Is a Single Euro Payments Area Still Achievable?

“The Single Euro Payments Area (SEPA) is the area where citizens, companies and other economic actors can make and receive payments in euro, within Europe, whether within or across national boundaries under the same basic conditions, rights and obligations, regardless of their location.”

That’s the formal definition from the European Payments Council (EPC), the organization created in June 2002 and mandated by authorities to develop SEPA schemes.

But what really is SEPA? In a webinar earlier this month, the EPC advised participants to think of SEPA like another network system – the railway industry. The uniform standards for train track infrastructure enable multiple commercial railway operators to take passengers in and out of countries in Europe. Similarly, SEPA seeks to implement standardized “railway tracks” in order to facilitate the exchange of euro credit transfers and direct debits across the continent, according to the EPC.

EPC Chair Gerard Hartsink during the webinar stated that European authorities originally envisioned that SEPA schemes would:


  • Make all euro payments domestic within SEPA

  • Eliminate differentiation between national and cross-border euro payments

  • Replace (eventually) national schemes for euro credit transfers and euro direct debits


Under the oversight of the European Central Bank (ECB), the EPC developed the following payment programs based on international guidelines (mainly ISO):


  • SEPA Credit Transfer Scheme (SCT)

  • SEPA Core Direct Debit Scheme (SDD Core)

  • SEPA Business to Business Direct Debit Scheme (SDD B2B)


EPC explained during the webinar that the payment schemes address business rules, including standards for data formats used to exchange messages (ex. SEPA: ISO 20022) and currency of funds exchanged (ex. SEPA: euro). In one webinar slide, the EPC stated:

“Migration to the EPC’s SEPA schemes does NOT imply migration to specific SEPA products and services or to a single payment system. The SEPA schemes provide a cooperative environment for banks by defining rules and standards for the execution of SEPA transactions that have to be observed by all. They allow for flexibility and contain optional features enabling banks to choose which features and services to add to core schemes. SEPA payment products offered to the customer are developed by individual or groups of banks operating in a competitive environment.”

On Nov. 1, an EU law went into effect that mandated all euro area banks be available for cross-border direct debit or SEPA Core Direct Debit. The legislation enables any consumer with a euro area account that allows euro direct debit payments at a national level to make cross-border payments by SEPA Direct Debit as well. Consumer bill pay and business payment collection can be more easily facilitated under the new law, advocated the EPC during the webinar.

As of Nov. 1, SEPA schemes had garnered the following number of bank participants: 


  • SCT: 4,489

  • SDD Core: 3,884

  • SDD B2B: 3,364


“The Commission and the European Central Bank… stress their support for the objectives set by the EPC…: That EU citizens, enterprises and public administrations should have the possibility to use SEPA credit transfer and SEPA direct debit payment instruments defined by the EPC,” said the European Commission and the European Central Bank (ECB) in a joint statement back in May 2006.

Yet the Commission in March and June 2010 released a “radically different SEPA vision,” according to the EPC. Gone, the EPC claimed, was the Commission’s decade-old vision for SEPA, in which the EPC’s SCT and SDD schemes would replace existing national euro payment systems.

The Commission in a discussion paper from earlier this year said it now envisions “multiple, interoperable, and ‘competing credit and direct debit schemes to emerge under the condition that they are compliant with essential requirements.'”

During the webinar, EPC Legal Support Group Chair Kevin Brown argued that a strategy centered on interoperability among payment schemes makes as little sense as the theory that different types of train tracks would encourage competition in the railway industry.

“The exact opposite would happen – train traffic would come to a grinding halt. An optimally efficient payment environment requires all banks of all bank customers to adhere to a net common scheme of rules and standards… Interoperability would require agreement at an extremely high level of detail to allow fully automated processing of payments across multiple schemes,” stated the EPC during the webinar.

The Commission’s newly-outlined strategy also included omitting definitive end dates for the replacement of current national euro credit transfer and direct debit schemes, as well as leaving the power to amend SEPA schemes with the Commission itself.

If EU lawmakers support the Commission’s approach, the EPC predicted during the webinar that payments innovation would be stifled, potential cost-saving opportunities resulting from the consolidation of cash management operations would be eliminated, and that the original vision of SEPA would need to be abandoned all together.

EPC presumed that the Commission’s change of heart came from the organization’s attempt to cater to a range of parties pursuing a variety of goals. In particular, the EPC noted that some EU Member States were against the concept of replacing long-standing euro credit transfer and euro direct debit schemes with a single set of SEPA schemes. Hartsink called Germany the biggest stumbling block and added that he felt it is impossible for the EPC to access what’s going on the capitals of EU Member States.

Brown also fired back against the Commission’s claim in its concept paper that “EPC has been granted a privately monopoly.” Pointing out that it was European regulators who authorized the EPC to develop a single set of SEPA schemes in the first place, Brown reinforced that migration to SEPA schemes does not equate to migration to certain SEPA products and services.

“It seems that Directorate General Internal Market and Services failed to make the case for market integration with Directorate General Competition – which is perhaps why the EPC is now being wrongly labeled a ‘monopoly,'” said the EPC during the webinar.

In addition, EPC emphasized many times throughout the webinar that they are a “not-for-profit” organization, and the power to mandate a timeline for integrating SEPA payment schemes lies with the Commission, not with the EPC.

Whether you believe the EPC is a monopoly or not, or concur with the Commission’s new outlook, much is at stake here for all of Europe. Across the 16 countries in the euro area in 2009, there were $15.7 billion credit transfers and $17.7 billion direct debits. The outcome of the SEPA debate would impact not only the 27 EU Member States, but Iceland, Liechtenstein, Norway, Switzerland, and Monaco as well. While the goal may remain a single euro payments area, ideas on how to get there continue to multiply. The Commission and EPC will likely need to come together to get the SEPA train back on the tracks.


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