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History of SEPA
Basic information about SEPA
The introduction of the euro as the single currency and the subsequent creation of the possibility to use this single currency in the cash domain within the euro area countries triggered the common effort to create the single payment area covering also cashless payments.. The project, which is aimed to unify the rules and standards in the implementation of cashless payments, was called SEPA – (Single Euro Payments Area). The basic aim of SEPA is, simply said, the practical removal of the boundaries for the execution of cashless payments in Euro. Within SEPA consumers, businesses and other economic operators, therefore, will be able to send and receive payments in Euro, whether within a country or between countries, under the same basic conditions, rights and obligations, and no matter in which country they have held a payment account. A direct result of the implementation of the SEPA payment instruments will be the replacement of the currently used domestic payment instruments, in particular for credit transfers and direct debits with common SEPA payment instruments. SEPA payments will be carried out according to the same rules, the same procedures and in accordance with the same standards in all SEPA countries (Iceland, Norway, the European Union countries plus Switzerland, Liechtenstein, Monaco).
The realization of harmonization in the implementation of the SEPA project will bring to the practice of millions of everyday retail payments. This harmonization process is supported by the European Commission, the European Central Bank, national central banks, and payment service providers to deliver new benefits for both consumers and for businesses that make payments in euro.
An increasing number of people in Europe live outside of their home country or they carry out regular payments abroad which means the need for accounts in several countries, or also the possible emergence of problems that cross-border transactions bring with them. In the case of direct debit even it was not possible to take advantage of this payment instrument cross-border.
Thanks to SEPA it will not be necessary for payment service user to held one account in the Slovak Republic and the second one in another SEPA country and at the same time, as mentioned, SEPA will cease any differences between domestic and cross-border transactions.
The legislative framework for the SEPA project was given by the adoption of European Parliament and Council Regulation (EU) No. 260/2012, establishing technical and business requirements for credit transfers and direct debits in euro and amending EC Regulation 924/2009. By this regulation of 14 March 2012 it has been set a deadline for the transition to SEPA credit transfers and SEPA direct debits, 1. February 2014.
Legislative support for the SEPA project also creates a directive on payment services (called. Payment Services Directive) that has been transposed into national legislation of the EU Member States. The directive was transposed in the context of the SR in particular into Act No. 492/2009 Coll. on Payment Services and on amendments to certain laws of 4 November, 2009.
The implementation of SEPA payment instruments in SR is governed by the Implementation plan for the introduction of SEPA in the SR (version 4.0 )
Key requirements of transition to SEPA within the meaning of regulation 260/2012
Each country migrating to the SEPA must ensure migration to SEPA payment instruments in accordance with regulation 260/2012. This is particularly the compliance with the following harmonized requirements:
• the same rules and standards for retail payments in euro
The regulation lays down the common rules, standards and technical requirements for all credit transfers and direct debits denominated in euro within the EU.
• the use of IBAN format account number
In the so-called interbank communication, i.e. between payment service providers, the IBAN will be used for all payment transactions, that is, as a domestic (within the SR), as well as cross-border, at the latest from the 1.2.2014.
• ISO 20022XML standard messages
In the framework of the SEPA the communication between payment service providers will be based on the ISO20022, through the same standard legal persons will gradually communicate with their payment service provider if they transmit payments in the file.
International Bank Account Number (IBAN)
The IBAN format account number is determined by the standard EBS204, which was issued by the ECBS (European Committee for Banking Standards) and is based on the international standard ISO 13616. An essential part of the IBAN is BBAN, thus basic account number that is used for payments in SR even nowadays. The standard sets the structure of the IBAN.
“Slovak IBAN” consists of 24 alphanumeric characters. The first two characters represent the country code (SK), the other two are the check digits, followed by a four-digit code of the bank (bank code is used for payments even at present, identifies a particular bank such as VÚB bank code is 0200 ). The IBAN is further made up of a prefix of account and basic account number (called the national part of the IBAN). In the case of the IBAN issued by the payment service provider in the Slovak Republic, such IBAN must have always 24 characters, that is, if currently used the prefix account has less than six figures, or currently used basic account number has fewer than ten digits, the missing digits are supplemented with zeros from the left so that the total number of characters of the IBAN forms 24 characters (e.g. SK3112000000001987426375). The length of the IBAN in the individual EU countries is different, depending on the length of the national part of the IBAN. In the case of France the IBAN has 27, in the case of Germany 22 characters, or for example in the case of Belgium it is 16 characters. In terms of the SR the IBAN is set by Decree No. 8/2009 of the NBS that establishes the structure of the bank account number, the structure of the international bank account number and details on the issuance of the identification codes converter.
The IBAN is assigned by payment service provider to its client and is also given in the statement of payment account. The calculation of the IBAN may payment service user verify on the webpage , however, this has only an informative character, whereas the payment account number in IBAN format and the manner of its use in the payment is required to notify to its client the payment service provider, who keeps the payment account.
