Experts generally acknowledge that credit transfer (CT) is the more straightforward. This involves replacing the traditional national sort code and account number with BIC and IBAN codes for transactions such as payroll and bill payment. This will create a pan-European identifier system for bank accounts that will facilitate more efficient and cost effective ways of transferring money around most of Europe.
However, migration to SEPA direct debit is more complex, with experts suggesting a timeframe of about three months to execute such a project properly. SEPA Direct Debit includes a number of important new elements, including file submission timeframes, customer file formats and an automated process for rejected and returned transactions. Enhanced consumer protection rights such as a no-quibble refund right will also have significant implications for direct-debit originators as well as financial institutions.
In the short-term, the main beneficiaries of SEPA will be consumers. With no additional outlay, they will enjoy benefits such as faster processing of transactions, especially across borders and a number of enhanced banking functions. For example, someone in Ireland owning a holiday home in France will no longer require a French bank account to process their regular debit debits, such as utility bills.
It also means people who live, work or study outside their own country may use their account in their home country to complete all their transactions.
Moreover, the legal framework around SEPA, in the EU’s Payment Service Directive, makes the rights of consumers paramount and includes an eight-week “no questions asked” refund system on payments from the likes of utility providers and financial institutions.
While businesses have had to engage in complex changes to their payment architectures, the transition to SEPA will be painless for consumers who currently have direct debit arrangements in place with their banks for regular payments, such as mortgage repayments.
Existing direct-debit mandates will remain valid in the SEPA environment. Payees collecting payments via direct debit will need to make changes to their internal systems and processes to cater for SEPA, but the payers do not have to take any specific action.