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THE SINGLE EURO PAYMENTS AREA (SEPA)

Banks and their corporate customers are about to enter an era of profound global business change.

In January 2008, foundations were laid for a Single Euro Payments Area (SEPA [1]) – a process that aims to deliver harmony in all financial transactions across Europe, and create the conditions for much greater standardization in the movement of money across the world. With this note, lets take a insight view of SEPA.

“The Single Euro Payments Area (SEPA) will be the area where citizens, companies and other economic actors will be able to make and receive payments in Euros, within Europe, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of their location.”

What is all the fuss about SEPA?

As its well known, Europe has had a common currency and monetary policy since the Euro was introduced in 1999 and Since 1 January 2002, consumers have been making cash Euro payments everywhere in the Eurozone.However, non-cash payments between countries - mainly credit transfers, and credit and debit cards have been expensive and complicated to transact, and a barrier to European monetary integration. There is currently no robust mechanism for a direct debit
between countries.

Therefore, The Single Euro Payments Area (SEPA) project is designed to eliminate national differences in payment instruments and processing infrastructures in Europe,and harmonies fees for cross-border and domestic Euro transactions.

SEPA Journey

It all started in the year 2002 as an initiative to transform European banking Infrastructure by creation of a European Payments Council (EPC). The purpose of such initiative was to define new rules and frameworks and simplify cross border complex payments process across Europe. This project aimed at achieving harmony between national and international payments in non-cash mode. European banking industry used to face severe losses in the process of cross border transactions. This led the banks to create the EPC.

SEPA aims at providing a common platform for all the associated members to make and receive payments in a single currency (i.e. euro) within Europe irrespective of their base location. SEPA project involves key members like European Commission (EC) and European Central Bank (ECB) supported by the European Payment Council (EPC).

About European Payments Council (EPC)

It is a European governing body, which consists of more than 50 banking institutions formed to standardize the payments mechanisms in Europe. It is the decision-making and coordinating body, which is responsible for issues related to payment systems in the European Banking industry.

Mission SEPA

SEPA Project

As per website [1] note, SEPA implementation schedule was split into three (overlapping) phases from a banking perspective:

Therefore this third phase is more meaningful to corporate who are running there accounting system in ERP and they must be make sure they should not impacted by product limitation and avoid penalties as there is Europe wide mandatory requirement for non-compliance. These penalties would be leveled for each individual payment, which would be substantial across 16 countries.

SEPA Consist of:

SEPA coverage area

As SEPA will be introduced on a phased basis. Thirty-one countries are currently committed to SEPA: the 27 EU member states, the three other European Economic Area countries (Norway, Iceland and Liechtenstein) and Switzerland.[source Website]

Currently only 16 counties under coverage area.

What are the different payment Instrument that cover in SEPA

There are four types of payment Instrument

  1. SEPA Credit Transfer
  2. SEPA Direct Debit
  3. SEPA Card
  4. SEPA Cash

Standardization -Addressing the SEPA schemes Requirements

The SEPA payment platform supports different schemes for both credit transfers and direct debits.

New schemes have been developed for credit transfers and direct debits that describe the technical and functional protocol for exchanging credit transfers and direct debits between two banks using formats and procedures. The formats are based on the ISO 20022 XML standard developed by SWIFT [2].

SEPA requires common information (‘data elements’) for SCTs and SDDs, outlined in the SEPA Credit Transfer Rulebook and SEPA Direct Debit Scheme Rulebook respectively.

SEPA within ERP

SEPA will make it possible for ERP systems to be better integrated and to communicate better with the bank.

SEPA@Oracle [3]

SEPA support is required in Oracle in these products;

Out of these EBS support started a few days back, which will be discussed in other post.

Possible changes with SEPA

Further References

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#1 Pingback By A bit on SEPA – IBAN & BIC | OracleApps Epicenter On September 22, 2008 @ 4:39 pm

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