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The vision for SEPA is to provide an area in which all Euro payments within the EU are effectively domestic, and where the current differentiation between national and cross-border payments no longer exists.

Not only does SEPA aim to improve the efficiency of cross-border payments, but also to develop common instruments, standards, procedures and infrastructures in order to generate significant economies of scale.

Ultimately, customers should be able to make payments throughout the whole Euro area in the same way as they do within national borders.

Lower costs 

For corporations, the successful introduction of SEPA should have several benefits. These include lower costs for both payments and format interfaces, particularly as increased competition among banks is likely to drive prices further down and result in improved service levels.

Another advantage would be the reduction in the number of bank accounts required across Europe, leading to increased efficiencies.

In addition, SEPA would enable better visibility into cash positions, improved reconciliation of invoices - the payment would carry a minimum of 140 characters of remittance data - and increased productivity due to less manual labour.

Achieving the vision for SEPA is a major undertaking, and expectations are high. Although some progress has been made, the path to SEPA has not been as smooth as many had hoped, and a number of fundamental issues have emerged.

It is important to notice that the ‘E’ in SEPA stands for Euro – not for European. This means that it only addresses Euro payments, not the other currencies used in the EU.

Utopia of a single area 

It is easy to make the assumption that SEPA embraces all European currencies, but in fact there are some notable exceptions – not least pound sterling.

The utopia of a single area in which there is no distinction between domestic and cross-border payments cannot therefore extend to the whole of Europe in its current incarnation.

As it stands, SEPA can only accommodate credit transfers. There has been a long and arduous delay with the Direct Debit directive.

The reason behind this is that direct debit functions vary greatly within the different countries of the Euro zone. EU domestic laws therefore need to be harmonised to enable a EU-wide direct debit.

This could furthermore mean that that organisations have to contact all of their clients to renew each and every direct debit mandate.

Not only is this time and cost consumptive, but clients may discover that they are paying for services that they no longer need or want.

An effective review of an entire portfolio of direct debits might therefore result in certain organisations taking an unwanted revenue hit. Legal debates and processes are not known for their swift resolutions.

Both IBAN and BIC required 

The delay incurred as a result of trying to resolve this issue – current estimations indicate that this could be until the latter half of 2009 – might also mean that organisations which are either considering or in the process of implementing SEPA-led projects may decide that they are no longer as crucial, and push them further down the agenda.

When assessing the more practical side to SEPA, it is important to note that, in order to be able to make a SEPA payment, both the IBAN (International Bank Account Number: a unique code for the identification of bank accounts worldwide) and BIC (Bank Identifier Code) are required.

In most cases these numbers can be calculated from existing domestic bank account numbers and bank identifiers, but not always, which means that corporates will need to ask their suppliers to provide these numbers in order to be fully SEPA compliant.

Once again, this is likely to be a time consuming and costly process, particularly if suppliers prove to be less than responsive.