As of the 1^st February 2014, the current national credit transferor and direct debit procedures will expire and will be replaced by the Single Euro Payment Area (SEPA) system.  SEPA, a European Union initiative dating back to 2008, concerns the 28 EU Member States and the four members of the European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway and Switzerland) and Monaco.

SEPA was created to facilitate cross-border payments in a manner which will be similar to the way national payments are carried out today within the Euro Area. It concerns three methods of payment:

·         credit transfer;

·         direct debit; and

·         credit and debit cards.

The concept behind this new standardised system is for a person to have only one account in any country of the Euro Area through which money can be paid and/or received from other countries, swiftly and without supplementary fees.  It is also intended to facilitate retail purchases outside one’s home country.  Payments are effected through one’s bank or another Service Payment Supplier and will be possible due to the requirements for all Euro Area banks and PSPs being required to adopt these common rules and procedures.

All banks and PSPs have to take on the International Bank Account Number (IBAN) which is the standard account identifier in Europe.  As for The Business Identifier Code (BIC), it will only be mandatory for cross-border payments until 1^st February 2016. There are other requirements for business banking such as:

·         the messages about the transaction between the payment service providers and business users have to be in the ISO20022 XML format, a standard model message for financial processes (microenterprises are exempted from this requirement);

·         the Multilateral Interchange fees are being eliminated for direct debits in Euro and will be eliminated for national payments by 1^st February 2017.

As stated above, the system is intended to provide several advantages. Notably, that charges for a cross-border payment in euro will be the same as for a national payment in euro (Regulation No. 924/2009). It is hoped that the standardisation process will:

·         create more competition between banks and Payment Service Providers in order to lower prices and improve services;

·         increase transparency and safety, by allowing customers to know all the fees in advance in a manner which is comparable to other PSPs;

·         increase the level of protection by blocking ‘black listed’ payers, whilst ‘white-listing’ others with a good track record;

·         allow users to determine maximum amounts or specify payment intervals and make use of complementary services like e-mandate (the debtors and creditors can agree mandates on-line, but the current mandates of payment will remains valid after 1^st February 2014), e-payments and mobile-payments.

The new system will also allow the use of e-invoicing, a system which would allow users to create invoices on-line in pdf format. It is estimated that e-invoicing can save up EUR65 billion per year through the reduction in administrative, and printing costs, amongst others.

This migration to the SEPA system provides that the banks and companies change their IT System in order to send and receive messages in the ISO20022 XML format. For the customer, there is no procedure. This migration will not create big changes, only an extend account number.

In Malta, IBAN was adopted back in 2004 and local banks have started the IT migration in order to adopt the SEPA system by the end 2013 for the direct debit.  The migration of the credit transfer will be carried out on the 1^st February 2014. There is no date for the migration of the point of sale terminals because their standardisation requires more time, whilst migration of ATMs is intended to be concluded by the end 2013.