Banking Without Borders

The Single Euro Payments Area (SEPA) will give the 490 million Europeans in the EU and the European Economic Community a uniform system for domestic and international payments, whether their countries have adopted the euro or not.

"SEPA will offer many advantages for the business community and consumers," said Hans-Joachim Massenberg, deputy head of Germany's federal association of banks. "The Single Euro Payments Area will also be an important step forward for the EU internal market."

National methods of payment, such as bank transfers and debit and credit cards, will, however, continue to exist during the transition period. But Massenberg said he expected that by 2015 at the latest SEPA would be the only system for payments in use in the EU and EEC, which includes Island, Liechtenstein, Norway and Switzerland.

In the EU currently, individuals, businesses and public authorities conduct around 60 billion transactions yearly using their bank accounts, mainly through bank transfers, direct debits and credit card payments. Nearly a quarter of those transactions are carried out in Germany, which has the largest population and economy in the EU.

Germans eschew checks

But each country has its own regulations and technical standards for such transactions, and methods differ.

In France, for example, checks are commonly used, while they're rarely employed in Germany. German bank customers usually opt for debit withdrawals -- particularly for covering regular payments like rent or electricity bills -- which they employ twice as much as the average European does. Brits prefer to pay with credit cards. The Portuguese and the Greeks hardly use debit withdrawals at all.

"The goal is an integrated market for payment services in which fair competition prevails and there's no differentiation between cross-border and national payments," Massenberg said.

IBAN, BIC -- common currency of the future

Thus the use of international bank account numbers (IBAN), international bank identifier codes (BIC) and standardized forms will become obligatory. That's already been the practice since 2003 for standard EU bank transfers within the euro zone.

The new regulations apply to bank transfers and debit and credit cards. Debit withdrawals across borders will also be introduced. For residents there will no longer be any difference between using debit and credit cards at home or elsewhere in the EU and EEC. Banks will be expected to charge the same fees for cross-border euro payments within SEPA as for comparable domestic payments, and they will be just as fast, safe and easy.

Multinational companies are likely to profit the most from SEPA. Instead of maintaining bank accounts in each country in which they do business, they'll be able to work from one account for most of the continent. At the end of each working day, they'll be able to quickly establish their bank balance without referring to a multitude of accounts.