Single Euro Payments Area (SEPA)

An Overview

The Single Euro Payments Area (SEPA) is a European Commission-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.

In 2008, the first stage of the SEPA payment scheme was introduced: Since 1st January 2008, card transactions were accommodated on the SEPA Cards Framework and since 28th January 2008, the SEPA credit transfer scheme commenced operation. Pan European direct debits were introduced since 1st November 2009 in accordance with the European Payments Council (EPC) scheduled timeframes. The SEPA Legal Framework provided under the EU Payment Services Directive (PSD) was incorporated into Irish law in November 2009. Both national payment schemes and the SEPA schemes will co-exist for a certain period of time after the launch, and typically to the end February 2014. 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

The maximum process time will be reduced to one banking day with effect from 1^st January 2012. Payments will be made using Bank Identifier Code (BIC) and International Bank Account Number (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).

This service was introduced on a phased basis throughout 2009 and AIB can process incoming SEPA credit transfers and offer SEPA credit transfers for outgoing payments to all customers. Receiving bank charges are 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.

Note: The date cycle above indicates the maximum execution timeframe permitted under the scheme rules.

SEPA Direct Debits

SEPA Direct Debit is a pan-European direct debit system that can be used for both domestic and international collections through the 32 SEPA countries. The scheme formally began on 1st November 2009 and will ultimately replace today's national direct debit schemes. 

The scheme allows consumers 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.

There is no difference in processing timeframes or fees for a domestic direct debit and an international direct debit.

This scheme is underpinned by the Payment Services Directive (PSD), which provides the legal framework for the pan-European direct debit product.

SEPA Credit and Debit cards

The SEPA Cards Framework introduced 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 the AIB Debit Card 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 SEPA Credit Transfer 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 SEPA Direct Debit scheme will allow a direct debit originator in one EU / SEPA zone country issue direct debits on accounts in another SEPA zone country, eliminating the requirement for local direct debit scheme membership.

The new scheme standards 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, SEPA Credit Transfer may initially have little impact. However, as the SEPA Credit Transfer and SEPA Direct Debit schemes will eventually replace the current national payments system, these businesses should start to consider their plans for moving to the new scheme standards. 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-term. 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 in this standard. In addition, service providers may issue direct debits through the SEPA Direct Debit scheme to debit consumers accounts either domestically or abroad.

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 SEPA Credit Transfer products will co-exist with Irish payment products for a period of time. 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 and most banks in the SEPA zone 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 1st January 2008, and is processing incoming and outgoing SEPA Credit Transfer payments since 3rd March 2008.

SEPA Direct Debits started on the 1st November 2009 in accordance with the European Payments Council (EPC) scheduled timeframes, with AIB accepting incoming SEPA Direct Debits since July 5th, 2010. AIB is offering a SEPA Direct Debit Origination service via iBB since the 1st November, 2010.

The SEPA Legal Framework will be provided under the Payment Services Directive (PSD) was also incorporated into Irish law on the 8th November 2009.

Who is in SEPA?

The SEPA zone comprises the 32 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, Monaco, Netherlands, Norway, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, Sweden, Switzerland.

Important / Regulatory Notice

Terms and conditions apply.

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