Fabian Demicoli

Businesses required to upgrade for this new system Being SEPA ready


The deadline for migration to the
SEPA system (SEPA credit transfer and SEPA direct debit) is 1 February 2014. It is important for companies to
realize that this will entail that they use new formats and procedures when
sending payment information to their banks. Many companies have already been
taking the necessary measures to conform but many are still lagging behind.
Companies that do not take up the necessary changes will undergo consequences
for not being ready.

Under the SEPA End-date Regulation,
banks will not be allowed to automatically convert non-SEPA payments to SEPA
payments after Feb 2014. This means that transactions in old formats will not
be processed by the bank.

It will be however possible for banks
or other providers to offer conversion services – as long as these are
independent of the banks' normal payment chain. This will however constitute an
extra cost for the retailer (if his systems are not SEPA-ready). In addition,
such services will be available only for a limited time.

What is
SEPA?

SEPA stands for Single Euro Payments
Area and is a project managed, supported and promoted by the European Payments
Council. The initiative aims to replace differing cross border payment methods
with a single common system to increase ease, simplicity and efficiency.

In effect, the introduction of the
Euro currency as cash was only the first half of a process. Introducing this
single payments area for digital transfers is the second step in becoming a
financially streamlined area for trade and payments.

Currently it can be a challenge or
even impossible for an Irish person to buy an item online, from France, for
example, using their Irish debit card. Problems also can arise transferring
money or attempting to set up direct debits if they are cross-border. Uniform
SEPA standards for payments and banking will solve this and is a very exciting
prospect for many businesses that will be able to buy and sell services and
goods online to a much wider audience when this comes into effect.

Benefits
and Changes in a Single Euro Payments Area

  • An individual or business will require only one bank account to trade
    and conduct business within the Eurozone
  • With Eurozone-wide competition on current accounts for banking, it is
    possible that this will lead to lower charges, improved services and
    introduction and adoption of more innovative technologies in banking and
    payments
  • Currently some services can be hard to sell across borders, SEPA
    reduces that opening up your business to a wider market

 

 

Specific
requirements for business and consumers

  • Rules and standards for all credit transfers and direct debits
    denominated in euro must be followed. The regulation stipulates rules and sets
    standards for all credit transfers and direct debits denominated in euro within
    the EU where the payment service provider (a PSP is a bank or other supplier
    that offers payment services) is located in the EU.
  • International Bank Account Number (IBAN) is the standard governing
    European bank account numbers. By February 2014, the IBAN will be the sole
    payment account identifier for national and cross-border credit transfers and
    direct debits in euro within the EU.
  • Business Identifier Code (BIC) may still be required until 1 February
    2014 for domestic payments and 1 February 2016 for cross-border payments.
    Member States may defer the requirement relating to the provision of the BIC for
    national payment transactions until 1 February 2016.
  • Pan-European reachability which means that payment service providers
    cannot reject a SEPA credit transfer or SEPA direct debit transaction if they
    currently accept equivalent transactions carried out by national schemes.
  • Free choice of payment locations: Payers cannot be restricted in
    choosing from which account in Europe they would like to make credit transfers
    or direct debits in euro. Neither can payees be forced to receive credit
    transfers or direct debits in euro in an account held in a specific country.
  • Additional debtor protection measures for direct debits: Consumers may
    instruct their payment service provider on how to handle incoming collections
    by specific billers. They may draw up black lists or white lists of billers,
    set maximum amounts, or specify payment intervals. Additionally, they can block
    any direct debit collections from their payment account.
  • Principle of equal charges: Payment service providers must apply equal
    charges to comparable cross-border and domestic payments in euro within the
    European Union (Regulation No 924/2009). This principle of equal charges has
    been reinforced by the end-date regulation (Regulation No 260/2012), which has
    eliminated the € 50,000 ceiling under which equal charges could previously only
    be applied.

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