Software problems hindering migration to SEPA standardised payment systems

Representatives from some EU member states said that software problems are hindering the "migration" of national payment systems to ones that meet Singe Euro Payments Area (SEPA) standards, (2-page / 30KB PDF) according to the minutes taken from a meeting last month of the EU forum for national SEPA coordination committees (SEPA EU forum) in Brussels.

Major banks including Barclays, BNP Paribas, Deutsche Bank and HSBC, and other members of the European Payments Council (EPC), have, been engaged in establishing standardised payment schemes and frameworks in a bid to make it easier for cross-border electronic payments to go through across the SEPA zone. In geographical terms SEPA refers to all 28 EU member states, Iceland, Liechtenstein, Norway, Switzerland and Monaco.

EU member states are subject to set EU rules that underpin the SEPA system, which were first introduced through common rules for the authorisation and the revocation of direct debits set out in the wide ranging Payment Services Directive (2007/64/EC). Further technical specifications for the payment systems, and compliance deadlines, are set out in the SEPA Regulation and the rulebooks that have been developed alongside it.

Under the SEPA Regulation, payment service providers must establish "payment schemes" that have the same "rules" for the purpose of carrying out cross border and national credit transfers (CTs) and direct debits (DDs). The measures are designed to ensure that different payment systems are "technically interoperable" with one another.

The Regulation sets out certain requirements that payment service providers must conform to when conducting those transactions, which include using a particular "payment account identifier" and "message formats", among other things.

Currently a number of national payment schemes are in operation and conform to different rules and technical standards for payment processing. However, by 1 February next year EU member states where the euro is the currency will have to have migrated their systems over to SEPA standards. Non-euro currency nations will have to make the migration by 31 October 2016.

However, some EU countries have flagged up problems with the migration of some payment systems, according to the minutes from the SEPA EU forum's meeting.

"Several Member States from both the euro and non-euro zone gave presentations on the state of play of migration in their home country, with particular focus on state of play on SCT (SEPA credit transfers) and SDD (SEPA direct debits) migration, legislative and non-legislative accompanying measures put in place for SEPA end-date Regulation and the use of the options," the minutes said.

"Common trends have emerged: the extremely poor migration rate for SDD, while for the SCT the situation is better, though not ideal; the very low SEPA awareness and preparedness of small local public administrations and SMEs and the difficulties in reaching them for raising their awareness; problems linked to software providers," it said.

Technology and payments law expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said: "Implementation of the SEPA rules requires the standardisation of the 'messaging' information that is used to sanction and process payments throughout Europe."

"Not all IT systems are able to send or receive in that format, so upgrading software and IT systems has been a major stumbling block to making the whole SEPA framework operational," he added.

According to the information the UK Payments Council presented (6-page / 175KB PDF) at the SEPA EU forum's meeting, 40 UK banks, accounting for 92% of the UK payments market by volume, have achieved compliance with SCT standards. Between July and December last year, 100% of UK-originated euro credit transfers and euro direct debits were made via the SEPA credit transfer and SEPA direct debit schemes respectively, it said.

The UK Payments Council said, though, that there remains concern that it may not be possible to make certain cross border payments, such as in relation to tax, social security and salary, in accordance with the SEPA standards.

Last year the EPC warned that the systems used to deliver tax or salary payments in some European countries may have to be altered so that euro currency transactions could take place across standardised systems.