The acronym SEPA stands for Single Euro Payment Area. As the name implies, it is a system that was put in place in Europe to improve financial efficiency between countries which use the euro as currency. This would allow Europeans to make cashless purchases anywhere within SEPA jurisdiction. Currently, the overall cost of moving capital around the continent is estimated as 2%-3% of the GDP.
The goal is to provide a uniform and unified method in which to process and conduct financial transactions. The intent of SEPA is to offer improved debit systems, better credit transfers and to save money for both individuals and businesses within participating countries. There are to be no tariff barriers between member nations, facilitating commerce.
The European Union had stated intentions of seeing the European market become self-sufficient by 2010, with banking institutions beginning to implement necessary changes in 2008. Delays and challenges continue and at the latest reporting only 13.9% of credit transfers were being managed under the SEPA guidelines in late 2010.
Currently there are 32 countries participating in the SEPA transition, but the European Central Bank has repeatedly expressed frustration over the lack of awareness, products and infrastructure. Incompatibility between security protocols and software continue to be a challenge. The necessity to invest heavily in new technologies is likely a source of the difficulties, especially considering the current economic climate.
It is worth pointing out that a common misconception about SEPA is that all credit transfers conducted under the system will be free to consumers. The mandate actually states that such credit transfers could only be charged the same amount as identical domestic transfers. Institutions can still charge fees, they just have to be applied equally.