SEPA – taking the rough with the smooth

As of next year, citizens and businesses in the eurozone should technically be able to make and receive cross-border payments as easily and at the same cost as in their own country.

The Single Euro Payments Area (SEPA) seeks to remove obstacles to cross-border payments by introducing instruments for credit transfers, direct debits and debit card payments. It is underpinned by the payment services directive, which sets out the legal framework for the system.

The system will at first be focused exclusively on the eurozone, but other member states and non-EU countries Iceland, Liechtenstein, Norway and Switzerland are also adopting SEPA standards and practices with a view to longer-term integration.

There are two main deadlines for the project. It is expected that harmonised cash and card services for citizens and businesses will be available in the eurozone from the beginning of 2008, with complete transformation of national systems from 2010 onwards.

The introduction of SEPA is unlikely to be smooth. Member states and banks are expected to experience some teething problems next year. A study published this year by UK-based research firm Coleman Parkes revealed that less than 30% of the 101 retail banks questioned have a full plan in place for the migration of operations from national to international systems. More worryingly, 78% of those questioned admitted that they were doing the bare minimum to meet requirements.

"It’s probably not going to be a big bang moment," says an official from the European Commission. "It will evolve over time. Everything seems to be on track." The Commission, the European Central Bank and the European Payments Council will celebrate the launch of SEPA in Brussels on 28 January.

As of next year, citizens and businesses in the eurozone should technically be able to make and receive cross-border payments as easily and at the same cost as in their own country.