SEPA payment instruments

SEPA payment instruments are the three general means of payments whose respective terms and conditions are harmonised across Europe: SEPA credit transfer, SEPA card payment and SEPA direct debit.

SEPA credit transfer

The main features of the SEPA credit transfer are the following:

euro payment;
any customer banking account in EU member states, Iceland, Liechtenstein, Norway and Switzerland can be reached;
payment is executed in full amount. Charges and commission fees are shared (SHA option) between two parties, i.e. the originator is paying to the originator's bank and the beneficiary is paying to the beneficiary's bank;
no limit is set on the value of the payment;
maximum payment execution time is three business days. SEPA legal framework stipulates, that a payment must be executed by the end of the next business day, as of January 2012;
IBAN and BIC are used as account identifiers (have been introduced in Latvia since 2005);
UNIFI (ISO 20022) XML message standards;
unified refund's conditions for wrongly deducted payments.

What is a credit transfer?
A payment initiated by the payer. In the case of a credit transfer, a payment instruction is sent to the payer's bank (the sender's bank), which moves the funds to the payee's bank (the receiver's bank), possibly via several intermediaries.*

On 28 January 2008, European banks implemented the SEPA credit transfer scheme. 14 Latvia's banks and one branch of a foreign bank operating in Latvia have also joined the SEPA credit transfer scheme since the first date of its operation. Please see the complete Register of Participants and the respective list of participants of Latvian banks and foreign bank branches.

With regard to the SEPA credit transfer scheme, the European Payments Council has has elaborated numerous papers:

adherence information;
commercial rules, i.e. SEPA credit transfer scheme rulebook;
technical standards for bank-to-bank domain, i.e. SEPA credit transfer scheme inter-bank implementation guidelines;
technical standards for customer-to-bank domain, i.e. SEPA credit transfer scheme customer-to-bank implementation guidelines;
template to induce changes to the SEPA credit transfer scheme

and maintains:

register of SEPA credit transfer scheme participants;
the list of clearing and settlement mechanisms, that comprises the list of companies which process the SEPA credit transfers;
the list of additional optional services that was chosen by European banking communities.

With respect to the SEPA credit transfer, the European Payments Council has elaborated the further versions of the documents, which shall be effective as of 1 November 2010:

commercial rules, i.e. SEPA credit transfer scheme rulebook;
technical standards for bank-to-bank domain, i.e. SEPA credit transfer scheme inter-bank implementation guidelines;
technical standards for customer-to-bank domain, i.e. SEPA credit transfer scheme customer-to-bank implementation guidelines.

SEPA card payment

The main features of the SEPA card payment are as follows:

cardholder can make purchases and withdraw cash with one card in EU Member States, Iceland, Liechtenstein, Norway and Switzerland;
cardholder and merchants may make and receive card payments in a unified and consistent manner;
merchant may freely choose card scheme thus facilitating competition and merchant's cost reduction.

What is a payment card?
Of the numerous types of payment cards that are available to cardholders, two main types can be identified:

debit cards, which allow the cardholder to charge purchases directly and individually to an account;
credit cards, which allow the cardholder to make purchases within a certain credit limit. The balance is settled in full by the end of a specified period, or in part, with the remaining balance taken as extended credit on which the cardholder is charged interest.*

In the field of card payment services in Europe, the respective requirements for the SEPA cards framework have been taken into account as of 1 January 2008. Four domains ensure the SEPA cards framework: cards-to-terminal, terminal-to-acquirer, acquirer-to-issuer and certification domain. In compliance with the SEPA Implementation plan in the banking sector of Latvia, the majority of Latvia's banks have undertaken to complete adaption of payment cards and payment card processing infrastructure to the SEPA requirements up to the end of 2010.

With respect to the SEPA card payments, the European Payments Council has elaborated:

SEPA cards framework;
SEPA cards standardisation volume;
Questions and answers clarifying key aspects of the SEPA cards framework in correspondence with market interest.

SEPA direct debit

The main features of the SEPA direct debit are the following:

euro payment;
payment will be able to receive any customer account holder in EU member states, Iceland, Liechtenstein, Norway and Switzerland;
it covers both one-off and recurrent payments;
receipt of payment on the payee's account on the same day when it is transferred from the payer's account;
IBAN and BIC are used as account identifiers (introduced in Latvia in 2005);
UNIFI (ISO 20022) XML message standards;
unified refund's conditions for wrongly deducted payments;
special direct debit scheme for business-to-bank and bank-to-business domains (business-to-business scheme).

What is a direct debit?
A transfer initiated by the payee (the receiver) via the payee's bank after agreement between the payee and payer (the sender). Direct debits are often used for recurring payments (such as utility bills) with a pre-authorised agreement being put in place with the payer. Direct debits are also used for one-off payments, where the payer authorises an individual payment.*

As of 1 November 2009, the European banks committed to implement the SEPA direct debit schemes. A uniform incorporation of the Directive 2007/64/EC, the so-called Payment Services Directive, into the national legislation is a precondition for smooth implementation of the SEPA direct debit schemes. The Payment Services Directive contains conditions for payment services, i.e. communication with clients, payments execution, refunding of wrongly deducted payments, etc.

With respect to the SEPA direct debit schemes, the European Payments Council has elaborated

adherence information:

business requirements:

technical standards for inter-bank domain:

technical standards for the customer-to-bank domain:

In addition:

elaborated SEPA core direct debit scheme e-mandate service implementation guidelines,
SEPA business-to-business direct debit scheme e-mandate service implementation guidelines,
sample SEPA direct debit mandate forms and their text translation for both SEPA direct debit core scheme, and "business to business" scheme and overview of creditor identifiers,
offers template to induce changes to the SEPA direct debit schemes, overview of creditor identifiers.

With respect to the SEPA direct debit schemes, the European Payments Council has elaborated the further versions of the documents, which shall be effective as of 1 November 2010:

business requirements:

technical standards for inter-bank domain:

technical standards for the customer-to-bank domain:

In addition:

* Information brochure "The Single Euro Payments Area (SEPA): an integrated retail payments market", European Central Bank, 2009.

Last updated: 21.01.2010. 17:37

SEPA payment instruments

SEPA credit transfer

SEPA card payment

SEPA direct debit

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