The retail payment systems of different countries have developed in line with national needs. Numbers of cross-border retail payments have remained small and so banks have focused on making domestic payment systems as reliable and efficient as possible. As a result, the national systems may function well and efficiently, but they are not compatible. Instead, they function according to national standards.
The European Commission has repeatedly drawn attention to the slowness and expensiveness of retail payments. The European Parliament and the EU Council in December 2001 adopted a Price Regulation, by which the banking sector immediately started developing the handling of cross-border payments.
With the regulation, the banks had to reduce prices charged for cross-border payments in euro, although in practice the payments were still handled by the same inefficient methods. In answer to the price regulation, European banks in June 2002 set up the European Payments Council (EPC), a cooperation body aimed at establishing a Single Euro Payments Area (SEPA).
The SEPA project covers all the most important payment methods besides cash: credit transfers, card payments and direct debits. One of the objectives of the project is to reduce the use of cheques, still common in a number of countries. They are used mainly in domestic payments and are expensive to process.
EPC is composed of European banking associations and dozens of banks. Finnish banks also participate in this cooperation. EPC endeavours to work with the European Commission and ESCB. It is also a kind of joint decision-making body for the banking sector as a whole, although its decisions are not binding. It has several working groups and sub-working groups, which address the various issues in the payment field.
As soon as the SEPA project becomes a reality, it will enable individuals and companies to make cross-border euro-denominated payments anywhere in the euro area as quickly, cheaply and securely as domestic payments. An efficient infrastructure is needed for processing euro-denominated payments on a uniform basis across the euro area, so that cross-border payment services will be on a par with domestic payment services. In other words, the aim of the SEPA project is to have payments processing that is as automated as possible and consistent with pan-European standards; to agree on common practices; to upgrade the processing of domestic and cross-border payments and ensure its cost-effectiveness.
SEPA was launched in January 2008, however the project has not yet been completed. The progress of the SEPA process can be monitored via the ECB website (SEPA in use).