EU close to agreeing single payment area switchover


A consensus is emerging among the EU's institutions on setting a deadline for banks' switchover to the Single Euro Payments Area (SEPA) system. However, divisions persist among banks, insurers and others regarding certain features of the proposal, notably on the modality of the switch and various national waivers.

Senior officials and politicians representing the Hungarian EU Presidency, the European Parliament, the German Finance Ministry and the European Commission seemed ready to set a deadline for the SEPA switchover at a panel debate organised by Deutsche Bank yesterday (12 April).

The panellists agreed that the current system of voluntary switchovers from existing transfer systems to SEPA (see 'Background') would not be sufficient and that a binding deadline was needed.

This would present certain costs for companies. But Elemer Tertrak, a senior official in the Commission's internal market department (DG MARKT), asserted that a switch would be better than maintaining the costs of the existing system. "Better a painful end than endless pain," he said.

They noted that even non-eurozone members Hungary, Poland and the United Kingdom supported SEPA, either because it would help their banking sector or because they aspired to be eurozone members.

Finnish centre-right MEP and European Parliament rapporteur on SEPA Sari Essayah (European People's Party) was also present. Her draft report, which should be formally presented next week, makes a number of changes to the Commission's initial proposal.

These include combining the two deadlines for switching over for credit transfers and direct debit into a single combined deadline (24 months following the directive's entry into force). 

According to experts, numerous hurdles need to be passed before the directive can be finalised. These include amendments to be submitted by the Parliament's economic affairs committee and examination by the member states.

However, a political consensus should emerge over the next six months ahead of a vote on the legislation in the Parliament plenary in September.

Points of contention and divisions among stakeholders

There are numerous points of contention that remain to be debated and whose outcome is uncertain.

There is particular nervousness regarding the role of Germany, because the country is particularly attached to its existing direct debit transaction system, known as 'ELV'. Essayah's report would shorten the waiver for the phasing out of ELV from five years to three.

A representative for German insurers told EU officials at the event that the switchover date was too soon and should be pushed back.

Similarly, Dr. Rolf Wenzel, a senior official in the German Finance Ministry, argued that the switchover deadline should be pushed back to 2016, saying, "it's not that far away, let's get real here!"

However, not all German interest groups were so hostile. Deutsche Bank itself, which has already made the switch to SEPA while maintaining existing systems at significant cost, would like the switchover deadline to be as soon as possible.

Another issue is the gradual phasing out of multilateral interchange fees ('MIFs'), a fee charged for transactions that banks in some countries rely upon for income.

A representative of the European Association of Cooperative Banks urged EU officials not to do away with MIFs. Essayah's report would gradually phase out MIFs over a seven-year period to give banks time to adapt their business models.

Other concerns include consumer rights, namely regarding data protection, privacy and the security of pan-European transfer payments. MEPs are likely to take a keen interest in these matters. There is fear among some in the industry that one of these issues might lead a member state or consumer groups to oppose the legislation.


The Single European Payments Area (SEPA) is an initiative to create a zone in which all electronic payments are considered domestic.

Discussions on SEPA began in 1999 with the adoption of the euro. It was launched in 2008 and was supposed to be adopted by banks and corporations voluntarily.

Proponents claim SEPA, by replacing 32 different payment systems currently in operation in the EU, will ease cross-border payments, lead to savings of some €123 billion per year and provide substantial benefits for e-commerce and tourism.

However, to this day, only about 15% of credit transfer operations and less than 1% of direct debit operations are done through SEPA.

While significant savings could be achieved through 'network' effects if all banks switched over, they are reluctant to take on the costs of the initial switchover.

Indeed, SEPA can be an additional administrative and financial burden for a bank if it must maintain old systems in parallel.

In December 2010 the European Commission made its proposal to establish binding deadlines for the replacement of existing transfer systems with SEPA.

  • 19-20 April 2011: Presentation of Essayah's draft report on SEPA.
  • 16 May 2011: Deadline for amendments.
  • 27 June 2011: Vote in the ECON committee.
  • Sept. 2011: Vote in plenary session.
  • 2013-2014: Planned switchover to SEPA.
  • 2013-2018: Planned phase-out of waivers.

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