SEPA Elements
SEPA is supported by the European Payments Council (EPC) who, with the backing of all participating countries’ governments, banking industry and customer stakeholders, have defined new rules and standards critical to the development of SEPA.
The EPC has put in place simplified sets of rules, technical standards and business practices to be adopted by all participating countries.
The five crucial elements which go to make up SEPA are:
SEPA Credit Transfer Scheme (SCT):
The SCT scheme is an inter-bank payment scheme defining a common set of rules and standard procedures for credit transfers in euro. In January 2008, more than 4,300 banks (representing roughly 95% of payment volume in Europe) took the historical first step to start SEPA by launching the SEPA Credit Transfer Scheme (SCT) for euro payments.
The scheme ensures a common level of service within the participating countries. All participating financial institutions must provide the service in a specified timeframe, with the maximum settlement time being three business days. They also must be capable of reaching any customer. The new bank identifier codes, BIC and IBAN, must be used, and there is no limit on the value of payments involved. A comprehensive set of rules for rejected and returned payments is provided.
SEPA Direct Debit Scheme (SDD):
The SDD scheme is an interbank payment scheme defining a common set of rules and standard procedures for direct debits in euro. The scheme ensures a common level of service within the participating countries. All participating financial institutions must provide the service in a specified timeframe — settlement time is five business days for the first payment, and two business days for recurring payments.
Financial Institutions must also provide SEPA-wide reachability, meaning that direct debits can be made from any domestic account to any receiver within the participating countries. For example, an Irish customer with a holiday home in Spain may now pay all utility bills relating to the Spanish property from one domestic account in Ireland. Or foreign workers in Ireland may have their salaries paid directly into their domestic account, eliminating the need to open many different accounts.
The new SDD scheme provides for both recurring and once-off payments in euro, allowing a customer to make a once-off major purchase, such as a car and pay by direct debit. The new bank identifier codes, BIC and IBAN, must be used, and a comprehensive set of rules for rejected and returned payments is provided.
SEPA Cards Framework (SCF):
The SCF is a set of high-level principles which has been put in place to govern SEPA card payments which all participating card issuers, acquirers, card schemes and operators must adhere to.
The SCF allows customers to pay with one card anywhere within the euro area (limited only by brand acceptance by merchants). It also provides for greater competition among payment card processors and enhances reliability and cost-efficiency.
Single Euro Cash Area (SECA):
The European Central Bank (ECB) has exclusive right to authorise the issue of banknotes within the euro area. In order to create a SECA for professional cash handlers, the ECB has agreed a number of measures aimed at providing a fair and competitive environment regarding Eurosytem's cash services.
All participating financial institutions will be involved in this process, to provide a smoothly operating service in relation to delivering cash to the end user. It is important to note that within Ireland, huge effort has gone in to reducing the amount of cash in general use, with the objective of creating an electronic payments-based society, which will both improve national competitiveness and reduce crime. To learn more, visit our NPIP section.
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