European Payments Council Launches Consultation to Expand EU Direct Payments

The European Payments Council (EPC), a nonprofit organization representing payment service providers (PSPs) that promotes the development of the Single Euro Payments Area (SEPA), has launched a consultation to expand the scope of SEPA payments beyond the Euro area.

The Single Euro Payments Area (SEPA) is an European Union integration initiative pursued by the EU institutions: the European Commission, the European Parliament, the Council, and the European Central Bank (ECB). A SEPA payment scheme enables funds (from a credit transfer) to be available in the recipient’s account within 10 seconds. Yet not all payments are completely harmonized in SEPA.

The proposed arrangement would enable international euro credit transfer payments between a payment account held at a PSP established in and/or licensed to operate in a country or territory included in the SEPA geographical scope, and an account held at a financial institution (FI) established in and/or only licensed to operate in a non-SEPA country or territory.

The SEPA geographic scope includes the 27 European members states, three countries from the European Economic Area (EEA) and six non-EEA countries. This proposal seeks to expand the benefits of SEPA payments, which includes fast and low-cost transactions to other PSPs outside this area.

The EPC represents 76 PSPs within the SEPA region, including most of the major banks in the region. Thus, despite being a private organization without any direct involvement in the adoption of any EU laws or regulatory initiatives, it has sufficient endorsement by the private sector to make some of its proposals a standard in the industry.

Read more: EU Banking Trade Group Presses The Issue On Instant Payments

This initiative may be part of a more comprehensive plan to redesign the payments landscape in Europe. A plan started by the European Commission in 2020 with a new Digital Finance Package, including a Retail Payment Strategy, that needs not only public support and new legislation, but also the involvement of the private sector.

One pillar of the EU strategy is to foster EU-wide cross-border instant payments, and the SEPA instant Credit Transfer Scheme will play an important role. The commission is considering passing legislation to compel countries to participate in the SEPA scheme, since not every EU country is currently participating. This would likely encourage more PSPs to join the SEPA scheme.

Another pillar of the EU strategy is to strengthen the euro’s position as a global currency making international money remittance server faster and more affordable. To achieve this goal, the commission is planning to support SEPA-like initiatives in other countries to join SEPA. The EPC’s proposal to extent SEPA payments to non-SEPA countries may very well fit in the Commission’s strategy to strengthen the euro and receive public support.

This is not the only private-led initiative supported by EU institutions to make the EU payment industry less reliant on U.S. card networks. In 2020, a group of 16 European banks launched the European Payment Initiative to create a pan-European payment solution leveraging the instant SEPA schemes. The group has grown to 31 banks and two payment processors, and is developing new standards in payments across all type of retail transactions including in-store, online and “peer-to-peer.” EPI is not focusing on developing the SEPA scheme, but on using it to develop new pan-European instant payment solutions which eventually could become the preferred option for EU consumers.

See also: Merchant Involvement in European Payments Initiative Has Been Less Than Satisfactory

These two initiatives from EPC and EPI are cementing the path for the EU’s initiatives and they are being complemented by new regulation, like the soon to be proposed PSD3 and enforcement actions to make the payment industry more open and competitive.

The EPC consultation will remain open until April 17 and after reviewing feedback from stakeholders, the EPC will consider concrete steps for the proposed arrangement.