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SEPA credit transfers

Today marks the official inauguration of SEPA, the Single Euro Payments Area. The project has been designed for three electronic payment instruments and related infrastructure support – credit transfers (1), direct debits and bankcards – with the first of these going live today. What this means is that, as scheduled, SEPA credit transfers in euros can now be made throughout SEPA countries. Of the other two, direct debits and bankcards, the first is to be on stream by the end of 2009 and the ongoing process concerning the second is set to be concluded by 2010.

The aim of SEPA is to allow bank customers to carry out their electronic payments in euros between SEPA countries with the same ease, speed and security as they now do domestically. SEPA should therefore be seen as a natural extension of the single currency and another step on the way to the construction of the Single Market. It will thus make a significant contribution to the Lisbon agenda.

SEPA credit transfers allow bank customers to make credit transfers in euros anywhere in SEPA countries in the same way as they do at present in their own country. These orders are carried out through an authorisation at the customer’s bank, either by a direct instruction at the branch, by magnetic support or file transmission or via the Internet. The operation must always include two alphanumeric codes, one being the IBAN (the international bank account number) and the other being the BIC (the bank identification code for SWIFT, which is the worldwide international communications network used by financial institutions).

In Portugal, there is another service for credit transfer using the Multibanco ATM network, where the service is designated “Bank Transfer.” This is the service that most people associate with credit transfers. But from a SEPA point of view, a “Bank Transfer” carried out through the Multibanco ATMs is considered an additional optional service, like many others provided through the network. These cover a range way beyond those available in most countries across Europe.

The Portuguese payment system is a totally integrated, state-of-the-art process. As a result, the Multibanco ATM network acts as a countrywide inter-bank service. Bank transfers are just one of the many services available to cardholders and it is based on the specific features of the ATM, where the person initiating the transfer order needs only one code, the beneficiary’s NIB (the 21-digit domestic bank identification number). The NIB of the person making the transfer is recognised automatically through the bankcard.

The domestic bank transfer service through the Multibanco ATM network is extremely efficient and user-friendly (for intra- and inter-bank transfers) and this will remain in place. The network, however, cannot be extended to transfers involving other SEPA countries. So there will be no change in the Multibanco ATM network for domestic transactions, whether by individuals, institutions or companies, and these represent the overwhelming majority of transfers made by individuals in Portugal. But given that SEPA must be developed on a reciprocal basis, i.e., no country is obliged to offer to any other country what it cannot receive in return, the Multibanco ATM network will not cover credit transfers to other SEPA countries.

Lisbon, 28 January 2008

(1)  A credit transfer is a banking operation that allows a current account to be debited by a specific sum and another to be credited to the same amount. The operation is carried out through an order (from and to an individual, institution or company), and the purpose is to transfer this amount to a beneficiary.

Two points are fundamental for an understanding of the aims of the SEPA in terms of credit transfers: transfers can be made between accounts in the same bank (intra-bank), or between accounts in different banks (inter-bank); and transfers can be between accounts in the same country (domestic or national) or between accounts in different countries (cross-border). The aim is to create a single set of conditions to cover credit transfers in euros in SEPA countries, whether they are intra- or inter-bank, domestic or cross-border.

For more information, see Banco de Portugal Booklet No. 2 (Portuguese version only), which is available on the site of the Banco de Portugal in the Internet.