The use of the Swift code BIC
In the case of cross-border transactions is used for identification of payment service provider’s BIC swift code. This code is currently being entered by users of payment services to payment orders. The code serves to correct routing of the specified payment. Payment service users will not need to enter the code BIC in the case of payments within SR after the implementation of the SEPA payment instruments into practice. In the case of cross-border payments this obligation will be removed within the meaning of regulation 260/2012 from 1.2.2016.
The SEPA credit transfers, SEPA direct debits and a common framework for payment cards
The SEPA project lays down common rules, common procedures, and common standards for two payment instruments – credit transfers and direct debits and at the same time defines a common framework for card payments. Under a common framework is necessary to understand the specific common requirements set out in the cards, payment terminals and ATMs. In the area of payment cards, therefore, initially it concerned mainly facilities of POS terminals and ATMs payment cards with EMV chip technology which brings the improvement of services in terms of higher security. The basic requirement of the common framework is the general acceptance of cards within SEPA and their acceptance under the same conditions in all SEPA countries.
Credit transfer means a payment service, where the payment order is submitted by the payer to his payment service provider and the amount stated on the payment order is debited from the payer’s payment account and credited to the payment account of the beneficiary on the basis of the instruction given by the payer. The implementation of SEPA credit transfers will have a minimal impact on residents (natural persons). In principle, it will be only a gradual “realignment” of the use of an existing account number to use the IBAN format account number.
Direct debit means a payment service in which the payment order shall be submitted by the beneficiary to his payment service provider on the basis of prior approval, which was given by the payer. A direct debit is used primarily for energy, telecommunications, etc. In the case of direct debits can be simply stated that the changes will affect in particular the beneficiaries of the payments. In addition to the transition to the IBAN will mean the following changes:
(a) the possibility of cross-border direct debiting, i.e. payment service providers in the SR shall allow the payment service user the possibility of direct debiting also on cross-border basis (in the case of beneficiaries of funds) or will be carried out also direct debit that will be sent from another EU country within the SEPA area. This will be of course subject to conditions to be laid down in the business terms and conditions of payment service providers,
(b) the communication in XML format messages with payment service provider in the case of sending payments in the file; until the 1.2.2016 conversion services could be provided
(c) the need to apply for the assigning of the CID and its subsequent use in the initiation of direct debit payment.
The identifier of the creditor (Creditor Identifier – CID)
The mandatory requirement of the SEPA direct debit message will be the identifier of the creditor CID, which serves to unambiguous identification of the direct debit beneficiary that is unique and it belongs to a single beneficiary. The holder of the CID is a legal or natural person who will use the product of the SEPA direct debit. According to the rules for the SEPA direct debit the CID made up of the ISO code of the country, of control digits, possible specifications of the business activities of the beneficiary and to 28 digits, which are earmarked for the national identifier of the beneficiary. Such identifier has not been used in the existing domestic direct debit scheme in the SR so far.
The approved way of setting of the national identifier within the SR is assigning of 11 local numbers commencing with digit 7 (on the left), which will be assigned as a serial number, that is, starting with the number 70000000001 adding to the last assigned number value 1 in ascending order (i.e. the next assigned CID will include part of the 70000000002, the other 70000000003, etc.).
Identifiers CID are issued by the Slovak Banking Association, their assigning it is necessary to ask by creditor of his payment service provider.
SEPA for natural persons
- The biggest change from the perspective of natural persons will be using of the international account number in IBAN format when entering payment orders. Payment service providers in the SR have the opportunity in accordance with regulation to provide conversion service to natural persons until 1.2.2016. Conversion service means that in cases where the payment service provider provides such a service, so natural persons will be able to continue to use the account number at entering a payment orders as they use it at present and bank it converts into the international IBAN format free of charge.
- Whereas the beneficiary of direct debit can be also a natural person according to the SEPA rules, as well as any natural person who is interested in receiving of debiting payment, even after 1.2.2014 must apply for the assigning of the CID.
SEPA for legal persons
- Legal persons must, in accordance with regulation to use in communication with its payment service provider account number in IBAN format at the latest from the 1.2.2014, as in the case of payments within the SR, as well as in the case of cross-border payments. Payment service providers do not have the possibility of providing them a conversion service in accordance with legislation, so as in the case of natural persons.
- Where legal persons are to be sent to their payment service provider payments in the file, so this communication will have to be based on the ISO 20022 XML standard at the latest from the 1.2.2016 (in the case of a legal person if it is ready before this date, it is possible, however the payment service provider must be prepared to communicate in XML format since 1.2.2014).
- In the use of the SEPA direct debit as the beneficiary of the product a legal person must apply for the assigning of the CID with its payment service provider.
The European Central Bank (ECB):
The European Commission (EC):
The European payment Council (EPC):
- The Single Euro Payments Area-SEPA
- The Single Euro Payments Area (SEPA): 7th Progress Report