Taking counsel - Introducing SEPA 's the single euro payment area

  • 2008-02-06
  • By Rasa Narbutaite [Jurevicius Balciunas & Bartkus]
The single European payments area (SEPA), an initiative launched on Jan. 28, 2008, started with credit transfers and eventually is expected to bring significant price reductions for consumers and offer new business opportunities for banks and payment operators across borders.

SEPA is defined as the territory in which consumers, companies and other economic actors will be able to make and receive payments in euros within Europe, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of location. The system will enable businesses, both large and small, to make payments to anyone located in Europe 's i.e., the EU27 plus Iceland, Liechtenstein, Norway and Switzerland 's using only a single bank account and a single set of payment instruments.
The SEPA introduces an EU-wide payments infrastructure and aims to improve credit-card or debit-card use for consumers across the continent, making it cheaper and easy to use payment cards and perform credit transfers. The SEPA will remove technical, legal and commercial barriers and harmonize banking systems.
As the SEPA is a market-driven initiative, banks and infrastructures are free to continue offering existing national payment products. This means that during the migration period that lasts until 2010, customers will typically be offered the choice between the old national and the new SEPA instruments. The new SEPA products will gradually replace national payment products.

SEPA evolved from the European Council's Lisbon Agenda, which sought to find strategies to stimulate production and economic growth within the European Community and transform it into one of the most competitive and advanced regions in the world. It consists of the single currency, a single set of euro payment instruments: credit transfers, direct debits and card payments, efficient processing infrastructures for euro payments, common technical standards, common business practices, a harmonized legal foundation and ongoing development of new customer-oriented services.

The key legislative instrument within SEPA is the Payment Services Directive, which is intended to create a more efficient and competitive payments market and is crucial for the establishment of SEPA by 2010. All 27 member states are to implement the Payment Services Directive by November 2008. The directive establishes the necessary legal framework for SEPA payments and will also apply to existing national payment products. The aim of the directive is to harmonize market access requirements for non-bank payment service providers.
The Directive also provides a clear and concise set of harmonized information requirements that all payment service providers must fulfil, whether they are offering SEPA payment products or existing national payment products. It also clarifies the core rights and obligations of users and providers of payment services.
For technical and legal reasons, the launch of the SEPA payment instrument for direct debits will take place subsequently. Still, it should occur no later than Nov. 1, 2009 across the EU.

According to information of the Association of Lithuanian Banks, three Lithuanian commercial banks and one bank department of a foreign bank offered their clients on Jan. 28, 2008 the possibility to receive and initiate SEPA credit transfers. There are three other credit institutions in Lithuania that offer the service of the receipt of such transfers.
Rasa Narbutaite is an associate advocate at Jurevicius Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Teder Glikman & Partnerid in Estonia and Kronbergs Cukste in Latvia, dedicated to providing a quality "one-stop shop" approach to clients' needs in the Baltics.