SEPA’s extended transition period: What does it mean for merchants, PSPs/ISOs?

By Josef Etz on 9. January 2014 in Market Insights
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The word is out: The European Commission has adopted a proposal to extend the SEPA transition deadline by a period of six month until 1 August 2014. The main reason for the proposed extended migration period is that merchants, payment service providers/independent sales organizations are struggling to meet the original February 2014 deadline for switchover to the new euro payment format.

Reasons for the extended SEPA deadline

The SEPA project aims at unifying Europe’s electronic fund transfer schemes. Following the actual SEPA roadmap this means that by February 2014 it would have become mandatory to use IBAN and BIC instead of account number and bank code for both domestic and intra-regional direct debit payments within the EU.

Even though migration rates have been growing over the last few months and in November 2013 reached 64% for SEPA Credit Transfers (SCT) and 26% for SEPA Direct Debits (SDD), they were not high enough to ensure a smooth transition to SEPA. Starting on 1 February 2014 banks and payment service providers have been required to stop processing payments that differ from the SEPA format. This could have resulted in serious difficulties for market participants that are not yet SEPA-ready. In order to counter the possible risk of disruption to payments and the accompanying consequences for consumers and merchants, the European Commission has now proposed an additional transition period of six months to ensure minimal disruption.

What does this mean for merchants, payment service providers/independent sales organizations?

For merchants, payment service providers/independent sales organizations the proposed extended transition period does not equal a SEPA migration break. The Commission’s proposal does not change the formal deadline for transition of 1 February 2014. It only means that payments that differ from the SEPA format can continue to be accepted until 1 August 2014, if adopted by the European Council and Parliament. Internal Market and Services Commissioner Michel Barnier even said: “The transition period will not be extended after 1 August.” Meaning SEPA is coming – the Commission is only proposing to prolonge the transition period.

We at PAY.ON offer our clients, PSP/ISO and further payment providers, a smooth migration and/or integration to SEPA within only one day. Meaning a SEPA migration with PAY.ON requires only little effort to implement and has maximum impact on client’s existing processing set-up. Find out more in our recent blog post on PAY.ON’s SEPA solution and start your SEPA transition today!

Josef Etz

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