Payment Systems

The Single Euro Payments Area (SEPA)

Introduction

Since the establishment of the European Economic Community in 1958, the movement towards a more integrated European financial market was marked by several events, the most visible of which were undoubtedly the launch of the euro in 1999, and the cash changeover in the first euro area countries in 2002. Less visible, but also of great importance, was the establishment of the central banks' large-value payment system, known as TARGET, on 1 January 1999. TARGET provided the backbone of the financial system in euro, and was the implementation tool for the Eurosystem's single monetary policy. Eventually, on 19 November 2007, TARGET, which was a decentralised platform, was replaced by the single shared platform called TARGET2.

The SEPA project represents the next major step towards closer European financial integration, and is a further rung in the ladder towards realising the full potential of the single market in Europe.  The SEPA is an initiative of the European banking industry, coordinated by the European Payments Council (EPC). The role of the EPC is to support and promote the SEPA project. The EPC involved not only the stakeholders in the euro area, but also countries of the European Free Trade Association, namely Iceland, Liechtenstein, Norway and Switzerland, as well as Monaco. 

The objective of SEPA is to put all electronic payments (credit transfers and direct debits, credit card and debit card payments) across the euro area on the same platform of domestic payments. In practice, SEPA means that a payer is able to make fast and secure transfers between bank accounts anywhere in the euro area, just like making domestic transfers, and at the same cost. Similarly, debit and credit cards can be used while shopping abroad, just like one does at home.

The SEPA project is strongly supported by the European Commission and the European Central Bank.  The legal framework supporting the SEPA project is the Payment Services Directive 2007/64/EC (PSD).

SEPA Instruments

(i) SEPA Credit Transfer (SCT)
The SCT is a credit transfer between one party and another through an intermediary, generally a Payment Services Provider which most likely is a bank. Under the SCTs, charges are shared between both parties and settlement should not take more than the following day after initiating payment. To effect payment instructions, the International Bank Account Number (IBAN) and until 1 February 2016, the Business Identifier Code (BIC), are required. Further details regarding SCT can be found at the EPC website by accessing this link.

(ii) SEPA Direct Debits (SDD)
Under the SDD, a payer can issue a direct debit order to a beneficiary in any of the SEPA countries. These require a specific mandate by the payer and are generally used for recurrent expenditures. SDD grants the payers a certain amount of rights. Further details regarding SDD can be found at the EPC website by accessing this link.

The SEPA Direct Debit Scheme requires a unique identifier to allow debtors and also debtors' banks to check collections received against mandate information. This checking requires a unique identification of creditors which cannot differ between institutions. Given that prior to SEPA a national Direct Debit system did not exist, this is a recent requirement for the Maltese banking community. Once obtained, the Creditor Identifier (CI) of the Creditor can be used on any SDD mandate and in any SDD collection initiated through any Creditor Bank and presented to any Debtor Bank regardless if the Debtor is register under the same SEPA country as the Creditor or not.

The Payment System User Group (PSUG) has created a scheme where it does not tax creditors, creditors' banks in providing a unique CI (in line with Rulebook v3.1 section 5.7) nor any other institution that takes up the role of providing/monitoring the issuance of such identifier. The Tax Return number (which in the case of a company is provided by the Tax Department) or the National Identification number are used in creation of the CI. In exceptional cases, mainly where an institution does not have a Tax Return number or a National Identification number, the Central Bank of Malta takes responsibility in issuing a unique identity number on their behalf and providing a CI.

Details on the composition of the Maltese SEPA Direct Debit Creditor Identifier can be found in Annex 1 of the SEPA Implementation Plan for the Banking Sector in Malta.

(iii) SEPA Cards Framework (SCF)
The SCF aims to cover the use of both the debit and credit cards where, with one card, payments and withdrawals can be done across all the SEPA countries.  Work in this regard is still on-going.  Further details regarding SCF can be found at the EPC website by accessing this link

SEPA for Consumers

For consumers the expected advantages are quite tangible, chief amongst them is that consumers can manage their euro payments in faster and simpler ways across Europe. SEPA will allow consumers to have just one account through which both local and cross-border payments to all SEPA countries can be effected. Consumers will also benefit from the harmonisation and competition which is expected to increase proportionally.

A SEPA brochure issued by the Central Bank of Malta can be found by accessing the following link.

SEPA for Businesses

The impact on businesses is greater than that on consumers as direct debits, pay-roll, and accounting systems should be ready for SEPA by the established time-frames. In respect of SCT, businesses must know that:

  • the IBANs and BICs will be used instead of account numbers and national sort codes;
  • new customer file formats are required.

Additionally, for SDDs, businesses must understand that:

  • consumer protection rights have increased;
  • a new automated process for rejected/returned transactions has been established;
  • new file submission time frames have to be adhered to.

It is important that businesses take a proactive approach and, in case of queries, help should be sought from their respective banks.

SEPA Implementation

Banks have been able to make the SEPA credit transfer (SCT) since 1 January 2008. The EPC launched the SEPA direct debit (SDD) in November 2009. The EPC SCT Scheme Rulebook defines the rules and obligations of the SCT scheme, and the common rules and procedures for a core scheme and for a business-to-business direct debit scheme.

In early 2012 the European legislator adopted Regulation (EU) No 260/2012 establishing the technical and business requirements for credit transfers and direct debits in euro, and amended Regulation (EC) No 924/2009, which stipulates the deadlines for replacing national legacy credit transfers and national direct debit schemes in euro with SEPA credit transfers and SEPA direct debits, respectively. For the euro area, the deadline was 1 February 2014. However, due to the low SEPA migration pace for SCTs and SDDs registered in a number of EU countries till the end of 2013, the European Parliament, the European Commission and the Council of Ministers decided, in February 2014, to extend the migration period by another six months, so as to ensure full compliance and minimise the potential risk of market disruptions. In view of this end-date extension, the Central Bank of Malta, as the appointed competent authority for SEPA in terms of the Regulation, has decided, in close collaboration with the Malta Bankers' Association, to extend the local SEPA migration end-date for SCTs by three months until 1 May 2014 and by six months for SDDs until 1 August 2014.

In Malta the SEPA project is run by the National SEPA Coordination Committee. It is chaired by the Central Bank of Malta and has, as its members, stakeholders representing the banking sector, the public administration, public entities and the constituted bodies. Moreover, the Payment System Users' Group (PSUG) is set up with the participation of credit institutions operating on the domestic market and the Malta Bankers' Association (MBA). It is chaired by the Central Bank of Malta and is responsible for the implementation of SEPA within the banking sector, as laid out in the SEPA Implementation Plan for the Banking Sector in Malta. The PSUG is assisted by experts on the local schemes and through a specialist sub-group focusing on the SEPA Cards Framework. The PSUG is represented by the MBA on the National SEPA Coordination Committee. 

National Facts Related to the SEPA Migration End-Date Regulation for Malta (219kb)

SEPA Competent Authority

The Central Bank of Malta has been appointed as the Competent Authority for SEPA implementation in terms of Regulation (EU) 260/2012 by the Minister for Finance.

Any complaints with regards to the implementation of this Regulation should be addressed to the Central Bank of Malta and sent by email.

In accordance with Article 35(c) of the Central Bank of Malta Act, any person who is a party to any dispute arising in respect of rights and obligations under the provisions of Regulation (EU) No 260/2012 may appeal to the Financial Services Tribunal as established under Article 21 of the Malta Financial Services Authority Act.