The SEPA Regulation | Information for businesses
The SEPA Regulation
May 2013*
The SEPA Regulation | Information for businesses
*This guidance was previously developed and published by Payments Council, which was replaced by a
new trade association – Payments UK - at the end of June 2015. To this end the documentation has been
rebranded but the content has not been updated, therefore the original date of the guidance on the front
of the document should be referenced as at the time of original publication.
This leaflet is designed to provide businesses with information on
1
Regulation (EU) No.
developments in European payments legislation, specifically the
260/2012 of the European
adoption of the SEPA Regulation1, which might impact on the
Parliament and of the
way your business makes and receives electronic euro
Council establishing
payments.
technical and business
requirements for credit
These changes only affect electronic payments made in euro
transfers and direct debits
within the EU and EEA (which are defined below). They do not
in euro and amending
apply to cash, cheque or card transactions, and they do not apply
Regulation (EC) No
to payments in non-euro currencies like Sterling.
924/2009
What is SEPA?
The Single Euro Payments Area (SEPA) is a payment-integration initiative of the European Union. It aims
at the creation of an integrated euro payments market and the harmonisation of national and cross-border
euro payment systems, both at a technical level and in terms of procedures and the customer experience,
so that payments can flow quickly, simply and cheaply across the whole of Europe. The latest regulation –
the SEPA Regulation – will help to enable this. It does so by mandating measures to increase
harmonisation, such as common formats and the use of computer language for electronic payment files.
SEPA forms a key part of the European Commission’s vision of a Single Market. The Single Market is
intended to extend to all European Union (EU) Member States as well as Norway, Iceland, Liechtenstein
(which together with the EU countries makes the European Economic Area (EEA)), as well as Switzerland
and Monaco, but with a focus on the eurozone (i.e. those states that have adopted the
euro as their currency).
The SEPA Regulation | Information for businesses
2
Retail payments are usually
Anyone (e.g. a citizen, merchant, business or public administrative
organisation) who makes a euro denominated electronic retail
payment2 i.e. a credit transfer or direct debit, will be affected in some
way by the SEPA Regulation. The SEPA Regulation does not affect
payments in non-euro currencies such as Sterling. It should be noted
that wire transfers, euro cheques and cash payments are also
lower in value and sent
through Automated Clearing
House (ACH) systems; higher
value payments tend to go
through real time gross
settlement (RTGS) systems.
outside the scope of the Regulations.
The banking industry has been co-operating for some time through the work of the European Payments
Council (“EPC”) and has already created three new euro payment schemes, which define the rules,
practices and standards for moving funds from account A to account B: the SEPA Credit Transfer
scheme (“SCT”), the SEPA Core Direct Debit scheme (“SDD”) and the SEPA Direct Debit Business-toBusiness scheme (“SDD B2B”). There is also a SEPA Cards Framework (“SCF”); acquirers and payment
systems were obliged to adopt the SCF by the end of 2010.

Launched 28 January 2008 since when over 4,500 PSPs have adhered.

Used for national and cross-border payments in euro of any value.
The SEPA Regulation | Information for businesses
)

Launched on 2 November 2009 in line with adoption of the Payment Services Directive (PSD)
and Regulation (EC) No 924/2009. To date nearly 4,000 PSPs across Europe have adhered to
the SDD Core scheme and >3,400 to the SDD B2B Scheme.

In the SDD B2B scheme there are no refunds for authorised transactions but it offers a significantly shorter timeline for presenting direct debits and a reduced return period.

