Coming to an EU bank near you: SEPA


On 1st February 2014, SEPA (Single Euro Payments Area) came into effect. SEPA is a payment-integration initiative of the European Union for the simplification of Euro payments across Europe. This in fact means the creation a borderless payment system throughout the 33 countries (SEPA countries) – these are the 28 EU members, plus Iceland, Liechtestein, Monaco, Switzerland and Norway.

The goal of SEPA is to make payments throughout Europe as fast, safe and efficient as they are under any current EU national payment system. SEPA enables customers to make payments (direct debits, credit transfers) to anyone located within the SEPA Zone. That means that there is no longer any distinction between national and cross-border Euro payments (within the SEPA zone). Also, both personal and business bank accounts will no longer be identified by the country-specific Base Bank Account Number (BBAN), but by an International Bank Account Number (IBAN)
Credit cards have bank accounts numbers linked to them

Under the new system, transfers and payments will benefit in terms of safety and greater operational simplicity. For example, within SEPA, international transactions will require the user to provide the IBAN and the BIC/Swiftcode of the destination bank, thus removing the hassle traditionally associated with international payments.

Finally, it´s also worth noting that SEPA is mandatory, which means that existing payment formats must be migrated eventually to SEPA formats. However, in order to prevent disruptions to payments for consumers and businesses, as well as to ensure proper migration from legacy systems to the new standard, the European Comission has allowed an additional 6-month transition period, in which payments that differ from the SEPA format could still be accepted.

Most banks and financial institutions across the EU have communication campaigns in place to make the transition to the new system as smooth as possible for both individuals and businesses. However, it is expected that customers would need a while to acclimatise themselves to the new framework – watch this space for updates on how the full roll-out of SEPA and IBAN is progressing.


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