The worthy primary aim of the Single Euro Payments Area (SEPA) is to ensure that euro payments, whether domestic or cross border, are handled with the same level of service and at the same price. This is essentially the logical second phase of monetary union that saw the introduction of the euro currency notes and coins.

The European Central Bank (ECB) is seeking to transform fragmented national payments systems into a single payments area (SEPA), essentially making all euro payments domestic for European citizens and companies. SEPA promises users potentially lower costs and greater transparency of fees, but banks will lose revenue currently earned on cross-border remittances made through the various national payments systems. SEPA covers three main aspects; direct debits, credit transfers and card payments. From a payments perspective, the Direct Debits and Credit Transfers pose the largest challenges.

SEPA Direct Debits
SDD, a part of the overall Single Euro Payments Area initiative, is the payment instrument and scheme that by 2012 will have totally replaced currently existing domestic direct debiting schemes. SDD entails a new set of standards and formats as well as a set of strict rules governing relations between creditor and debtor, their banks, as well as between banks themselves. SDD covers all aspects of the direct debit lifecycle, but of primary concern are issues surrounding on-us and not on-us routing, timeline verifications, sophisticated mandate management, stop payments and processing of R-transactions (returns, refunds, reversals and rejections).
More information on SEPA Direct Debits

SEPA Credit Transfers
Compliance with credit transfers under SEPA is considerably less complex than the parallel direct debit scheme. Compliance covers initiation and receipt of credit transfers (originator and beneficiary banks), support of BIC and IBAN, support for UNIFI ISO20022 messages, exception management (R-transactions) and PE-ACH interfacing (STEP2). All this needs to be ready by the start of 2008. Many banks have already addressed, or are currently addressing SCT based on compliance with established EC directives on pricing and the fact that domestic credit transfers are similar to SEPA credit transfers.

However, developments are already underway to augment the standard SCT system with the launch of the Euro Banking Association’s “Priority Payments Scheme”. This enables urgent credit transfers to be completed end-toend within 4 hours as opposed to the standard 3 day execution for SCTs.
More information on SEPA Credit Transfers

A unified SEPA Approach - SDD With SCT
While basic SCT compliance can be readily achieved through upgrades to legacy
systems, a strategic solution to SEPA by combining SEPA Credit Transfers with
SEPA Direct Debits offers greater returns. Due to the SEPA timescales, and the
fact that SDD dates are slipping, SCT can be viewed as a precursor to the larger
overall SEPA compliance.

SDD and SCT contain many shared common business services such as accounting,
validations of BIC & IBAN, routing, etc. As a result, the SDD and SCT specific flows
and services that are unique are minimal; a combined SDD and SCT platform
offers higher ROI and lower TCO.

Single Euro Payments Area Brochure 1,0 MB
SEPA Direct Debits Brochure 932 KB
SEPA Credit Transfers Brochure 1,0 MB

Download SEPA white paper and the SEPA Direct Debits white paper

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