SEPA: Easier credit transfers but uncertain cost cuts


Since 28 January 2008, every credit transfer carried out in euros is processed in the same way across Europe, with identical procedures and the same timeframe, but at a cost that will remain different from bank to bank “for a certain time”.

The European Commission launched the first step of the Single Euro Payments Area (SEPA) yesterday. SEPA is designed to harmonise all credit transfers carried out in euros regardless of borders (see EurAcitv 28 January).

This move is a direct consequence of the adoption of the euro, which since 2 January 2002 has been the only currency used for cash payments across the eurozone, irrespective of the country.

The European Commission has presented SEPA as a development that could allow “net benefits to payment markets” of 123 billion euros in six years, according to a study published yesterday, carried out by Capgemini on behalf of the Commission.

Brussels identifies benefits for consumers, business, public administration and banks thanks to the new common payment system. Consumers will be able to have a single bank account, used for all their financial operations in euros across Europe. In addition, all the operations will take a maximum of three days, regardless of the country of destination. At the moment, a range of procedures are either prohibited or more complex if carried out in a different country.

The Commission also hopes to see a decrease in the cost of operations covered by SEPA. Brussels thinks that making the use of services offered by banks easier regardless of the country concerned will allow customers to make the best choices and force banks to become more competitive and cut costs.

But price differences for credit transfers are not expected to change overnight, according to the banking sector. “Lowering prices is not the objective. Our target is to work in a competitive environment,” said the general manager of the Italian Banking Association (ABI), Giuseppe Zadra, whose country is one of the most expensive in Europe for small consumer operations, such as money withdrawals or credit transfers.

The Commission is sure that the new system will bring bank costs down: “SEPA will allow banks to realise huge operational savings through product standardisation and channel simplification,” reads one of the press releases issued yesterday by the EU executive body.

“We had to bear huge investments for SEPA, whose returns will be slow and uncertain,” pointed out Zadra. In a letter to Commission President José Manuel Barroso, the European Credit Sector Association (ECSA) stressed the necessity of shared responsibility with other stakeholders during the next two phases of SEPA.

"SEPA will strengthen competition, improve efficiency and offer greater economies of scale. Consumers will benefit from lower prices," said Internal Market Commissioner Charlie McCreevy  at the official launch of SEPA. 

"There will also be pressure on the revenue of banks. I know that this is a challenge for the banking industry. But I am confident that banks will take up this challenge, improve the efficiency of payments, make use of the scale economies and use the opportunity of a bigger European payments market," McCreevy added.

"Banks have not shied away from their responsibilities and commitment and will continue to do so," declared Michel Pébereau, President of the European Banking Federation and Chairman of BNP Paribas. "But they are not solely responsible for the future final achievement of SEPA: all stakeholders must be actively committed and information and cooperation are key if SEPA is to fulfil its role as a competition enhancer", he added. 

"All these projects, although not yet fully implemented, will eventually benefit every single European citizen," said Xavier Durieu, Secretary General of EuroCommerce, the association which represents six million EU retail companies.

"Today's launch is indeed an important step, but we believe that it is definitely too early to celebrate," said Gerhard Huemer, Director for Economic and Fiscal Policy at UEAPME. "As it stands today, SEPA is simply not suitable for everyday use, all the less so for SMEs that typically process only a few cross-border payments per year and will find the new system rather unclear, too burdensome and possibly more expensive than what they are used to," he said.

SEPA seeks to extend the possibilities offered by the common European currency to electronic and non-cash payments, which at the moment are only possible in Europe under a range of different national schemes that make them more complicated and less reliable.

The second step in the introduction of SEPA will be the launch at the end of 2009 of a common instrument for direct debits, after the full implementation of the Payment Services Directive, which constitutes the necessary legal framework to apply the foreseen measures. Direct debit payments are executed by a bank automatically following instructions from the customer – for example, monthly rent paid to the same bank account.

The final phase of SEPA's entry into force will be the introduction by the end of 2010 of a European credit card, featuring a microchip and a common security system. The issuing companies will remain the same, but the requirements for the new cards will be harmonised across Europe.

  • 1 Nov. 2009:  Deadline for the introduction of a SEPA payment instrument for direct debits.
  • 1 Nov. 2009: Deadline for the implementation of the Payment Services Directive. 
  • 31 Dec. 2010: Deadline for the replacement of current credit cards with SEPA-compliant cards.

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