RegionsEEAThe SEPA Initiative: Time’s up! Or is this Just the Beginning?

The SEPA Initiative: Time’s up! Or is this Just the Beginning?

An independent study of European businesses by software group Sage Mid-Market into their SEPA preparedness – published in January 2014 just ahead of the original 1 February implementation deadline – found that only about one in seven was ready to handle SEPA payments.

In these circumstances, it was obvious that the European Commission (EC) had to risk undermining its credibility and provide a six-month extension of its deadline to 1 August in order to coordinate cross-border payments. The risk proved worth taking, as the additional transition period was essential and gave the principal SEPA objectives a fighting chance of being achieved.

Within that extension time, organisations have come a long way in meeting many of SEPA’s core goals. Sage’s survey, which was conducted before the extension was given, revealed that about half of the participant organisations did not have a complete SEPA compliance plan in place; although 81% stated that they had appointed someone to manage the SEPA migration.

The good news is most of the businesses that were trying to implement SEPA objectives shook off their complacency and became proactive in completing their migration. The improvement was demonstrated by the European Central Bank’s (ECB) updated SEPA statistics issued in June, which revealed that only about 3% of firms were still not compliant with SEPA credit transfers (SCTs) and about 5% were not compliant for SEPA direct debits (SDDs).

It would seem that harmonising cross border payments, a subject close to everyone’s hearts, is getting much closer to hitting its mark. As a smart acquirer, Credorax has seen at first-hand an uptick in interest from online merchants and independent sales organisations, who want to be able to make cross-border electronic commerce (e-commerce) transactions with ease.

Globalisation is here. It has helped enormously to have international experience to help online merchants, payment service providers (PSPs), and ISOs to navigate differing languages, currencies, cultures, regulations and laws. There is a need for expertise, including familiarity with what is needed to adhere to the required SEPA eXtensible markup language (XML) format. Merchants want to ensure their provider can perform conversion seamlessly as part of their professional services.

A Greater Range of Services

As this high level of synchronisation is carried out throughout SEPA, it means that online merchants and PSPs will be able to offer their services more easily to customers, regardless of location. It also means that they will be more readily able to increase their business and meet their customers’ needs, by offering services such as electronic and mobile payments (e- and m-payments) and e-invoicing on top of any core SEPA products.

This is an area that Credorax follows closely, as cross-border transactions have always been of great interest to many of its customers. For instance, online merchants and PSPs have access to the company’s smart processing platform for SCT and SDD transactions for all of their existing euro-currency bank accounts. There are various technical requirements and compulsory data elements to be considered by PSPs when carrying out these transactions, in both the interbank and bank customer domains. For instance, it is important to know that they must use the message format ISO 20022 XML. In addition, they have to provide the data elements specified in the annex to the regulation and the remittance data field must allow for 140 characters.

Many PSPs and online merchants surveyed also see the increased potential of SEPA to increase market efficiency. This is because it will align such conditions under which payments are being made, by delivering a single set of rules and open access to the European market. It must also deliver a level of transparency never before achieved, and provide a more integrated playing field through newly-found interoperability. From the PSPs’ perspective, it will give them more negotiating power to obtain better conditions and terms with their own service providers.

Credorax operates as an acquiring bank in 28 European countries, with Japan and the US to be added shortly. What the firm has been seeing is that financial intermediaries are struggling with having to apply equal charges to comparable cross-border and domestic payments in euros within the European Union (EU), which is part of Regulation 924/2009.

This equal charges principle has been reinforced by the end-date regulation (Regulation 260/2012). It did away with the €50,000 ceiling under which equal charges could previously only be applied. Cross-border payments were traditionally viewed as more expensive and complex to process. By making them as simple, efficient and inexpensive as national payments, this imbalance will eventually be overcome.

By giving PSPs and online merchants a single point of entry it avoids any communication problems, which can occur when banks’ systems try to integrate but the interoperability isn’t there. Data analysis can also present a problem especially when the information comes from a variety of sources.


Online merchants and PSPs will gain even greater benefits from using a payment processing and acquiring technology- even when SEPA has progressed further in its implementation and evolution – as it will make the PSP’s integration and onboarding faster. It will also yield even higher approval and conversion rates if supported by robust end-to-end transaction monitoring and reduce chargebacks, deliver more immediate responses and increase the overall effectiveness of processes such as optimised chargeback handling.

As part of SEPA’s evolutionary stages, it is probable that from February 2016 bank identifier codes (BICs) will no longer be mandatory for cross border SCTs. We will also see the expansion of SEPA adoption for euro-denominated payments in non-euro area countries. One thing is certain – the merchants, PSPs, card schemes, regulators, processers and mobile network operators (MNOs) all have their eyes on what the next generation SEPA will look like as its roll-out continues. For instance, in February 2017, domestic interbank fees for direct debits will no longer be permitted and there will be other amendments to follow.

Our best recommendation to online merchants and PSPs is to choose their providers wisely. Be sure to conduct the proper due diligence in ensuring their provider has a global perspective and the expertise to back it up. It is a crucial element towards growth, success and more expansive opportunities.

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