More than 3,000 banks operate in the EU and there are 60 payment systems in use.

According to the European Commission and the European Central Bank, by 2010, national payment systems will have to be integrated into European systems. Cross-border payments will then be as easy to make as domestic payments.

The Single Euro Payments Area (SEPA)

In 2002, the strategic objectives of the European institutions were laid down in a series of documents that form the basis for the Single Euro Payments Area (SEPA).

SEPA is the economic area, i.e. the enlarged European Union, in which citizens, companies, and other economic players will be able to make and receive payments in euros, both inside and across national borders, on the same basic terms and conditions, with the same rights and obligations, regardless of their place of residence or place of business.

SEPA is founded upon the convergence of national and pan-European standards and practices, with the aim of consolidating payment procedures and infrastructures.

Towards a single payment structure and a single clearing house for Europe

The EU 25 has 445 million inhabitants, and accounts for 66 billion cash transactions (2002), of which 57.8% are transfers and 42.2% are in plastic money (credit and debit cards). In addition, 900 million cross-border payments are carried out in the EU 15 (2003, excluding cash payments).

The SEPA project faces major challenges. Technological implementation will need to take account of the different payment practices in the various countries. The structure of account numbers, the guidelines regarding the payment of bank charges, the banks’ reporting obligation to the authorities (balance of payments), bank codes, etc., also need to be harmonised. The enlargement of the European Union, and in time, of the euro zone (currently 12 euro countries and 13 non-euro countries) represent further hurdles.

Straight-through-processing of transfers via Internet protocol networks and economies of scale through a top-down approach are key concepts. The aim is to create a single payment structure and a single clearing house for Europe.

Straight-through-processing requires a powerful information and communications infrastructure and standardisation of transfers. The IBAN (International Bank Account Number) and BIC (Bank Identifier Code) are a first, transitional step towards further convergence of cross-border payments in Europe.

The future pan-European automated clearing house will be called PEACH (Pan-European Automated Clearing House) and there may be more than one. A PEACH prototype is currently responsible for transfers (150,000 payments a day) but, , each country still has one or more clearing houses.

Added value for companies

Progress has already been made with the automation needed for SEPA. Companies should use the optional IBAN and BIC for all of their cross-border payments as this will drastically reduce their payments administration and result in cost savings. IBANs and BICs are only quoted on 70% of eligible payment instructions, i.e. where the payment is in euros, within the EU 25, and less than or equal to EUR 50,000.

SEPA already promises to add considerable value for companies, and not only more cost-effective payments through standardisation and economies of scale.

The convergence of payment systems and business applications will increase efficiency, enabling standardised payment data to be input direct, via automatic data links, into the relevant software, e.g. for administration, bookkeeping, business management, electronic invoicing, reporting, archiving, etc.

A single European payments market will reduce the need for companies that have branches abroad to have local accounts. Cross-border cash management via cash pooling and zero balancing will be simplified.

Fortis is pan-European, and therefore has operations in most EU countries. The combination of the Bank’s multi-disciplinary expertise in international cash management, its professional approach, and the accessibility of its staff, means that our corporate customers will have the banking relationship they need.

Companies need to become familiar with the new forms of payment guidelines, which are more complex than the existing ones. They also need to become more aware of the security aspects of the payment instruments used, particularly with regard to cross-border transactions.