SEPA operations: year one 



In 2002, the European Commission and the European Central Bank, anxious to strengthen the European market and promote economic development, initiated SEPA (Single Euro Payment Area or Single Euro Payments Area). This standard became mandatory on 1 February 2014. Twelve years after the changeover to the euro, 33 countries and 700 million citizens are now part of a harmonised Euro Payments Area.

SEPA offers two new payment instruments: the SCT (SEPA Credit Transfer) and SDD (SEPA Direct Debit) and an interoperability framework for credit cards, the SCF (SEPA Card Framework). Companies, banks, governments and consumers can now make payments to SEPA countries under the same conditions as easily as in their own country.

With a major challenge and committed actors, this very ambitious European project is more complicated than expected. Such a level of technical, legal and operational complexity has not been exhaustively assessed from the outset.

As soon as 2010, the banks seemed fairly relaxed about receiving SCT and SDD, the new SEPA XML format, from their creditors. The reality of flow migration projects, however, showed the need for them to adjust, technically and continuously, their process of transmission and reception of interbank transactions to embrace all the market’s specificities.

Businesses that carry out significant volumes of credit or debit transactions with their customers have belatedly realised the difficulty in transforming, within months, their front to accounting information system, in order to upgrade their interbanking connection platforms and integrate software solutions to convert the payments to the new format. The number of payment flows to supervise and control have multiplied.

Besides, understanding and applying the new legal rules, such as management mandate, in turn lengthens the duration of the migration process to SEPA.

The choice of software solutions and outsourced services (for SMEs) has often been made hurriedly, with the major challenge being a lack of perspective and objective benchmarking, since the software available on the market suffered from little experience and a lack of significant references. Thus, software providers along with their clients have simultaneously continued learning about cash flows production and integration, including XML standards and technical specifications, which do not always meet the specific questions asked by CIO clients. For instance, there is the classic example of the complexity of integration of pre and post release compensation (CAMT054) in the internal process of managing operational anomalies and validating accounting reversals.

Also, Michel Barnier, the European Commissioner for Internal Market and Financial Services, said on 9 January 2014: “migration rates for credit transfers and direct debits are not high enough to ensure a smooth transition to SEPA. ...Therefore, I am proposing an additional transition period of 6 months”. If the official deadline remains unchanged, users of payment services finally have until 1 August 2014 to migrate. Those countries concerned which are not part of the euro area have an extension until the end of October 2016.

The work necessary to stabilise IT production and operational management processes continues.

SMEs that have opted for light outsourcing solutions provided by their banks must soon decide between maintaining this outsourcing in the long-term, or the strategic re-insourcing of the flow conversion process, if they want to strengthen their autonomy vis-à-vis their banking partners.

For creditors and large institutions, the explosion in the volume of operations induced by SEPA raises the critical question of how to optimise flow supervision processes in order to automate controls and maintain the ability to locate any anomaly or bug in that flow at all levels of application. Even more complex issues are emerging, such as the merger of ICS (id Creditor SEPA), which is a technical and legal nightmare for IT and operational teams, due to the constant need to change the settings within the applications and to decide on the right implementation process, ensuring the entry into force of new legal entities resulting from mergers.

It is also worth noting the change to banking information operations’ integration and transport; the SEPA formats are still poorly integrated in companies and banks themselves.

The operational and legal learning field is also important, ranging from situations in which RUM numbers can be modified without the mandatory signing of a new mandate or creditors who decide to move from a SEPA zone to a SEPA COM zone where bankers are still operating with the older format of payment flows, CFONB, to route operations in Pacific Franc.

This initial part of the SEPA adventure has been a bumpy road in every way, with budgetary aspects having often expanded beyond expectations.

With a six month delay, the SEPA payment flow transmission phase is finally up and running. Meanwhile, there is still no deadline for the bank return message (return code) to migrate to the SEPA format. It is a work in progress, but today only a few banks can provide these new services. Companies are now mobilising themselves to adapt bank rejection messages to the new format. SEPA Year Two already promises equally important new challenges.


Elodie Aviotte is a managing partner, Laurent Colombie is a financial market & payments consultant and Karim Ramdani is a partner at STEPS Consulting. Ms Aviotte can be contacted by email:

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Elodie Aviotte, Laurent Colombie and Karim Ramdani

STEPS Consulting

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