By Business & Finance Single Euro Payments Area (SEPA) Commission has introduced an additional transitional period of six months to ensure minimal disruption for consumers and businesses.
The Commission has adopted a proposal to give an extra transition period of six months during which payments which differ from the SEPA format can still be accepted so as to ensure minimal disruption for consumers and businesses. The proposal does not change the formal deadline for migration.
Internal Market and Services Commissioner, Michel Barnier said: “An efficient single market needs an efficient SEPA. The entire payments chain – consumers, banks, and businesses – will benefit from SEPA and its cheaper and faster payments. Cross-border payments are no longer exceptional events which is why an efficient cross-border regime is needed. As of today, migration rates for credit transfers and direct debits are not high enough to ensure a smooth transition to SEPA despite the important work already carried out by all involved.”
Barnier added: “I am proposing an additional transition period of six months for those payment services users who are yet to migrate. In practice, this means the deadline for migration remains 1st February but payments that differ from a SEPA format could continue to be accepted until 1st August 2014. I regret having to do this but it is necessary to counter the substantial risk of disruption to payments and detrimental consequences for individual consumers and SMEs in particular.”
The Single Euro Payments Area (SEPA) is where more than 500 million citizens, over 20 million businesses and European public authorities can make and receive payments in euro under the same basic conditions, rights and obligations, regardless of their location.
The SEPA Regulation was adopted in 2012 and aims to create the reality of a European Single Market for retail payments. The SEPA Regulation marks the 1st February 2014 as the point at which all credit transfers and direct debits in euro should be made under the same format: SEPA Credit Transfers (SCT) and SEPA Direct Debits (SDD).
The Commission, together with the European Central Bank has been monitoring progress of all stakeholders: banks, payment institutions, national and local administrations, corporates (including small and medium-sized businesses), and consumers. Although migration rates have been growing over the last few months to reach 64.1% for SCT and 26% for SDD in November, it is now highly unlikely that the target of 100% for SCT and SDD can be reached by the February deadline.
If no action were to be taken by the Commission and the co-legislators, banks and payment services providers would be required to stop processing payments that differ from the SEPA format as of February. This could result in serious difficulties for market participants that are not yet ready, particularly SMEs, who could have their payments (incoming or outgoing) blocked.
That is why the Commission is making a proposal today to amend the SEPA regulation in an effort to avoid such disruption. The introduction of a transitional period of six months, until 1 August 2014, means that the SEPA end-date remains the same but banks and payment institutions will still be able to process payments that differ from the SEPA standard until then.
