Single European Payment Area (European Union)

1. PRESENTED BY
A B H I S H E K C H A U B E
Single European Payments Area
(SEPA)

2. Introduction
 The Single Euro Payments Area (SEPA) is a payment-integration
initiative of the European union for simplification of bank transfers
denominated in euro, As of November 2013, SEPA consists of the 28
EU member states, the four members of the EFTA (Iceland,
Liechtenstein, Norway and Switzerland) and Monaco.
 All the retail payment markets in the euro area will merge to form one
market – the Single Euro Payments Area (SEPA),within SEPA all euro
payments will be treated as domestic payments and the current
differentiation between national and cross-border payments will cease.
 European Payments Council (EPC) which brings together the European
banking communities and the main European banks, launched the
SEPA project in 2002 the project is supported by the European
Commission and the Euro system.

3. Why SEPA Introduce ?
 The project's aim is to improve the efficiency of cross-border payments
and turn the fragmented national markets for euro payments into a
single domestic one.
 SEPA will enable customers to make cashless euro payments to anyone
located anywhere in the area, using a single bank account and a single
set of payment instruments.
 The project include the development of common financial instruments ,
standards, procedures, and infrastructure to enable economies of scale,
this should, in turn, reduce the overall cost to the European economy of
moving capital around the region (estimated as two to three percent of
total GDP).

4. History of SEPA
 1 January 1999: Beginning of the third phase of the Economic and Monetary
Union with the gradual introduction of the euro and the implementation of a
common monetary policy by the ECB.
 1 January 2002 : Euro coins and banknotes enter circulation.
 2002: Launch of the SEPA project to conclude the implementation of the single
currency with the creation of a single European payments market.
 April 2006: Creation of the National SEPA Committee by the Banque de France
and the French Banking Federation. Bringing together all the French
stakeholders, this committee is in charge of coordinating the French migration
to the SEPA payment instruments.

5. History of SEPA (2)
 13 November 2007: Adoption of directive 2007/64 on payment services which
facilitates the implementation of the SEPA payment instruments by setting the
legal basis for a single European payments market.
 28 January 2008 : Launch of the SEPA Credit Transfer.
 16 September 2009 : Adoption of regulation N° 924/2009 which extends the
equality of charges principle for cross-border and national payments in euro to
all electronic payments under 50 000 euro, including credit transfers, direct
debits, withdrawals at ATMs, card payments and money remittances.
 2 November 2010: Launch of the SEPA Direct Debit in France.
 1 February 2014: end of the migration to the SEPA Credit Transfer and the
SEPA Direct Debit. After this date, it will no longer be possible to make
payments using national credit transfers and/or direct debits.

6. SEPA Payments Instruments
 The first set of SEPA payment instruments focuses on the three most
widely-used instruments in Europe:
1. The SEPA Credit Transfer (SCT)
2. The SEPA Direct Debit (SDD)
3. The SEPA Cards Framework (SCF)
Note: Cheques which are rarely used in other European countries, remain
outside the scope of SEPA.

7. 1. The SEPA Credit Transfer(SCT)
 It allows to transfer funds between two payment accounts
held by banks located within the SEPA area.
 Regulation N° 260/2012, the SEPA Credit Transfer will
replace the national credit transfer at the latest on 1
February 2014.

8. Credit Transfer Characteristics
The SEPA Credit Transfer has the following characteristics:
1. SEPA-wide reach ability.
2. The account of the beneficiary is credited of the transaction’s
full amount.
3. The maximum execution time is 1 banking business day since 1
January 2012.
4. A remittance field of 140 characters is at the disposal of the
originator to transmit information to the beneficiary. The
remittance data is forwarded in full and without alteration.
5. The beneficiary’s account is identified by the IBAN and BIC.
6. The use of international technical standards allows for straight
through processing.

9. IBAN and BIC
IBAN:
The IBAN consists of 34 characters and a fixed length per country.
It consists of: 2 letters country code ,2 digits: a key control and
30 positions (maximum): the BBAN (Basic Bank Account Number), which corresponds to
our current RIB.
BIC:
The BIC contains 8 or 11 characters.
4 characters code corresponding to the bank, 2 characters corresponding to the ISO country
code, 2 characters localization and possibly three additional characters may define an
agency or a branch (branch code)

10. 2. SEPA Direct Debit(SDD)
 The SEPA Direct Debit is a fully automated payment instrument which
is generally used for recurrent euro payments. It allows a creditor to
initiate the payment order. In doing so, it exempts the debtor from
having to send a separate payment order at each due date.
 In accordance with the regulation N° 260/2012, the SEPA Direct Debit
will replace the national direct debit at the latest on 1 February 2014.
 The SEPA Direct Debit has the following characteristics:
1. SEPA-wide reachability.
2. Initiators of direct debits must obtain a signed authorization
from the debtor called the mandate. They must archive the
signed mandate.

