What is SEPA? | What is a SEPA Credit Transfer (SCT)? | What is a SEPA Direct Debit (SDD)? | How will SEPA work? | What will SEPA mean for you? | European payments now and in the future | Albany and SEPA
The Single Euro Payments Area (SEPA) is a European Commission (EC) and European Payments Council (EPC) initiative that plans to remove the barriers to movement of cross-border electronic Euro payments. As a result of this initiative, the high costs presently associated with cross-border transfers hope to be brought into alignment with the costs of performing internal domestic electronic transfers.
The Payment Services Directive (PSD) which has started to be adopted by the member states, came from the EC and is enabling the legal framework to licence banks and payment service providers, and allow them to introduce European-wide payment initiatives for credit transfers, certain debit and credit card payments, pan-European Direct Debits or regular payments via Credit Cards.
The initial introduction of SEPA compliant cross-border schemes happened on 28 January 2008 with the introduction of the SEPA Credit Transfer, although take-up is still only 15% of potential. The delay in the introduction of the legal framework, and debates about inter-change fees and existing DD mandates, has resulted in the delay of a robust launch of SEPA Direct Debits.
The latest views are that the EU will impose a deadline of 2014 for the migration from legacy domestic payments to the SEPA payments.
The SCT is a cross-border non-urgent euro payment scheme. It allows transfer payments to be made between any SEPA country, including euro payments within the UK. Once the bank receives the instruction from the payer, the person being paid will receive the monies within 3 working days.
The SDD scheme initially rolled-out during 2010, will eventually enable Direct Debit originators to collect euro payments on any of the SEPA countries, including their own domestic DD using a single Direct Debit service rather than having to use the country specific Direct Debit Services that currently exist.
For Euro payments, there will be a range of options available to organisations, including:
At present, it now seems likely that there will be just a single Pan-European Automated Clearing House (PE-ACH) for processing all the Euro transactions. Additionally we are seeing several SEPA compliant regional ACHs (Automated Clearing Houses or Clearing Settlement Mechanisms) - such as the Dutch / German / Italian - Equens and the UK's VocaLink (which is working in partnership with the Swedish ACH)) which will operate alongside the Euro Banking Association (EBA) purpose built PE-ACH.
In addition, banks will have bilateral file exchange arrangements in place with partner banks to handle particular concentrations. These 'super CSMs' will have competitive advantages in terms of pricing, efficiency and additional functionality, such as direct corporate access.
The impact on UK internal domestic payments (such as Direct Credits and Direct Debits) will be limited while the UK continues to trade in Pounds Sterling, with payments continuing to be submitted via Bacstel-IP to VocaLink.
However, the main attraction for UK based organisations is the ability to make cheaper, and in time faster, payments in Euros. This will prove useful for transactions such as Supplier Payments and Pension and Salary payments into the Euro countries, or for companies wishing to collect Direct Debits centrally in Euros, such as insurance premiums, credit card repayments, mobile phone bills, and magazine subscriptions.
The use of Bank Identification Codes (BICs) and International Bank Account Numbers (IBANs) are mandatory for Euro cross-border payments. Banks are able to reject payments from corporate organisations that do not include valid BIC and IBAN data. This, together with the associated rising costs and penalties of submitting payments with incorrect BIC and IBAN data, necessitates the need for validation at an early stage of the funds transfer process.
Albany's validation solution performs fast, accurate BIC and IBAN validation at the touch of a button, significantly reducing error rates, meaning fewer bank charges and faster completion of funds transfers.
Albany is working with all the key organisations currently involved in the SEPA initiative. As an Associate member of the UK Payments Council, a SWIFT Solution Partner and a member of the Bacs Affiliates Interest Group, we are well placed to help drive forward this scheme. We are also working closely with VocaLink, VISA, MasterCard, Equens, and EACHA together with all the major UK Banks and some of the major European banks, on issues relating to SEPA.
Albany is committed to ensuring that we are able to meet the ongoing needs of our customers for value-for-money international payments, as seen by its strategic alliance with Travelex Global Payments (a business division of Travelex), to deliver a secure and reliable cross-border payments solution that handles all major trading currencies and not just Euros.
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