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SEPA last rehearsal

Week 05, 2008

SEPA is the natural evolution of the Euronotes and coins introduction in 2002.SEPA enables people to make cashlesspayments throughout the Euro area asquickly, safely and easily as they makenational payments. In SEPA, all Europayments are considered domestic andare made with one set of paymentinstruments. SEPA is thus a naturalprogression to the introduction of theEuro and another major step in realizingthe full potential of the single marketfor Europe.

The first implementation step took placethis month with the launch of the firstSEPA payment instrument: "SEPA CreditTransfer Scheme", which enables basic,non-urgent euro credit transfers acrossthe EU, the European Economic Areacountries (Iceland, Liechtenstein andNorway) and Switzerland. The nextpayment instrument to be introduced, in2009, is "SEPA Direct Debit Scheme",which enables direct debits in Euros on aSEPA-wide basisThen, our industry will be directlyinvolved, through "SEPA CardFramework" (SCF), to be fully introducedby 2012. The principle is that anyEuropean card should be acceptedanywhere in the SEPA area, just as if itwas a domestic card.

Even if the industry has been preparingfor theses changes for years there arestill several options available. Shall wehave only two pan-European debit cardschemes (owned by MasterCard andVisa), or will there be Europeanexpansion of domestic card schemes, orshall we experience new card schemescreated from scratch? Also, theinterchange issue is still pending: theEuropean Commission has ruled againstMasterCard on interchange issues and iscurrently studying Visa's case, but noone can anticipate what will be theoutcome. From this decision may dependthe future shape of the card paymentindustry in Europe.

There are little technical issues on thecard side: SEPA is just an EMVimplementation. But the whole smartcard ecosystem still has to worktogether to implement SEPA procedures,and their technical implications. SEPAwill imply a change in business modeltoo, as issuers will be competing againsteach other on a European scale. SEPAallows new entrants in the paymentmarket with less stringent regulationsthan now. Issuers will have to developnew strategies, and choose newpositioning. The payment card valuechain might be disrupted, as SEPA allowsnew entrants such as automated clearinghouses (ACHs), non-bank paymentservice providers, or even organizationsfrom outside the region and theindustry.

Thierry Spanjaard
Chief Editor
Smart Insights