11. SEPA Direct Debit characteristics:
3. The creditor sends his collection at the latest five days (in the case of a first or
a one-off collection) or two days (in the case of a recurrent collection) prior
to the due date. On the due date, the debtor’s bank transfers the funds to the
creditor’s bank.
4. A remittance field of 140 characters is at the disposal of the creditor to
transmit information to the debtor. The remittance data is forwarded in full
and without alteration.
5. The debtor’s account is identified by the IBAN and BIC.
6. The debtor may ask his bank to reimburse a SEPA Direct Debit that has
already been settled. He may present his refund request within 8 weeks
starting from the date on which his account was debited in the case of an
authorized direct debit and within 13 months in the case of an unauthorized
direct debit. The refund by his bank of a direct debit does not discharge the
debtor of his obligations towards the creditor.

12. 3. SEPA Card Framework (SCF)
 Payment cards enable payers to issue electronic payment
orders, either via point-of-sale (POS) terminals, ATMs or
through remote channels.
 Payment cards are widely used in Europe and generally
enable cardholders to execute transactions abroad.
 SEPA relies on existing national and international card
payment schemes and aims to strengthen their
interoperability and their security.
1.

13. Card Payments Principles
In order to comply with the SEPA Cards Framework, card payments must abide to
the following principles:
1. Cardholders are able to pay with a single card throughout the SEPA
area provided the brand of the card is accepted by merchants.
2. Merchants are able to accept cards under the same conditions irrespective of
their country of issuance. They continue to have discretion on which card
schemes they choose to accept.
3. Card payments use EMV technology and are most of the time authenticated
using a PIN code.
4. Payment are guaranteed according to the terms defined by the card network.
Note: SEPA-compliant payment cards are mainly cards issued by banks. Issuers of
store or loyalty cards (e.g. credit cards issued by specialised organisations) may
also, should they wish to do so, comply with the SEPA principles.

14. Advantage of SEPA on Corporate and Banks
 Most banks are fairly closely aligned in their views on corporate benefits,
with the ability to reduce euro accounts (100%) rationalise banking
relationships (88%) and simplify cash management structures (88%) the
most commonly cited advantages.
 13% of banks view that SEPA brought few or no advantages for their
corporate customers.
 Banks are likely to derive significant competitive advantage by creating
momentum amongst corporate customers to migrate to SEPA with clear
and pragmatic communication, (as well as high quality solutions) to move
beyond the high level statements.
 SEPA system reduces the number of euro banks and accounts but there is
nonetheless a view that SEPA will allow greater standardization of
payments, and the simplification of European liquidity management.

15. Disadvantage of SEPA
 There were some disadvantages for corporates in
introducing SEPA, but the majority of these were short
term issues relating to migration, such as modifying
existing software and systems integration.
 Only two of the potential disadvantages raised were
1) Some believed there was a greater likelihood of failed
payments.
2)Some thought that the SEPA payment products were
inferior to existing payment types.

16. Impact of SEPA on France
 France one single domestic credit transfer : the Virement , which
is having format CFONB160 (fixed file of 160 characters) is
impacted If initiating credit transfers from French channels in
CFBON160 format and have to change the way of working in order
to produce SEPA compliant files before 1 February 2014.
 Virement do not allow SCT payment and account are mentioned in
RIB not in IBAN so there is huge impact economically to change to
this Format in France.
 File format is plain text where as in SEPA it is XML.
 There is also change in operation for SDD that should be
implemented.

17. Conclusion
SEPA bring significant cost savings for corporate and other
paying institutions in the euro-zone , most of the leading
cash management banks have taken the opportunity of the
SEPA project to offer payments worldwide via a common
standard: ISO 20022 i.e. all payments can be delivered in
the pain.001 or pain.008 XML formats for outgoing
payments and direct debit collections respectively ,the
differences between banks in the usage of the standards
have been significantly reduced. However it will impact
economically and technically to all banks for the
transformation of their format to SEPA format.