Payment systems

The Single Euro Payments Area: SEPA

Since the introduction of euro banknotes and coins on 1 January 2002, it is possible to make cash payments in the euro area in a common currency with the same convenience and simplicity as these transactions were carried out with before in the respective national currencies.

However, to enable the introduction of the euro as the common currency to be complete, it was necessary for individuals and companies to be able also to make their payments throughout the euro area without having to use cash. That meant searching for a formula to make it possible to issue and receive payments from a single account in any place in the area with a single set of payment instruments so that all transactions (domestic and cross-border) offer the same conditions of ease, efficiency and security. To that end, the project to create a Single Euro Payments Area (SEPA) was devised. Under a geographical perspective, SEPA extends to all EU member states, as well as Iceland, Liechtenstein, Monaco, Norway, San Marino and Switzerland.

The objective of SEPA is not only to improve euro payment processes between countries, but also to develop common instruments, standards, procedures and infrastructures. Thus, in January 2008, the SEPA Credit Transfer was launched, followed in 2009 by the SEPA Direct Debit. Since then, the legacy credit transfers and direct debits were gradually migrated to the European instruments, culminating the process in 2014.

The other payment instrument on which the SEPA project has focused on are payment cards. In this case, the SEPA objective is removing pre-existing legal, operational and business barriers, so that the pan-European interoperability of the instrument is ensured; that is, so that its use is not limited by geographical constraints.

One of the main promoters of the project from a practical point of view was the European Payments Council (EPC). As the decision-making body and coordinator for the European banking industry in this area, it has taken on a central role in defining the new instruments and the standards necessary to guarantee efficiency and security for payments in SEPA.

In the field of payment cards, the European Cards Stakeholders Group (ECSG) is actively working in this domain. Among others, it is tasked with the maintenance and development of the SEPA Cards Standardisation Volume (known as the Volume), in which the European guidelines on standardization, interoperability and security are defined.

Meanwhile, both the central banks and the European Commission have worked in close collaboration with other key players in this initiative, thereby contributing to the elimination of possible technical, local and commercial obstacles that could exist, while also providing support to the general objectives of SEPA.

As the implementation of the SEPA project moved forward, its governance aspects also evolved. In this sense, the SEPA Council, which was established in 2010 and contributed to achieve an effective implementation of SEPA in Europe through a proper representation for users and payment service providers, was replaced in December 2013 by the Euro Retail Payments Board (ERPB). The ERPB was established under the chairmanship of the European Central Bank (ECB) with the aim of contributing to foster the development of an integrated, innovative and competitive euro retail payments market in the European Union. ERPB members include representatives from the supply and the demand side, as well as the European Commission, the ECB and the national central banks.

Given that the ERPB work demands a complement in each national community, the National Payments Committee was set up in Spain in November 2014, as a meeting point for the market.

Finally, in the area of community legislation, it is worth noting a set of initiatives that have been decisive in moving forward the development and consolidation of SEPA:

  • The Payment Services Directive, enacted by Law 13/2009 on Payment Services, established a standardised set of rules applicable to all payment services provided in the European Union. This regulation was replaced by the EU Directive 2015/2366 (known as PSD2), in place since January 2016.
  • Regulation EC 924/2009 (amended by Regulation 260/2012), which establishes equality in the fees charged for domestic and equivalent cross-border payments in euro, except cheques.
  • Regulation EC 260/2012, which establishes deadlines for migration to the SEPA instruments by setting a series of technical and business requirements for credit transfers and direct debits in euro.