The European Commission (EC) has set out proposed EU-wide end-date of 2012 for the migration of the old national credit transfers and direct debits to the Single Euro Payments Area (SEPA) instruments.

National credit transfers and direct debits will be phased out and the pan-European systems will take their place, 12 and 24 months respectively after the entry into force of the Regulation.

The EC said SEPA will reduce the costs of payments, increase competition and make cross-border payments as easy as domestic ones. The European Parliament and the Member States will now consider the proposals.

“We have a Single Market, many countries share a single currency and soon we will move to a single pan-European payment system in Europe,” commented internal market and services commissioner Michel Barnier. “It means that making payments cross-border will become as east as making them at home.
Consumers will only need one bank account and their payments will be faster, cheaper and safer. Businesses will benefit from one set of standards and much simpler processes. The proposal adopted today fixes end-dates to make this pan-European system a reality, hopefully as early as 2012.”

Data from the European Central Bank (ECB) shows that, as of October, only 9.6 per cent of all credit transfers in the euro area were executed using a pan-European payment instrument. Should this trend continue, SEPA’s full benefits and implementation would only be recognised after more than 25 years.
The proposed Regulation will ensure a quick and smooth migration, said the EC.

However, the European Savings Banks Group (ESBG) said it is disappointed by the proposal.

It said the EC’s long uncertainty over SEPA end-dates has contributed to the low acceptance of the schemes developed by the industry. The Group believes the accompanying impact assessment relies on “an outdated costs and benefits study”, using 2005 data, and that actualised data shows the societal benefits from SEPA could be as low as €23 per year per citizen.

Clarity as to the standards and technical requirements that have to be used is insufficient, triggering additional compliance costs for early adopters of pan-European payment instruments, and in this absence, interoperability remains a fantasy, with the ‘any scheme’ reachability obligation generating substantial costs for payment service providers.

The ESBG also said the ban for debtor banks to recoup direct debit transaction costs from counterparties, combined with the obligation to support more functionalities and the impossibility in many instances to charge debtors, is neither compatible with the principles of a market economy, nor with the BIS Core Principle VIII for Systemically Important Payment Systems.

“It is regrettable that this Regulation proposal – coming on top of two earlier pricing regulations and the non-harmonious transposition of the Payment Services Directive – will do little to further the foundations for an innovative and efficient internal market for payments,” commented Chris De Noose, managing director, ESBG. “To meet the challenges of a very competitive international environment the Commission should definitely resist the temptation to revert to a command economy when it comes to payments.”

Stephen Hawkes, product manager at Experian Payments, added that some actions are now necessary in order for banks and corporate to meet this deadline.

“As part of the migration to SEPA, banks are required to replace their dual payment infrastructures while corporate need International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) in order to initiate validate payment instructions, as the mandatory international ID for all payments.
Therefore, if corporates want to be ready for SEPA payments, they need to be able to collect their IBANs and BICs to update their customer and supplier databases. If domestic details are not updated by the set end-date, incorrectly formatted payments might lead to errors in transactions and additional costs. Unfortunately, obtaining the correct IBAN and BIC is up to the corporate and whilst many banks are happy to provide these details for their own customer accounts, most banks are reluctant to contact other banks in various countries, to obtain and generate the details.”

Hawkes added that banks should be communicating the changes to their customers to support them throughout the migration process and minimise correction and rejection charges of failed payments. “Ultimately, the more proactive the banks are, the more attractive they are for the corporate – a win/win situation for both parties.”

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