Magazine article Business Credit

SEPA Stands to Simplify European Business

Magazine article Business Credit

SEPA Stands to Simplify European Business

Article excerpt

Moving capital around Europe is a costly process. Complicated and expensive international infrastructures make paying and receiving payment a difficult process in the region and the effect of these restrictions and processes has been estimated to cost 2.5-3.0% of European Gross Domestic Product.

However, starting in 2008, SEPA, which stands for Single Euro Payments Area, will go into effect and change the nature of European business. SEPA is described as an area in which consumers, companies and other economic actors will be able to make and receive payments in euros, whether between or within national boundaries under the same basic conditions, rights and obligations, regardless of their location. This means that businesses operating in Europe will be able to unify their payment options rather than being forced to tailor them to each individual European nation. In essence, SEPA will make all euro payments in the euro area "domestic" payments.

According to the European Central Bank (ECB), the driving force behind the program, SEPA is expected to "advance European integration with a competitive and innovative euro area retail payments market that can bring with it higher service level, more efficient products and cheaper alternatives for making payments."

SEPA, when implemented in the coming year, will consist of seven elements: the single currency, a single set of euro payment instruments (credit transfers, direct debts and card payments), efficient processing infrastructures for euro payments, common technical standards, common business practices, a harmonized legal basis and the ongoing development of new user-oriented services.

In a release on the organization's website, the ECB noted that SEPA will allow for easier processing of credit card transactions saying, "To accept card payments, merchants need an agreement with the bank which 'acquires' the card payment."

"SEPA will allow acquirers to process all SEPA-compliant card payments, even across borders," said the ECB. "Merchants can therefore choose any bank to acquire their card payments, which will increase competition and drive costs down."

"SEPA will help companies simplify their pan-European business management, as all financial transactions can be done centrally from one bank account using SEPA payment instruments," said the release. …

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