SEPA Direct Debit Scheme successfully launched

From today, the Bundesbank is offering credit institutions and public administrations a new service for the settlement of SEPA direct debits. Some of the first SEPA direct debits submitted were collections for the Federal Revenue Administration. The implementation of the SEPA direct debit scheme went smoothly thanks to the fact that all parties involved were well prepared. “Germany is the largest market for direct debit payments in Europe and the success of the SEPA direct debit scheme will thus hinge on its success here. The positive momentum generated by the launch of the SEPA direct debit scheme should now be exploited by the banking industry and consumers alike”, explained Dr Hans Georg Fabritius, member of the Bundesbank’s Executive Board responsible for payment systems.

The SEPA direct debit is a new payment instrument that is to replace the current national collection procedures in the medium term. It offers a high level of settlement security and, for the first time, can also be used for cross-border euro collections in 32 European countries. However, a number of hurdles still have to be overcome before it can be hailed a success. For example, there are currently no legal arrangements for migrating existing direct debit mandates to SEPA mandates. Furthermore, investment security has to be established by agreeing a binding end date for national direct debit procedures.

With its “Retail Payment System” (RPS), the Bundesbank provides participating credit institutions and public administrations with a high-performance, competitively neutral system for interbank clearing in the RPS sector. With more than 10 million transactions per day, RPS is one of the largest clearing systems in Europe. The new SEPA clearing procedure in the RPS, in which approximately 100 credit institutions in Germany participate directly, enables SEPA payments to be processed throughout Europe. To date, SEPA credit transfers can be made to roughly 4,500 credit institutions in Europe and SEPA direct debits to around 2,400 credit institutions. The number of institutions is expected to increase over the next year as, from November 2010, all European credit institutions will be under legal obligation to accept SEPA direct debits.

The aim of SEPA (Single Euro Payments Area) is to fully realise the single European market for cashless payments. The European banking industry via the European Payments Council (EPC) has therefore agreed on common European standards for SEPA credit transfers and SEPA direct debits. A common framework for SEPA card payments has been established. In the medium term, the new SEPA procedures are to be used for all euro payments in 32 European countries, thereby replacing the current national standards. However, the SEPA direct debit scheme will not be in place at all institutions until 1 November 2010 when the banking industry will be obliged to accept such payments under the revised EU regulation on cross-border euro payments SEPA consists of the 27 countries of the European Union, plus Iceland, Liechtenstein, Norway, Monaco and Switzerland.