The introduction of SEPA: What will it mean for you?

3 April 2014

The payments industry is one of rapid change and evolution, as new techniques and technologies are used to improve the way payments are made across all channels, from contactless purchases and online shopping, to m-commerce and digital currencies.

One of the latest developments within this sector is the Single Euro Payments Area (SEPA), which will allow more than 20 million businesses in operation in Europe to make and receive payments in euros under the same conditions, rights and obligations, regardless of where they are located.

The payment technology was due to be implemented in February 2014, but the slow pace of implementation and change has seen the migration deadline delayed until August 2014. The focus of SEPA is on the eurozone, as the introduction of the single currency made it easier to pay with cash in other nations, but until now making electronic payments across borders was more difficult.

It was also difficult to transfer money from a bank account to an account in another euro area country, with the payment taking much longer and the payee often not getting the full sum.

The benefit of using SEPA in eurozone nations

SEPA is expected to make all electronic payments in the euro area as easy as making cash payments, with each transaction set to cost just the same as a domestic one. The technology makes it possible to make fast and secure transfers between bank accounts and enable the use of debit cards to make a payment in euros.

The implementation of the SEPA will also improve banking services, according to the European Union. It said that pricing transparency will emerge as a result of the widespread use of SEPA, while there will be guarantees that payments are received promptly and that the amount will be correct. Banks will also resume responsibility if something goes wrong with a payment, making it more reliable for consumers and businesses alike.

A study conducted by PricewaterhouseCoopers earlier this year stated that the overall gains for all stakeholders have been estimated at €21.9 billion per year.

The introduction of SEPA direct debits will benefit businesses dramatically as the process of cross border regular payments will improve. Without the introduction of SEPA, businesses needed to create bank accounts in each nation to collect direct debits from a customer, but the standardised payment technology means this is no longer the case.

The Credit Transfer options provided by SEPA mean that businesses can connect with vendors across Europe, assisting with international credit transfers, while the SEPA technology will make card payments a much more attractive concept for businesses operating within Europe. Generally, payments will go through an EFT service provider and retailers will have integration with their accounting systems. A move towards EMV chip cards should help to make card payments more secure across Europe.

The Royal Bank of Scotland described SEPA as "simplicity itself".

Are businesses ready for SEPA?

The general consensus is that businesses operating in Europe are not ready for the launch of SEPA. This was indicated by the migration deadline being pushed back. A PwC survey in 2013 indicated that 55 per cent of organisations were at risk of missing the February deadline. At the time of the survey 21.6 per cent of respondents were yet to define and plan their SEPA readiness, 43 per cent of respondents were not confident that the majority of their customers would be ready for the new system and 92 per cent of those questioned named system readiness as their main concern ahead of the implementation deadline.

It's not just eurozone nations that need to be ready for the launch, as non-EU nations are expected to implement the payment technology by October 2016. However, for these nations in the second wave of implementation, it is not time to rest on their laurels, as those that do business in the eurozone will need to be aware of the new payments technology.

SEPA may impact these business and it is important they conduct a risk analysis to gauge the effect it will have and determine a course of action as soon as possible.

With the deadlines approaching, RBS urged businesses to act now, taking the time to assess the impact of SEPA on organisations, put plans in place to ensure a seamless migration to the new payment method and also use the time to look into any other cost and efficiencies gains that may be available in the medium and long term.


By Tony Aynsley

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