EC sets Sepa migration deadlines

EC sets Sepa migration deadlines

The European Commission has finally set out its proposals for EU-wide end-dates for the migration of national credit transfers and direct debits to Single Euro Payments Area (Sepa) instruments.

The move means that, once the regulation comes into force, national credit transfers will be replaced by the pan European Sepa SCT within 12 months, with direct debits following after another year.

The proposal now passes to the European Parliament and the member states for consideration.

The EC says it has moved to enforce the move because self-regulation has failed. According to available European Central Bank data, as of October, only 9.6% of all credit transfers in the euro area were executed using a pan-European payment instrument. If this trend continues, it will take 25 years for the full benefits of the Sepa to be felt.

To ensure interoperability, the use of certain common standards and technical requirements such as the use of international bank account numbers (Iban), bank identifier codes (Bic) and a financial services messaging standard (ISO 20022 XML) will be mandatory for all bank account payments in euro in the EU.

Internal market and services commissioner Michel Barnier says: "We have a Single Market, many countries share a single currency and soon we will move to a single pan-European payment system in Europe. It means that making payments cross-border will become as easy as making them at home. Consumers will only need one bank account and their payments will be faster, cheaper and safer. Businesses will benefit from one set of standards and much simpler processes. The proposal adopted today fixes end-dates to make this pan-European system a reality, hopefully as early as 2012."

The European Central Bank's Gertrude Tumpel-Gugerell - who has long called for a deadline - told the Financial Times that she "very much welcomed" the EC proposal.

Last month the European Payments Council warned that the EC will "effectively derail the entire Sepa project" if regulatory intervention on migration end dates does not include deadlines for phasing out national schemes.

Comments: (4)

A Finextra member
A Finextra member 16 December, 2010, 19:44Be the first to give this comment the thumbs up 0 likes So what now? Banks are currently still operating with dual payment processes - one for cross-border and another one for domestic payments - and the introduction of the SEPA payment system for both cross-border and domestic payments will remove costs associated with these dual payment systems. This should accelerate competition in the payments market and corporates should shop around to get the best possible service from their bank. As part of this process, we might see corporates putting pressure on their banks to pass on the cost savings made from changing to a universal payment system. Now that the end-date for migration has been announced, there are some actions that need to take place in order for banks and corporates to meet this deadline. As part of the migration to SEPA, banks are required to replace their dual payment infrastructures while corporates need International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) in order to initiate validate payment instructions, as the mandatory international ID for all payments. Therefore, if corporates want to be ready for SEPA payments, they need to be able to collect their IBANs and BICs to update their customer and supplier databases. If domestic details are not updated by the set end-date, incorrectly formatted payments might lead to errors in transactions and additional costs. Unfortunately, obtaining the correct IBAN and BIC is up to the corporate and whilst many banks are happy to provide these details for their own customer accounts, most banks are reluctant to contact other banks in various countries, to obtain and generate the details. However, corporates shouldn't be thrown in the deep end completely, and banks should be communicating with their customers to familiarise them with the upcoming changes and support them throughout the migration process to minimise correction and rejection charges of failed payments. Ultimately, the more proactive the banks are, the more attractive they are for the corporates - a win/win situation for both parties.
Sean Fitzgerald
Sean Fitzgerald - CEO - Sentenial 17 December, 2010, 11:09Be the first to give this comment the thumbs up 0 likes

Just to clarify. A Regulation is the legislative instrument used by the EU if something is not happening quickly enough or in the manner intended.

This proposal must now be approved by the European Parliment and the member states in the form of the council. The council can take several configurations and I suspect that in this case its the ECOFIN version(Finance Ministers). This can happen relatively quickly, particularly with the broad level of support that exists.

Officials expect mid 2011 for completion according to the FT article today. The revised Regulation is then published in the Official Journal and comes into force in relatively short order eg. Reg 924 was published on 09/10/09 and came into force on 01/11/09. We can expect something similar with this regulation.


Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 17 December, 2010, 13:15Be the first to give this comment the thumbs up 0 likes

On the one hand, PayPal and other alternative payment providers are making it easier to even put through cross-border payments by using only the email address or mobile phone numbers of a recipient. On the other hand, if the proposed EC measures go through, banks would be forced to ask payers to enter at least twice as many keystrokes to initiate a domestic payment via SEPA.

While Mr. Barnier might believe that "...making payments cross-border will become as easy as making them at home", I somehow can't escape feeling that "making payments at home will become as hard as making them abroad".

I hope this doesn't result in an overall drop in e-payments adoption and a return to cheques! Why am I suddenly reminded of a recent Finextra article that said that UK's Payments Council is planning to introduce a paper-based alternative to cheques? 

A Finextra member
A Finextra member 17 December, 2010, 19:46Be the first to give this comment the thumbs up 0 likes

The whole point of SEPA is to support a true single market.  The overwhelming majority of domestic payments are B2C (or strictly C2B).  In the UK this is dominated by Direct Debit bill payments.  If the breakdown in Euro-in countries is anything similar it will take an extra decade before the amount of cross border traffic reaches even 20% of domestic traffic.  Does the prospect of buying my gas or my phone service from Germany or Spain appeal?  Well, maybe but it will be a while before a large slice of the population does that.  We shall see.