The SDD Schemes offer businesses the opportunity to make efficiency gains through automation
and centralisation, and to facilitate business expansion across borders.
The ‘SEPA Regulation’ entered into force on 31 March 2012. The main aim of the SEPA Regulation is to
ensure the migration of existing national euro payments to the harmonised, pan-European SEPA payment
schemes (SCT and SDD) so that consumers and businesses can make and receive cross-border euro
payments across Europe as efficiently and easily as domestic euro payments are made today. To achieve
this the SEPA Regulation sets end-dates by when existing national euro payment schemes need to be
replaced with the SEPA schemes. These end-dates are:
1 February 2014: in euro Member States
31 October 2016: in non euro Member States (or one year after joining the euro, if earlier)
The SEPA Regulation | Information for businesses
The SEPA Regulation applies to euro payments within the
eurozone and throughout the rest of the EU and the EEA.
Accordingly, it applies to euro payments in, into or from the UK.
While UK-located banks/payment service providers (“PSPs”) do
not automatically have to sign up to the SEPA Schemes, the UK
payment industry has been engaged with the creation of the SEPA
Schemes and is committed to making SEPA a reality. As a result,
as of April 2013: 40 UK-based institutions had already adhered to
the EPC’s SEPA Credit Transfer Scheme; 21 had joined the SEPA
3
Current adherence
figures are available from the
European Payments Council
(EPC) website:
http://www.european
paymentscouncil.eu/
content.cfm?page=ad
herence_to_the_sct_scheme
Direct Debit Core Scheme; and 13 had joined the SEPA Direct
Debit Business-to-Business Scheme3.
You can find out if your PSP is reachable for / offering SEPA
payments by checking the EPC’s register of participants
(http://epc.cbnet.info/content/adherence_database) or by
speaking to your PSP directly.
SEPA assists pan-European trade and helps UK businesses compete by making it simpler and cheaper
to send and receive euro payments. The new common standards will enable much more information to
be sent with a payment, enabling the development of new value-added services. Larger businesses will
probably have the most to gain, as they are more likely to operate on a pan-European basis and to wish
to rationalise their cash management and card acceptance arrangements. Such rationalisation may in
turn help to reduce the cost of making and receiving payments across Europe and improve cash-flow
visibility. As a result, businesses that currently make or receive significant volumes of euro payments
should review their payment arrangements with their PSP.
The SEPA Regulation | Information for businesses
For businesses that only operate in the UK, in Sterling, there will be no change – these payments will
continue to be made just as they are today. However, businesses that make or receive euro payments
may be affected by the SEPA Regulation; for example, businesses that make payments to suppliers
located in the SEPA area, or who collect payments from customers located in the SEPA area.
For businesses that operate in multiple SEPA countries it is important they understand what the local
SEPA migration plans are in each respective country. Each country must ensure that its migration to the
new SEPA schemes is conducted in accordance with the SEPA Regulation. However, individual national
timelines may be shorter or longer than at the general European level, as some requirements and
migration deadlines vary from country to country during the transitional period (for example, Finland fully
migrated to using SEPA Credit Transfers domestically in October 2011). The transitional period will end
in 2017 for all requirements, with the last key date being 1 February 2017. Further information on the
SEPA migration plans of each Member State is available from the European Central Bank’s website:
(http://www.ecb.int/paym/sepa/about/countries/html/index.en.html).
As a Member State that does not use the euro (‘non-euro’) the 31 October 2016 deadline for migration
(see page 4) will apply here. Nevertheless, firms sending/receiving significant volumes to/from Europe
may effectively have to be SEPA-ready by the eurozone 2014 deadlines in order to avoid potential
operational difficulties.
On the next few pages there is further information on some of the changes that businesses may need to
make to become SEPA-ready.
The SEPA Regulation | Information for businesses
Banks/PSPs will be responsible for executing the majority of the technical changes brought about by the
SEPA Regulation. However, businesses that send or receive euro payments will also need to make
changes. Companies and their treasury teams should not underestimate the amount of time required to assess their payment processes (often these extend beyond treasury teams, e.g. into procure-
ment teams) and how they will be affected by the SEPA Regulation. Affected businesses are advised to
speak to their PSP as soon as possible to discuss their own requirements for becoming SEPA-ready. An
overview of some of the issues that may need to be considered is provided below.
From 31 October 2016 the use of the ISO 20022 XML 4 message
standard becomes mandatory for the bundled5 transmission of
credit transfers and direct debits in euro by businesses that are
not microenterprises (microenterprises are those with less than
ten staff members and a turnover or a balance sheet total of up to €2
million).

A single, common format
defining the “language” of
financial transactions.
5
Where several payments are
batched together and
Businesses must take steps to ensure they have the
submitted, rather than sent as
capability to initiate and receive bundled payments in ISO
individual payments.
20022 XML format by 31 October 2016. For example, their
systems must be capable of processing cash management
(CAMT) and payment initiation (PAIN) messages.

