SEPA Credit Transfer

What is a Payment Scheme?

The Single Euro Payments Area (SEPA) payment schemes as defined in the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Rulebooks contain sets of rules and technical standards for the execution of SEPA payment transactions that have to be followed by adhering payment service providers. These rulebooks can be regarded as instruction manuals which provide a common understanding on how to move funds from account A to account B within SEPA. The schemes are based on technical standards defined by standards bodies such as the International Organization for Standardization. The SEPA Schemes have open access criteria in line with Article 28 of the Payment Services Directive (Directive 2007/64/EC of the European Parliament and of the Council of the EU of 13 November 2007 on payment services in the internal market). The SCT and SDD Schemes are developed by the European Payments Council (EPC) in close dialogue with the stakeholder community.

The SEPA payment schemes as defined in the SCT and SDD Rulebooks allow for flexibility and contain optional features enabling payment service providers to add features and enhance their core services. SEPA payment products and services offered to the customer are developed by individual payment service providers operating in the competitive environment. The development of payment products and services, based on the SEPA payment schemes, including all product-related features is outside the scope of the EPC.

The EPC is an international not-for-profit association which makes all of its deliverables, including the SEPA Scheme Rulebooks and adjacent documentation, available to download free of charge on the EPC Website.

Examples of rules and technical standards defined in a payment scheme

The following list includes examples of rules and technical standards that are typically defined in a payment scheme:

  • Currency of the funds (money) exchanged - SCT and SDD: euro.
  • Format of the account identifier - SCT and SDD: International Bank Account Number (IBAN - ISO Standard 13616).
  • Standard data formats used to exchange messages between banks - SCT and SDD: ISO 20022 message standards.
  • Rules for 'R' transactions (refunds, returns and rejects) - see SDD Rulebooks detailing rules for exception handling.
  • Number of characters carried with remittance information - in the SCT Scheme: 140 characters of remittance information are delivered without alterations from the payer to the payee.
  • Timelines to be observed by payment service providers when executing a payment transaction.

Given that there are some 36 billion euro credit transfers and direct debits processed annually by thousands of banks in the European Union (EU), an optimally efficient and integrated euro payments market will rely on payment scheme rules and technical standards that are adhered to by all European banks. This ensures the efficient straight-through processing of payments.

The purpose of creating a single set of harmonised SEPA payment schemes

In May 2006, the European Commission and the European Central Bank commented in a joint statement (see below): "The introduction of the euro as the single currency of the euro area will only be completed when SEPA has become a reality, i.e. when consumers, businesses and governments are able to make cashless payments throughout the euro area from a single payment account anywhere in the euro area using a single set of payment instruments as easily, efficiently and safely as they can make payments today in the domestic context."

In essence, a SEPA payment scheme can be compared to other frameworks, which prescribe standardised processes to be observed by actors operating in network industries. Such standardisation or integration initiatives enable the provision of services by service providers in a two-sided market across traditional boundaries (for example, national borders).  An example of such integration initiatives are standardised railway tracks allowing a multitude of commercial railway operators to move their trains across borders. Similar examples of standardisation in network industries can be found in the areas of telecommunication, television or radio. In the area of payments, the introduction of the euro can be regarded as a means of standardisation.

The purpose of migrating from a multitude of national euro payment schemes for credit transfers and direct debits, to a single set of harmonised SEPA Schemes can be compared to implementing standardised 'railroad tracks' for the exchange of payments across the EU.

The SCT and SDD Schemes represent  integration at a European level of the multiple sets of single national payment schemes existing today. Migration to a single set of SEPA payment schemes allows multiple payment service providers to offer a broad range of diversified payment services and products for euro credit transfers and euro direct debits throughout SEPA. As a result, customers benefit from increased competition and more choices in the payments market. Integration at the scheme level is the very precondition for increased competition and diversity of payment service providers at the services and product level.

EU Regulation defines mandatory deadlines for migration to SEPA

In February 2012, the EU co-legislators, i.e. the European Parliament and the Council of the EU representing EU governments, adopted the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the SEPA Regulation). It defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. In non-euro countries, the deadline will be 31 October 2016. Effectively, this means that as of these dates, existing national euro credit transfer and direct debit schemes will be replaced by SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD). For more information on the SEPA Regulation, refer to this dedicated page on the EPC Website: SEPA Legal and Regulatory Framework.