What is SEPA?
SEPA stands for ‘Single Euro Payments Area’. It is an international system for standardising inter- and intra-country payments within the SEPA regulation zone. The countries affected by the SEPA regulation include the 27 EU member states plus Iceland, Norway, Switzerland, Monaco and Lichtenstein.
SEPA regulation compliance is compulsory for all banks and companies who wish to process payments by direct debit or credit transfer.
SEPA regulation covers €uro currency transactions only.
How do I prepare for SEPA?
If your organisation is a company that is already processing direct debits within the SEPA regulation zone, or may want to accept / process payments using direct debits, credit transfers or SEPA regulation compliant payment cards, you must migrate your payment processing systems to a SEPA regulation compliant platform. This can include migrating and enhancing any existing mandates on which you base direct debit transactions as these mandates will no longer contain SEPA regunation compliant information. The process can be time-consuming, costly and risky.
Sentenial, Origix Corporate, has a mature suite of modules that are already fully SEPA regulation compliant and in use by banks and companies all over Europe. Sentenial’s experience can help to ensure that end to end migration is as fast, efficient and painless as possible for banks, large corporates and SMEs. Migration projects have been implemented in as little as a week, allowing the corporate to continue business as usual, changing nothing in their existing systems.
As a consumer, you will not need to do anything to prepare for the SEPA regulation. Depending on the nature of any direct debits you already have in operation, you may be sent a letter confirming the migration of your mandate to the new SEPA regulation standard. Sentenial handles this communication for a number of companies and banks. In these letters, a Unique Mandate Reference (UMR) is included. This is, in simple terms, the lifetime identifier for that particular mandate. Not all companies will, or are required to, send these letters.
When will the European domestic direct debit schemes be phased out?
Since all SEPA regulation zone banks and corporates must be SEPA regulation compliant by February 2014, national legacy payments systems will be phased out after this date.
Will direct debits be the only SEPA regulation payment instrument?
No. SEPA regulation includes a set of rules, standards, procedures and requirements relating to
• SEPA direct debits (SDD)
• SEPA credit transfers (SCT)
• SEPA card framework (SCF)
What are SDDs for?
SDDs are an interbank payment mechanism for direct debit payments in euro, meaning that direct debits can be made from any domestic account to any receiver within any of the participating countries, including across borders with no additional cost or effort.
What are SCTs for?
SCTs are an interbank payment mechanism for one-off credit transfers in euro (e.g. similar to ‘bank transfer’ but with the addition that any account holder in the entire SEPA regulation zone is reachable with no additional cost or effort). All participating financial institutions must be able to complete the credit transfer with three business days. They must also be capable of reaching any customer.
What is the SCF for?
The SCF is a framework put in place to facilitate the development of SEPA regulation payments cards. These cards, unlike some domestic / legacy payments (e.g. debit) cards will allow customers to pay with one card anywhere within the SEPA regulation zone. The SCF defines a set of rules, standards and procedures that all participating providers must adhere to.
What is the difference between the SEPA regulation B2B and CORE schemes?
SEPA CORE SCHEME
Refunds: Debtors can recall any transaction during an eight week period from due date. This essentially gives the debtor a consumer-friendly, ‘no questions asked’, remedy. Debtors can also recall any unauthorized transaction during a 13 month period from due date and automatically expect a refund of any unauthorised payments. (From the EPC 016-06 CORE SDD version 6 rule book, a refund for an unauthorised SDD up to 13 months from settlement date would require Bank approval and might not be “automatic”. An unauthorised SDD within 8 weeks of the settlement date would be automatically refunded.)
Verification required: Only debtor verification is required.
Advance period for processing direct debits – First collection: 5 Days. Recurrent collections: 2 Days
Who does the SEPA Core scheme apply to? Consumers only.
SEPA B2B SCHEME
Refunds: A debtor is not entitled to a refund of an authorised payment. Unauthorised payments may still be recovered up to 13 months after the date of settlement.
Verification required: Debtor and debtor bank verification is necessary.
Advance period for processing direct debits – First collection: 1 Day. Recurrent collections: 1 Day
Who does the SEPA B2B scheme apply to? Business clients only.
What are the implications of the SEPA regulation?
All national domestic direct debit systems will be switched off and all direct debits will have to conform to the SEPA regulation standards. If your organisation relies on direct debits for automatic collection of payments, you will no longer be able to collect these payments.
What are the main benefits of the SEPA regulation?
• Corporates can receive payments up to 3 days quicker than in legacy systems. This particularly impacts on international payments.
• Collection of domestic and cross-border direct debits across 32 countries will facilitate efficiencies and cost reductions.
• Sentenial’s suite of SEPA products facilitates ‘reachability’ testing, validation & verification of debtor account details, reducing the possibility of payment requests failing due to error, sometime after contracts are agreed.
• Corporates will have the ability to determine the exact date of collection Corporates will be confident that all payments will be settled within a pre-determined time
• Faster settlement, meaning increased control over, and visibility of, payments and cash flow
• Corporates can now standardise their billing and payments systems, enjoying the benefits of standardisation and increased efficiencies of bulk processing.
• Complex payments systems in use in large corporates can be centralised and transformed using payment & collection factories or hubs and automated straight-through multi-bank routing.
• The number of rejects or exceptions will be reduced, meaning more effective payment collection and reduced resourcing needed for investigating anomalies.
• Straightforward reconciliation of payments received
• As national barriers in SEPA regulation will be removed, corporates will increasingly have access to new markets with the same standardised formats.
• Banks can leverage the efficiencies and advantages of the SEPA regulation to drive new business or reduce the cost of existing business processes.
• Banks can leverage their position in the SEPA regulation landscape to help corporate customers become compliant, with little effort, and leverage corporate relationships to maintain (or increase) them.
• Banks can help corporate consumers benefit from the efficiencies and cost reductions that SEPA regulation facilitates - without changing their existing legacy systems.
• Banks can creatively leverage SEPA regulation to offer new services to their customer base, such as eMandates; electronic signing for payment instruments related to contracts; verification and validation of debtors and accounts; enhanced cash management services.
• Fast, simple, automatic ‘No-questions-asked’ refund procedure.
• Consumers can use a single bank account to make faster, cheaper payments across all 32 SEPA regulation countries (the 27 EU member states plus Iceland, Norway, Switzerland, Monaco and Lichtenstein).
• SEPA regulation allows consumers to pay bills in SEPA regulation countries, facilitating international B2C contracts to be entered into with a high degree of confidence on both sides. This will drive competitiveness.
• Bank payment cards will not change, except that they will increasingly be accepted by merchants across the SEPA regulation zone, including for online payments and electronic mandates.