The retail payment systems of different countries have developed in line with individual national needs. Cross-border retail payment volumes have remained small, and so banks have focused on making domestic payment systems as reliable and efficient as possible. However, with the single economic area starting to take shape, the need has arisen for harmonised products that enable area-wide payments by all who belong to the single economic area. This project is referred to as the Single Euro Payments Area (SEPA).
Common standards, faster execution of payments and simpler payment-related processes benefit the economy of the whole EU area. The most important advantage is the enhanced overall efficiency of the payment process. There will be more competition and customers will also have a better chance of inviting competitive bids from banks, when all area-wide payments are made in accordance with the same standards and jointly agreed rules. Going forward, it will be more likely and easier for new payment-related product innovations to enter the market, when the playing-field is one big market area, instead of many small areas using differing standards.
The aim of the SEPA project is to have payments processing that is as automated as possible and consistent with common standards, to agree on common practices, to upgrade the processing of both domestic and cross-border payments and to ensure cost-effectiveness. The SEPA project covers all the most important payment methods besides cash: credit transfers, card payments and direct debit. SEPA credit transfers have been possible since the beginning of 2008. SEPA direct debits were introduced in November 2009. In Finland, traditional bank cards will be withdrawn from the market and replaced by international debit cards. Cheques are not covered by SEPA. One of the objectives of the project is to reduce the use of cheques, still common in a number of countries. They are used mainly in domestic payments and are expensive to process.
The cooperation body of European banks, the European Payments Council (European Payments Council (EPC), is composed of European banking associations and dozens of banks. Finnish banks also participate in this cooperation. EPC endeavours to work with the European Commission and the ESCB (the European System of Central Banks). It is also a kind of joint decision-making body for the banking sector as a whole, although its decisions are not binding. It has several working groups and sub-working groups, which address the various issues in the payment field. The EPC website posts descriptions of all SEPA products. In Finland, the Federation of Finnish Financial Services is a key player in this connection. Its website provides access to abundant information on SEPA from the Finnish perspective.
SEPA was launched in January 2008, however the project has not yet been completed. The progress of the SEPA process can be monitored via the ECB website.
What is SEPA?