SEPA

About SEPA (Single Euro Payments Area): An Overview

SEPA is an EC-mandated program designed to create a single transparent payment market for domestic and international euro transactions. Like the euro currency itself, SEPA is another support for the free movement of goods and services within the SEPA zone.

SEPA is a major harmonisation project on a scale similar to the introduction of euro notes and coins. Its introduction involves new legislation, common business rules as well as uniform technical standards for core credit transfers, direct debits and cards.

During 2008, the first stage of the SEPA payment scheme was introduced: From 1st January, card transactions were accommodated on the SEPA Cards Framework and from 28th January 2008, the SEPA credit transfer scheme commenced  operation. Pan European direct debits are scheduled for delivery by November 2009 in accordance with the European Payments Council (EPC) scheduled timeframes. This timeframe may be subject to change. The SEPA Legal Framework will be provided under the Payment Services Directive (PSD) also scheduled for incorporation into Irish law by November 2009. Both national payment schemes and the SEPA schemes will co-exist for a certain period of time after launch, and typically to the end of 2015. This period differs within each country and is determined by national migration plans. The existing national payment schemes will gradually be phased out and be replaced by the SEPA schemes.

Payment Products

SEPA payment products provide standard (non-urgent) payment services effected in euro, and are supported by three payment programmes:

SEPA Credit Transfer (SCT) Scheme

SEPA Direct Debits (SDD) Scheme

SEPA Payment Card (Credit & Debit card) Framework Agreement

These products comply with the standards and data components identified in the respective scheme rule-books or framework agreement defined by the European Payments Council. Payments complying with these specified standards will deliver a high Straight Through Processing (STP) rate and improve the overall efficiency of payments.

SEPA Credit Transfers

Under SEPA, a basic credit transfer in euro must have a maximum execution timeframe of three banking days, although it is envisaged that the majority of payments will have a much shorter processing time. This maximum process time will be reduced to one banking day with effect from 2012. Payments will be made using the BIC and IBAN standards and payments may carry information for the beneficiary relating to the payment (up to 140 characters for remittance information and up to 35 characters for customer reference codes).

Receiving bank charges will not be netted or deducted from the payment amount unless the receiver of the payment has agreed to this arrangement i.e. receiving bank charges will be levied separately to the credit to the receiver's bank account. This feature supports reconciliation of payments and will provide price transparency. AIB will be able to process incoming SEPA credit transfers and offer SEPA credit transfers for outgoing payments to all customers. This service will be introduced on a phased basis throughout 2009.

Note: The date cycle above indicates the maximum execution timeframe permitted under the scheme rules. It is envisaged that in transitioning to SEPA that the SCT payments will retain any existing shorter execution timeframes supported by current national payment schemes.T he ultimate goal of the SEPA project is to achieve an execution timeframe of D +1 by 2012, or earlier, for all SCT payments.

SEPA Direct debits

At present, Direct Debit schemes operate as national payment schemes and most countries across Europe operate similar, but distinct Direct Debit schemes.

SEPA will introduce a standard Direct Debit scheme, operable across the 31 states of the SEPA zone. This scheme will be underpinned by the Payment Services Directive (PSD), which provides the legal framework for the pan-European direct debit product.

Once available, consumers will be able to use Direct Debits to pay bills in euro anywhere in Europe, not only in Ireland. For example, consumers with property abroad will be able to pay their utility bills from their bank account in Ireland and therefore there will be no need to have an account in another country.

SEPA Credit and Debit cards

The SEPA Cards Framework introduces a new standard which allows the cardholder to pay and withdraw cash throughout the SEPA zone. To enable this, all cards and terminals will use a standard technical and operational interface, known as the EMV standard.

All SEPA compliant credit and debit cards will be required to have an embedded chip (to improve security and comply with EMV standards). With a SEPA compliant card, consumers can make payments and cash withdrawals anywhere in the SEPA zone with the same ease as in their home countries. Retailers and service providers will need to ensure their terminals are suitable for EMV.

AIBs card suite is compliant (through Maestro on our debit cards and through the Visa and MasterCard schemes on our credit cards) since January 2008.

Who will benefit from SEPA?

In the main, SEPA will benefit businesses allowing consolidation of some administration activities and reducing the number of domestic payment standards that a multi-national business might otherwise have to maintain or accommodate.

Multi-national businesses:

The SCT scheme will allow business make payments to both national and international suppliers using a single standard payment type. In due course, bulk credits, like salaries could be paid to accounts in different countries across the SEPA zone from a single account source and a single bulk file submission.

Similarly, the SDD scheme will allow a direct debit originator in one EU / SEPA state issue direct debits on accounts in another SEPA state, eliminating the requirement for local direct debit scheme membership.

The new scheme standards will provide businesses with the capability to transmit additional information with their payments that the banks must deliver to the receiver of the payment. This information can be used by these businesses to manage their account payables and receivables process for their customers and to improve their internal reconciliation of the transactions.

Local / Domestic businesses:

For exclusively domestically focussed businesses, SCT may initially have little impact. However, as the SCT (& SDD) will eventually replace the current national payments system, these businesses should start to consider their plans for moving to the new scheme standrads. For instance, a business can choose to adopt the SEPA standard instead of the national standard in the short term, or alternatively use the two standards interchangeably (although this dual approach may incur additional costs).

These businesses will also be able to benefit from the use of the additional information that can be carried with each payment.

Consumers:

The impact of SEPA on the consumer will be limited in the short-run. The overwhelming majority of payments effected by Irish consumers are domestic payments and the domestic payments standard will continue to operate during the transition period. However, as businesses such as utility companies e.g. Eircom, ESB may want to benefit from the credit management and reconciliation benefits provided by the new scheme, consumers may be required to effect SEPA payments early in the transition period.

Consumers may however choose to use SEPA Credit Transfers for either domestic or international payments to another SEPA zone country, and may receive incoming payments to their account on this standard. In addition, service providers may, in due course issue direct debits through the SEPA Direct Debit scheme at debit of the consumers account from late 2009 onwards.

When will SEPA happen?

SEPA started on the 1st January, 2008 with the adoption of the SEPA Cards Framework. On the 28th January 2008 the SEPA Credit Transfer scheme started so that SCT products will co-exist with Irish payment products until at least 2015. The domestic payments services, based on NSC (National Sort Code) and Account Number will eventually be phased out.

Since early in 2008, banks started using the SEPA Credit Transfer Scheme. During the course of 2008 /2009 most banks in the SEPA zone will offer their customers the capability to initiate SEPA Credit Transfers and SEPA-compliant card payment instruments.

AIB is offering SEPA compliant debit and credit cards since 01 January 2008, and is processing  incoming and outgoing SEPA Credit Transfer payments since 3rd March 2008.

SEPA Direct Debits are scheduled for delivery by November 2009 in accordance with the European Payments Council (EPC) scheduled timeframes. This timeframe may be subject to change. The SEPA Legal Framework will be provided under the Payment Services Directive (PSD) also scheduled for incorporation into Irish law by November 2009.

Who is in SEPA?

The SEPA zone comprises the 31 countries of the greater European Area, as listed:

Austria, Belgium, Britain, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland (Republic of Ireland), Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, Sweden, Switzerland.

Important / Regulatory Notice

Terms and conditions apply.

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