A new option: e-payments to any online merchant in SEPA

In the virtual shopping mall the online buyer traditionally uses a transfer, a credit card, and more recently PayPal, at the merchant's Internet checkout. In several SEPA countries today, consumers are also able to make payments from one's current account when completing their online purchases. This form of electronic payment avoids the costs associated with credit card usage for the buyer, the merchant, or both. National payment facilities which allow online buyers to have payments debited from their own current account are referred to as e-payments schemes. Many of these e-payments schemes, however, today only work within national borders: the Belgian customer can buy on the website of a Belgian merchant and pay from his current account with a Belgian bank, but he cannot make a payment in this way to a non-Belgian merchant. The Internet, obviously, does not recognise such political boundaries. The Belgian customer who finds just what he wants on a Finish merchant's website might prefer to pay from his Belgian current account rather than use his credit card. In fact, he may be holder of a current account but not have any debit or credit card at all.

An e-payment scheme connected to the SEPA e-Payments Framework will enable a buyer using Internet to visit the web-shop of an online merchant regardless where he is located in SEPA, and to pay the merchant using both his internet banking services and his current account. The Framework will create a situation where a number of e-payments schemes existing in the market today can easily integrate SEPA payments services.

The SEPA Credit Transfer is the key to cross-border e-payments

To enable customers to make e-payments across all SEPA countries it is also necessary to provide a payment vehicle that allows the exchange of funds between any accounts held in SEPA. Obviously, at this point the SEPA Credit Transfer (SCT) is the only payment instrument that can be used for domestic and cross-border electronic payments in Europe.

To illustrate the convenience of making an SCT payment under the SEPA e-Payments Framework, imagine the following scenario: I have a current account with a bank in Belgium. I am spending time in Italy. I want to buy my ticket for a concert in Milano now, at 2am Saturday, from an Italian online merchant for the event at 8pm tonight. In this instance, my Belgium-based bank will issue a payment guarantee to the Italian online merchant in real-time, so that the merchant can release my ticket for tonight's concert immediately. The merchant will be sure that the money will arrive by SCT on his account in due time.

This scenario is contingent upon the following: my Belgium-based bank must offer Internet banking services and SCT services. The merchant's Italy-based bank must be able to receive SCT payments, e.g. both banks must be so called SCT scheme participants. At the same time, the Italian bank and the Italian merchant must be participants in the same e-payments scheme. This e-payments scheme must be compliant with the SEPA e-Payments Framework.

The way forward

The SEPA e-Payments Framework is being developed by the EPC E-Channel Task Force. It is planned to release the Service Description of the Framework for national consultation in the first half of 2009 and to complete the Framework by year-end 2009. The SEPA e-Payments Framework marks yet another step forward to creating a euro payments infrastructure that will give consumers and enterprises a maximum of choices. In SEPA, eventually, I will debit my Belgium-based current account making e-payments to an online merchant in Finland over the mobile phone while sipping a cup of coffee in Milano (by the way, that concert was great). See also the article "SEPA goes mobile" in this newsletter.

John Holsberg is a member of the EPC SEPA Payment Schemes Working Group (SPS WG) and the Chair of the EPC E-Channel Task Force.