4
PSPs have a legal requirement to ensure that their business
customers use this format from 31 October 2016.
The SEPA Regulation does not specify how businesses should meet
this requirement. Some businesses may choose to make their own
internal systems ISO 20022 XML compliant in support of their SEPA
traffic. Others may wish to use conversion services to convert their
existing message formats into the ISO XML 20022 format, at least
for a transition period. These conversion services can be offered by
third parties and in appropriate circumstances by PSPs themselves.
The SEPA Regulation | Information for businesses
The deadline for the use of the ISO 20022 XML format in the UK is 31 October 2016. However, because
eurozone countries will have to use this format by 1 February 2014, UK businesses that receive SEPA
credit transfer and direct debit payments from the eurozone will need to ensure that their payment
processing will not be negatively impacted from 2014, e.g. through difficulties relating to reconciliation
and continuity, and therefore they may wish to consider becoming SEPA Regulation compliant before
the 31 October 2016.
When payments are made, an account identifier is required to ensure that the payment gets to the
correct beneficiary. The SEPA Regulation states that the account identifier for SEPA payments should
be the International Bank Account Number (IBAN) only. Although PSPs will not be able to require
payers to provide it, businesses dealing with higher volumes of payments may also wish to continue to
provide the Business Identifier Code (BIC) together with the IBAN to help minimise the risk of payments
being delayed or incorrectly executed.
The deadline in the UK for using IBAN as the only account identifier for SEPA payments is 31 October
2016. However, in eurozone countries the deadline for using IBAN as the account identifier is 1
February 2014. Therefore, UK businesses that initiate euro payments will need to ensure that they hold
the correct payment information for their euro payees by 1 February 2014 in order to avoid processing
errors. Businesses may wish to consider having their databases cleaned or validated to ensure that they
are not charged for ‘rejected’ payments.
The SEPA Direct Debit Schemes (Core and Business-to-Business) offer businesses many benefits, for
example, making it easier to collect payments from customers and other businesses across Europe.
However, as a result of the SEPA Regulation there are some potentially complex modifications required
by businesses that use SEPA direct debits (“SDDs”).
The SEPA Regulation | Information for businesses
For example, the SEPA Regulation states that existing euro direct debit mandates will remain valid for
SDD, provided they are enriched; for example, a creditor identifier and a unique mandate reference for
each direct debit will be needed. It is also necessary that all mandates, together with any later
modifications or cancellations, are stored by the corporate initiating the direct debit (or a contracted third
party (e.g. its PSP)).
For businesses that currently issue direct debit mandates under one of the existing national euro
payment schemes (e.g. in France or Spain), the Regulation also usefully states that these mandates will
be valid for the SDD beyond 1 February 2014.
Businesses making use of the SDD Core Scheme as creditor (or payee) should also note that the SEPA
Regulation brought in some additional debtor protection measures that they may wish to be aware of:

If consumers use SEPA direct debits they are now able to instruct their PSP on how to handle
incoming collections by specific billers (for example, payment collections from French or Spanish
utility company).

Consumers may draw up black lists (blocking direct debits from certain payees) or white lists
(acquiring direct debits from certain payees), set maximum payment amounts, and specify the
payment intervals. Additionally, they could choose to block all direct debit collections from their
account.

In cases where the direct debit mandate does not provide for the right to a refund, consumers may
instruct their PSP to check whether the amount and periodicity of each incoming direct debit
transaction is equal to the amount and periodicity agreed on the mandate.
Further information about the SEPA Direct Debit Core Scheme, for example, regarding procedures or
timelines, can be found on the EPC website (http://www.europeanpaymentscouncil.eu/index.cfm).
Businesses that currently use or are planning to make use of either of the SEPA direct debit schemes
should speak to their PSP as soon as possible to discuss compliance with the SEPA Regulation.
The SEPA Regulation | Information for businesses
Another change introduced by the SEPA Regulation is around payment accessibility, and it applies to all
payers and payees for payments falling under the scope of the SEPA Regulation. The Regulation states
that payers cannot be restricted in choosing from which account in Europe they would like to make euro
credit transfers or direct debits. Neither can payees be forced to receive euro credit transfers or direct
debits in an account held in a specific country. Therefore, any business that currently requires
customers to make their payments from a specific country will need to review these requirements
immediately, as this aspect of the SEPA Regulation took effect in March 2012 and is now law.

In the first instance, businesses should contact their PSPs for further information and help.

The European Payments Council website contains various documents on the SEPA Schemes and
the SEPA Regulation:
http://www.europeanpaymentscouncil.eu/index.cfm

The European Payments Council has also written a useful summary document of the benefits of
SEPA for businesses:
http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=214

The official text of the SEPA Regulation is available from the Commission website:
http://ec.europa.eu/internal_market/payments/sepa/ec_en.htm

Details of the migration plans of each Member State are available from the ECB website:
http://www.ecb.int/paym/sepa/about/countries/html/index.en.html
The SEPA Regulation | Information for businesses

SEPA – Single Euro Payments Area - all European Union Member States as well as Norway,
Iceland, Liechtenstein, Switzerland and Monaco but with a focus on the eurozone (i.e. those states
that have adopted the euro as their currency).

ACH – ‘Automated Clearing House’ payments are usually lower value retail payments, rather than
the higher value payments that tend to go through real time gross settlement (RTGS) systems.
Payments going through large value payment systems excluding direct debit payments which the
payer has not explicitly requested be routed via a large value payment system e.g. TARGET2,
Euro1 and STEP1 are not in scope of the SEPA Regulation.

EPC – European Payments Council

SCF – SEPA Cards Framework

SCT – SEPA Credit Transfer

SDD – SEPA Direct Debit (the Core scheme)

SDD B2B – SEPA Business-to-Business Direct Debit (only for use by corporates)

PSP – Payment Service Provider, e.g. a bank or an electronic money institution

PSU – Payment Service User, e.g. a business or consumer

IBAN – International Bank Account Number

BIC – Business Identifier Code
The SEPA Regulation | Information for businesses