sepa (single euro payments area)%3a a major step in european payment landscape

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SEPA (Single Euro Payments Area): A major step in European Payment Landscape

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©2007 SAP AG 1

SEPA (Single Euro Payments Area): A major step in EuropeanPayment Landscape

Appl ies to:

Business Process Experts

Summary

In present scenario, there is an immense regulatory pressure on various payment service providers (e.g.

banks) all over the world. With the introduction of Sarbanes Oxley Act, Basel II and many other compliance

acts, these providers are severely scrutinized by various regulatory authorities. SEPA is one of such

compliance initiatives in the European payments landscape. This article gives an insight into SEPA and

possible transformation into payments landscape with the help of IT.

Author : Abhijeet Sakargayan

Company: HCL Technologies Ltd

Created on: 10 September 2007

Author Bio

Abhi jeet Sakargayan is working with HCL Technologies Ltd. as a GRC Business Process expert.





©2007 SAP AG 2

Table of Contents

Applies to:........................................................................................................................................ 1 Summary.......................................................................................................................................... 1 Author Bio........................................................................................................................................ 1 SEPA story....................................................................................................................................... 2 About European Payments Council (EPC)...................................................................................... 3 Objectives of SEPA .........................................................................................................................3 Milestones........................................................................................................................................ 3 Role of IT ......................................................................................................................................... 3 SEPA @ SAP .................................................................................................................................. 4 Need of the hour.............................................................................................................................. 5 Related Content............................................................................................................................... 5 Disclaimer and Liability Notice......................................................................................................... 6

SEPA story

It all started in the year 2002 as an initiative to transform European banking Infrastructure by creation of a

European Payments Council (EPC). The purpose of such initiative was to define new rules and frameworks

and simplify cross border complex payments process across Europe. This project aimed at achieving

harmony between national and international payments in non-cash mode. European banking industry used

to face severe losses in the process of cross border transactions. This led the banks to create the EPC.

SEPA aims at providing a common platform for all the associated members to make and receive payments in

a single currency (i.e. euro) within Europe irrespective of their base location. SEPA project involves key

members like European Commission (EC) and European Central Bank (ECB) supported by the European

Payment Council (EPC).





©2007 SAP AG 3

About European Payments Counci l (EPC)

It is a European governing body which consists of more than 50 banking institutions formed to standardize

the payments mechanisms in Europe. It is the decision making and coordinating body which is responsible

for issues related to payment systems in the European Banking industry.

Objectives of SEPA

• It aims to provide a single area for all payments across Europe.

• Single Account, single card mechanisms irrespective of country

Milestones

SEPA project aims at achieving several milestones in next few years. These milestones are the major driving

factor for involvement of various big companies in this area. The major ones are:

• Availability of banking instruments in the form of plastic money across Europe irrespective of

geography. (Pan- European Credit/Debit Facility)

• Increase the efficiency of payment processes in current financial infrastructure through consolidation

of processes.

Role of IT

Information technology can play a major role in this transformation process. The main area of focus is the

Standardization of fragmented payment market. This transformation process is being led by various big IT

players in the market. The transformation process can be depicted as:





©2007 SAP AG 4

Transformation (As-Is Æ To-Be)

• Localized payment

environment

• Multiple standards,

frameworks and experiences

• Lack of interoperability

among different schemes

• Fragmented implementation

• High complexity in cross

border transactions

• High Risk

• Uniformity in the solutions

with other services also

• Consistency in payment

standards, frameworks and

instruments

• High level of interoperability

among different schemes

• Consolidated

implementation

• Reduction in complexity

• Improved Risk Management

& High efficiency

SEPA @ SAP

According to industry specialists, the level of preparedness for SEPA in the corporate world is yet to be

improved. In fact companies are putting SEPA adopted implementation on the back burner for some time till

the banks become mature enough on their part. In corporate world, SEPA has major impact on the electronic

connectivity of various companies with banks and other financial institutions, the ways in which their ERP

data is handled, payments mechanisms and much other functionality.

As an early step to establish itself in the market, SAP has provided various applications to help companies

comply with the SEPA regulations. SAP Payment Engine application is one of them. This application acts as

a standard interface which streamlines all the payment processes and allows multiple applications to interact

through single payment point. SAP also provides an integrated package called SWIFT (Society for

Worldwide Interbank Financial Telecommunication) which is useful for achieving lower Total Cost of

Ownership (TCO) in bank communications. This package helps in efficient payment processing. SWIFTNet

provides a direct access to SWIFT and other financial institutions across the globe. Moreover SAP is





©2007 SAP AG 5

banking on SAP NetWeaver as a technology of its future and building all major applications and integrated

packages around it.

Need of the hour

The introduction of SEPA compliant payment schemes is still in the pipeline. The expected official launch is

J anuary 2008. The positives and negatives are still to be realized. Few IT majors are already in the process

of developing solutions for their prospective customers under this initiative. But it is suggested by various

industry experts to take some other pro- active measures in this area of compliance so as to catch the train

at the right time.

Related Content• Addressing SEPA with SAP Payment Engine

• http://www.sap.com/usa/industries/banking/pdf/BWP_SAP_Payment_Engine.pdf

• SEPA vision

http://www11.sap.com/industries/banking/brochures/index.epx

http://www.sap.com/usa/industries/banking/pdf/BWP_SAP_Payment_Engine.pdf

http://www.europeanpaymentscouncil.eu/content.cfm?page=sepa_vision

http://www.europeanpaymentscouncil.eu/content.cfm?page=sepa_vision

http://www.sap.com/usa/industries/banking/pdf/BWP_SAP_Payment_Engine.pdf

http://www11.sap.com/industries/banking/brochures/index.epx





©2007 SAP AG 6

Disclaimer and Liabili ty Notice

This document may discuss sample coding or other information that does not include SAP official interfacesand therefore is not supported by SAP. Changes made based on this information are not supported and canbe overwritten during an upgrade.

SAP will not be held liable for any damages caused by using or misusing the information, code or methodssuggested in this document, and anyone using these methods does so at his/her own risk.

SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or code sample, including any liability resulting from incompatibility between the contentwithin this document and the materials and services offered by SAP. You agree that you will not hold, orseek to hold, SAP responsible or liable with respect to the content of this document.

sepa (single euro payments area)%3a a major step in european payment landscape

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