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Payment instruments

The SEPA project focuses on three payment instruments: credit transfers, direct debits and cards. The European Payments Council (EPC) has developed new payment schemes for credit transfers and direct debits. These schemes are defined in rulebooks that cover the rules, practices and standards applicable to the new SEPA payment instruments. For card payments, the EPC has established a framework which the industry needs to adapt to in order to comply with SEPA. A common feature of all three payment instruments is the need for a clear separation between schemes (rules, practices and standards) and processing infrastructures.

In addition to the new payment instruments, SEPA also aims to harmonise the handling of cash. In this context, the term Single Euro Cash Area (SECA) is used.

Credit transfer
Direct debit
Cards
Cash

Credit transfer

The SEPA credit transfer (SCT) scheme defines common rules and procedures for banks and other participating payment institutions regarding credit transfers in euro (and is therefore called an “interbank” payment scheme). The scheme defines a common service level and the maximum time frame for processing SEPA credit transfers. Banks must adhere to these minimum requirements. The SCT scheme was launched on 28 January 2008.

Features

What is a credit transfer?
A payment initiated by the payer. The payer sends a payment instruction to his/her bank. The bank moves the funds to the receiver’s bank. This can happen via several intermediaries.

SEPA-wide reachability – any customer can be reached.
The full amount is credited. Any fees should be charged separately to increase transparency for the consumer.
Maximum settlement time is two business days (one day from 2012).
IBAN and BIC are used as account and bank identifiers.
Rules for handling rejected and returned payments.

Please consult the SCT Rulebook for further details:

SEPA Credit Transfer Scheme, European Payments Council (October 2009)

Use of SEPA credit transfers

The Eurosystem compiles indicators on the use of credit transfers in the euro area as a whole and at national level. In addition, a number of non-euro area countries provide data on a voluntary basis. more

Direct debit

The SEPA direct debit (SDD) scheme defines common rules and procedures for banks and other participating payment institutions regarding direct debits in euro (and is therefore called an “interbank” payment scheme). The scheme defines a common service level and the maximum time frame for processing SEPA direct debits. Banks must adhere to these minimum requirements. The SDD scheme was launched on 2 November 2009.

What is a direct debit?
A transfer initiated by the receiver via his/her bank. Direct debits are often used for recurring payments, such as utility bills. They require a pre-authorisation (“mandate”) from the payer.
Direct debits are also used for one-off payments. In this case, the payer authorises an individual payment.

Features

SEPA-wide reachability – direct debits can be made in favour of any receiver.
Covers both recurrent and one-off payments in euro.
IBAN and BIC are used as account and bank identifiers.
Rules for handling rejected and returned payments.

In addition, the European Payments Council has developed a business-to-business (B2B) direct debit scheme. It is largely based on the core SDD scheme, but it includes specific features for payments between two businesses. In addition, the introduction of a direct debit scheme with a pre-defined debit amount is planned for 2010 (“Fixed amount direct debit scheme”).

Please consult the SDD rulebooks for further details

SEPA Core Direct Debit Scheme, European Payments Council

Use of SEPA direct debits

The Eurosystem compiles indicators on the use of direct debits in the euro area.. more

Cards

The European Payments Council has developed a set of high-level principles for SEPA card payments. Issuers, acquirers, card schemes and operators will have to adapt to them. The principles are referred to as the SEPA Cards Framework (SCF).

What is a payment card?
The two main types are:
Debit cards - allow the cardholder to charge purchases directly and individually to an account.
Credit cards - allow purchases within a certain credit limit. The balance is settled in full by the end of a specified period. Alternatively, it is partly settled. The remaining balance is taken as extended credit on which the cardholder must pay interest.

Features

Cardholders will be able to pay with one card all over the euro area (limited only by brand acceptance on the part of the merchant).
Merchants will be able to accept all SEPA cards from a single terminal.
Cards and terminals will need to be based on EMV technology.
Payment card processors will be able to compete with each other and to offer their services throughout the euro area. This will make the market for processing card payments more competitive, reliable and cost-efficient.

Please consult the SCF and “The Eurosystem’s view of “SEPA for cards”” for further details:

SEPA Cards Framework v2.1, European Payments Council, download (December 2009)
The Eurosystem’s view of “SEPA for cards” (November 2006), de el en es fi fr it nl pt sl sv

Implementation of the EMV specifications

The Eurosystem compiles indicators on the level of implementation and use of EMV for cards and terminals in the EU, the euro area and at national level. more

Compliance for card schemes

The Eurosystem has defined Terms of Reference for the SEPA compliance of card schemes. Those Terms of Reference are based on the criteria contained in the SEPA Cards Framework (developed by the European Payments Council) and the criteria included in The Eurosystem’s view of a “SEPA for Cards” of November 2006. more

Cash

The smooth operation of payment systems requires a mix of payment instruments, including cash.

Who issues banknotes?
In the euro area only the ECB has the right to authorise the issue of banknotes. The national central banks of the euro area put them into circulation by providing them to the banking sector. Banknotes are mainly distributed to the public via ATMs.

The Single Euro Cash Area (SECA) is already a reality from a consumer perspective. In order to create SECA for professional cash handlers as well, the ECB has agreed on a number of measures with a view to contributing to a fair competitive environment regarding the Eurosystem’s cash services. These measures affect, in particular, the banking industry and cash-in-transit companies.

In February 2007 the Governing Council of the ECB approved the timetable and a roadmap for further convergence of national central bank cash services in the medium term.

The objective is to allow the different stakeholders (for example banks, cash-in-transit industry and retailers) – in particular those with a lot of cross-border cash activities – to fully benefit from the common currency (in all euro area countries) and to achieve a fair competitive environment.

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