ECB and Bundesbank urge speed up of Sepa switchover

ATM cash SEPA.JPG

The European Central Bank and the German Bundesbank have warned that businesses are stalling on updating their payment systems in preparation for the switchover to the new EU-wide transfer and direct debit procedure, the Single Euro Payments Area (Sepa). EURACTIV Germany reports.

In its latest report, the ECB said that migration to the new system was progressing well for credit transfers but was late for direct debit.

According to the report, many companies had decided to delay the changeover until the last quarter of 2013, or even later. But the ECB warned that this approach created operational risks.

In addition, procrastination may affect the ability of companies to react to unanticipated developments which could crop up during the migration process.

Benoît Cœuré, member of the executive board of the ECB, said: “I have said this before and will repeat it: everybody has to be ready on 1 February 2014 or risk disruptions in their individual handling of payment orders."

February 2014 is the deadline established by European law for eurozone countries to migrate to the Sepa credit transfer (SCT) and Sepa direct debit (SDD) schemes.

“Since our first migration report, we have been emphasising the fact that both payment providers and users are responsible for being sufficiently prepared. And our message to them is still the same: don’t leave it to the last minute,” he added.

“Looking at the numbers, it is alarming,” said a statement from the German Bundesbank on Thursday (24 October). Sepa transfers in Germany during the third quarter made up only 14%, with Sepa direct debits only amounting to 0.68%.

“Now, a genuine sprint to the finish is required in Germany,” said Carl-Ludwig Thiele, a member of the Bundesbank’s executive board.

For the vast majority of citizens, not much will change. The account information which was required before (account number and bank sorting code) will be replaced by an international account number (Iban). The latter is primarily composed of a country code, a two digit verification number and the familiar bank sorting code and account number.

Private standing orders, such as those for rent, electricity and telephone bills will be converted automatically. Privately issued direct debits will also be automatically changed.

The real changes will be felt by businesses, municipalities and associations, who must comply with the changeover. “If a business is not Sepa-competent by the legally established migration deadline, liquidity bottlenecks and costs are likely to be caused by payments which are incorrect or processed late,” Thiele warns.

“This not only applies to those who are dragging their feet on Sepa migration, but also to their business partners, employees or customers.”

In Germany, roughly 25 million working-day transfers valued at €227 billion and around 35 million direct debits valued at €52 billion must be converted to the new system.

“Banks, businesses, associations and public coffers must be completely Sepa-compliant by 1 February 2014. That is the law," said Hartmut Koschyk, the parliamentary state secretary of the German federal finance minister.

"Consumers are given a transition period until February 2016, during which they are allowed to continue using the old account number and bank sorting code system in their principle bank.

“Exertions are still required [to meet the February deadline]. But I am confident that, in Germany, the payment transactions migration can be completed on time,” Koschyk said.

The implementation of the Single Euro Payments Area (Sepa), which seeks to introduce the same procedures and obligations across the EU for credit transfers, direct debits and payment cards, remains patchy across the EU.

A clear timeline specifies when the rules need to be implemented in all member states. For the euro area, the final deadline is 1 February 2014. The deadline for euro-denominated payments in non-euro area countries will be 31 October 2016, however.

However, even within the eurozone countries there are some doubts that full implementation will be possible by February next year. In Italy, for example, implementation has been slow.

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