Single Euro Payments Area (SEPA)


  • integrates all retail payment markets in the euro area into a single market
  • primary aim to further integrate the European community
  • implements common standards for clearing and processing of euro payments, allowing cashless transfers from anywhere in euro area
  • directly involves banks and other “stakeholders” in planning process

The Single Euro Payments Area (SEPA) is an initiative of the European Central Bank which will unify all of the retail payment markets in the euro area to form a single market.  Though the TARGET/TARGET2 programs have helped to create a common large-value payment system for the euro, low-value electronic payments are still handled differently throughout the euro area.  In 2004, SEPA was introduced as the program designed to facilitate the integration of retail payment markets.1  The initiative has three phases: a design phase, followed by a period of integration, followed by total migration to the new system.  SEPA is currently nearing completion of its migration phase, indicating that its instruments are generally in use at this time.


The official brochure produced by the European Central Bank describes SEPA in many ways.  It is primarily described as “an area in which consumers, companies and other economic actors will be able to make and receive payments in euro, whether within or across national borders, with the same basic conditions, rights and obligations, regardless of their location.”2  This integration of retail payment markets will make all euro payments domestic and will allow for cashless payment throughout the euro area.  SEPA is described as having the potential to “strengthen European integration” and “make a notable contribution to the Lisbon agenda, which aims to foster competitiveness and ensure the continuous development of the European economy”. 3  The brochure goes on to say that:

“These changes are needed to move towards a more integrated payment market, which will bring with it substantial economic benefits. SEPA will not only introduce more comparable services, but also foster competition and drive innovation. Institutions that are able to embrace new technological developments and offer customers additional ser vices will benefit from this new integrated and competitive market. It is important that the SEPA project be viewed not as a “one-off operation”, but as a continually evolving project that fosters European integration, seeking to improve all aspects of the euro area retail payment market on an ongoing basis. SEPA will also make a notable contribution to the Lisbon agenda, which aims to foster competitiveness and ensure the continuous development of the European economy. ”4

The primary feature of SEPA are described as being:

  • the euro as the single currency
  • a single set of euro payment instruments – credit transfers, direct debits and card payments
  • efficient processing infrastructures for euro payments
  • common technical standards
  • common business practices
  • a harmonized legal basis
  • ongoing development of new customer services.

The integration of markets via SEPA will necessitate cooperation between a number of parties including the European banking and settlement industries, the European Central Bank, major corporations in the euro area, as well as the European Union and constituent governments.  All of these industries,  particularly the banking sector, participate heavily in the implementation and planning of SEPA.

The European banking industry is responsible for restructuring the payment systems of the euro area.This restructuring will, in the short term, generate considerable costs; however, in the medium to long term, the European banking industry will benefit from cost savings and potential new revenue streams. To coordinate its efforts, the industry has set up a decisionmaking body to manage and coordinate the SEPA project. This body, the European Payments Council, consists of 74 European banks and banking associations, including the three European credit sector associations and the Euro Banking Association (EBA). Industry participants from the EU, Iceland, Liechtenstein, Norway and Switzerland are represented in the EPC, the work of which covers all euro payments in these countries.

Various infrastructure providers, such as automated clearing houses (ACHs) and card processors, are actively participating in this work. The European Automated Clearing House Association (EACHA) has
developed a set of procedures to ensure interoperability between infrastructures, while the EBA has developed STEP2, the first pan-European automated clearing house (PEACH), for the clearing of both cross-border and national retail payments in euro.5

Integrating the European Community

SEPA is described as a key part of the agenda for European integration which   In fact, the primary aim of the initiative is described as strengthening “European integration by establishing a single market
for retail payments.”  The official brochure describes this motivation:

Following the establishment of the European Economic Community in 1958 the movement towards a more integrated European financial market has been marked by several events. The most visible were the launch of the euro in 1999 and the cash changeover in the euro area countries in 2002. Less visible, but also of great importance, were the establishment of the large-value central bank payment system TARGET on 1 January 1999 and that of its successor, TARGET2, in 2007. TARGET2 is the backbone of the financial system in euro and is the implementation tool for the Eurosystem’s single monetary policy. The SEPA project represents the next major step towards closer European integration. SEPA will allow customers to make non-cash euro payments to any beneficiary located anywhere in the euro area using a single bank account and a single set of payment instruments. All retail payments in euro will thereby become domestic, and there will no longer be any differentiation between national and cross-border payments within the euro area.

In 2002 the banking industry launched this challenging project by creating the European Payments Council (EPC).The EPC is defining the new rules and procedures for euro payments. In so doing, it is
involving not only the stakeholders in the euro area, but also those in other countries of the European Union (EU), Iceland, Liechtenstein, Norway and Switzerland. Communities outside the euro area will thus have the opportunity to participate in euro payment systems and will be able to adopt SEPA standards and practices, thereby contributing to the establishment of a single market for payment services.6

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