willing to proceed to SEPA
implementation with an open checkbook. The original SEPA project was
mistakenly believed by the European commissioners to be a bank-to-bank
project. This assertion has produced a SEPA solution that is out of
touch with the requirements of corporate users.
Learn more about SEPA
- Press Release
- European Central Bank SEPA page
- BISS Whitepaper (discussion of SEPA obstacles)
- Bank Systems & Technology article