SEPAIntroductionThe introduction of the euro has helped to make cash payments anywhere in the euro area as easy as within domestic countries previously. However, it was still not so easy to pay for goods or services electronically in another euro area country, for example with a bank debit card. Furthermore, when an individual wants to transfer money from his home bank account to an account in another euro area country, the payment could take much longer, and sometimes the beneficiary did not get the full amount.The Single Euro Payments Area (or SEPA for short) is where more than 500 million citizens, over 20 million businesses and European public authorities can make and receive payments in euro under the same basic conditions, rights and obligations, regardless of their location. Having a common currency is no longer enough in a digitalised payment environment. To ease the usage of a common currency would require further initiatives. The political drivers of the SEPA initiative - EU governments, the European Parliament, the European Commission and the European Central Bank (ECB) - have focused on the integration of the euro payments market. Since then, the political drivershave called upon the payments industry to bolster the common currency, by developing a set of harmonised payment schemes and frameworks for electronic euro payments.As of February 2014, SEPA consists of the 28 EU member states, the 4 members of theEFTA (Iceland,Liechtenstein,NorwayandSwitzerland),MonacoandSan MarinoHow SEPA worksThere are two milestones in the establishment of SEPA:Pan-European payment instruments for credit transfers began on 28 January 2008;direct debitsanddebit cardsbecame available later. By the end of 2010, all present national payment infrastructures and payment processors were expected to be in full competition to increase efficiency through consolidation and economies of scaleTheEuropean Commissionhas established the legal foundation through the directive of payment services (PSD). The commercial and technical frameworks for payment instruments were developed by the European Payments Council (EPC), made up of European banks. The EPC is committed to delivering three pan-European payment instruments:1. Credit transfers:SCT SEPA Credit Transfer2. Direct debits:SDD SEPA Direct Debit. Banks began offering this service on 2 November 2009. 3. Cards:SEPA Cards FrameworkSEPA clearance is based on theIBAN (International Bank Account Number) bank identification and theSWIFT-BIC(Society for Worldwide Interbank Financial Telecommunication-Business Identifier Codes)bank identifier. Domestic transactions are routed by IBAN; earlier national-designation schemes will be abolished by February 2014, providing uniform access to the new payment instruments.SEPA guarantees that euro payments are received within a guaranteed time, and banks are not allowed to make any deductions of the amount transferred, introduced by a regulation in year 2001.Banks and payment institutions still have the option of charging a credit-transfer fee of their choice for euro transfers if it is charged uniformly to all EEA participants, banks or payment institutions, domestic or foreign.This is relevant for countries which do not use the euro; domestic transfers in euro by consumers are uncommon, and inflated fees might be charged. Sweden and Denmark have legislated that euro transfers shall be charged the same as transfers in their own currency; which has the effect of giving free euro ATM withdrawals, but charges for ATM withdrawals in other currencies used in the EU.The integration of a multitude of existing national euro credit transfer and euro direct debit schemes into a single set of European payment schemes is a natural step towards making the euro a single and fully operational currency. Creating a SEPA for cards aims at ensuring a consistent customer experience when making or accepting payments with cards throughout the euro area. The SEPA programme seeks to incentivise increased use of electronic payment instruments, while reducing the cost of wholesale cash distribution.BenefitsSEPA made all electronic payments in the euro area as easy as cash payments. Consumers can make fast and secure transfers between bank accounts anywhere in the euro area. And if an individual is shopping abroad, he can also use his bank debit card to make a payment in euro, as he would in his home country. . Consumers can rely on a single set of euro payment instruments throughout SEPA: one bank account, one bank card, one SEPA Credit Transfer(SCT) and one SEPA Direct Debit (SDD). Moreover, customers will enjoy benefits resulting from increased competition in the payments market.SEPA also means better banking services for all: transparent pricing, valuable guarantees ensuring that payments are received promptly and in full, and banks assuming responsibility if something goes wrong with payments. SEPA benefits is not limited to individual consumers, but also to businesses and public administrations.Once SEPA is achieved, it will be possible to exchange euro payments between any accounts within SEPA as easily as it is within national borders today.The implementation of innovative and competitive SEPA payment services translates into efficiency gains for businesses and public administrations. Common standards, faster settlement and simplified processing will improve cash flow, reduce costs and facilitate access to new markets. The advantages of the changeover are manifold, and will benefit everybody involved: there is cost-cutting potential mainly for companies operating throughout Europe as well as authorities; there will be a wider choice of payment services providers, faster and more efficient processes as well as greater transparency for consumers. Over the medium term, lower fees can also be expected in high-price markets. According to Capgemini calculations dating from 2008, a speedy changeover to SEPA could create added value for the economies of Europe to the tune of between EUR 123 billon and EUR 362 billon over a period of six years.Other issuesEfficiency gains for the economy as a whole, however, can only be achieved if SEPA and the Payment Services Directive (PSD) are fully implemented across the entire SEPA territory. Particularly under identical EU-wide competition conditions can payment providers throughout the single market compete for customers with their respective price/performance offers. Moreover, protracted parallel operations of SEPA and the national systems will saddle users and suppliers with unnecessary and higher costs. The changeover should therefore take place within the next two to three years, at the latest. Reasonable transition periods should be applied to allow customers and banks to get used to the adjustments in domestic payment transactions.The impact of SEPA however, transcends monetary policy and payment services. The European Commission expects the legal and technical SEPA harmonisation exercise to streamlinebusiness processes by replacing paper-based procedures with standardised electronic solutions such as e-invoicing, for example. These objectives are also set out in the European Commission Communication'A Digital Agenda for Europe'. 'The Digital Agenda for Europe' defines the key enabling role that the use of Information and Communication Technologieswill have to play if Europe wants to succeed in its ambitions for 2020. 'The Digital Agenda for Europe' is one of seven flagship initiatives of the European Commission's'Europe 2020 Strategy'.Referenceshttp://ec.europa.eu/finance/payments/sepa/index_en.htmhttp://www.europeanpaymentscouncil.eu/index.cfm/about-sepa/sepa-vision-and-goals/http://www.europeanpaymentscouncil.eu/index.cfm/sepa-customers/sepa-benefits-for-customers/https://www.dbresearch.com/servlet/reweb2.ReWEB?addmenu=false&document=PROD0000000000261960&rdShowArchivedDocus=true&rwnode=DBR_INTERNET_EN-PROD$BANKEN&rwobj=ReDisplay.Start.class&rwsite=DBR_INTERNET_EN-PRODhttps://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000244256/SEPA%3A+Changing+times+for+payments.pdfhttps://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000191004/Payments+in+Europe%3A+Getting+it+right.pdf