Primary navigation:

QFINANCE Quick Links
QFINANCE Topics
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > Operations Management Best Practice > Business Implications of the Single Euro Payments Area (SEPA)

Operations Management Best Practice

Business Implications of the Single Euro Payments Area (SEPA)

by Juergen Bernd Weiss

Table of contents

Executive Summary

  • The Single Euro Payments Area (SEPA) affects all companies doing business with European partners and sending or collecting payments in euros.

  • SEPA introduces two new pan-European payment instruments, replaces local payment formats, and requires the utilization of new master data for payments.

  • Companies can simply try to comply with the new SEPA framework or pursue a strategic approach involving the redesign of their business processes.

  • The German Würth Group implemented a strategic change program that included corporate connectivity with SWIFT and further cash management centralization.

A Brief History of SEPA

SEPA is one of the largest projects in the history of pan-European monetary transactions. It is another major step toward a common financial market following the introduction of the euro in 1999. SEPA, which became effective in January 2008, affects all companies doing business with European partners and sending or collecting payments in euros. SEPA not only erases the boundaries between payment service systems in the European Union (EU), but also forces corporations to comply with new payment standards, change master data, and reconsider their business processes in financial accounting, cash, and corporate treasury management.

SEPA is the result of actions taken by the banking industry in 2002, when the industry created the European Payments Council (EPC) to define the standards, frameworks, and rules for euro payments. SEPA enables individuals, companies, and other stakeholders to make and receive payments in euros within Europe, whether across or within national boundaries, under the same basic conditions, rights, and obligations, regardless of their location. The political driver behind SEPA is the European Commission along with the European Central Bank.

Background

SEPA applies to all national and cross-border euro payments within and between the 27 member states of the European Union, the three European Economic Area ountries, and Switzerland. All of these 31 countries must gradually harmonize their payment systems and procedures. This means establishing European standards for processing payments, reducing barriers to market entry, increasing efficiency, and lowering transfer costs. Setting such standards will lead to payment format and master data changes—not only for companies in Europe, but also in the United States and other countries that have subsidiaries in Europe. So-called one-leg-out payments—where either the payment service provider of the payer or the beneficiary is not located within the SEPA—are not subject to SEPA payment regulations.

The official SEPA roadmap allows for a transitional period in which both the old and the new payment formats coexist. This is similar to the roadmap for the euro. After a critical mass of payment transactions using the new SEPA payment formats has been reached, the old formats will be abolished by the European banking industry. Although there is currently no fixed end date defined for this event (the initial plan envisioned 2010, which is rather unrealistic), such a date will undoubtedly be set and all enterprises doing business in Europe will have to become SEPA-compliant eventually.

Back to Table of contents

Further reading

Books:

  • Skinner, C. (ed). The Future of Finance After SEPA. Hoboken, NJ: Wiley, 2008.

Reports:

Websites:

Back to top

Share this page

  • Facebook
  • Twitter
  • LinkedIn
  • Bookmark and Share