The European Commission and the European Central Bank have welcomed a document published by the European Payments Council (EPC), the association of banks and banking associations which is setting up the Single Euro Payments Area (SEPA). Through this document, which takes the form of Questions & Answers, the EPC clarifies key aspects of compliance with the SEPA Cards Framework (SCF) for payment card schemes and banks, as well as the conditions for geographical coverage of card schemes within the SEPA. This should facilitate the transition from the existing fragmented and monopolistic national payments markets towards a competitive, SEPA-wide, payment cards market where economies of scale and increased competition can drive efficiency and innovation to the benefit of European consumers and companies.

The Single Euro Payments Area (SEPA) is a unique initiative of the European banking industry to move from 31 national payment systems to an integrated euro payments area. The European Commission and the ECB warmly support the SEPA process and commend the industry, in particular the EPC, for their efforts to make SEPA achieve its objectives. Once SEPA is a reality, citizens will be able to make payments and cash withdrawals in euros throughout the SEPA area with the same ease and convenience as in their home country. SEPA will bring more competition into the payments market, thus bringing better service at better prices to consumers and businesses alike.

Commissioners Neelie Kroes for Competition and Charlie McCreevy for Internal Market, together with Mrs Tumpel-Gugerell, member of the Executive Board of the ECB, have however been concerned that some of the provisions in the SEPA Cards framework may not been understood in a way that would help to fully reach the SEPA goals of more effective competition and greater efficiency.

One of the most pressing issues concerned the rules for migration of cards to SEPA. Unlike the comprehensive rule books for credit transfers and direct debits, the SEPA Cards Framework does not develop any detailed rules and standards, but rather describes three options for attaining SEPA compliance. Market participants seemed to interpret these three options in a way that a card scheme is only 'SCF compliant' if it covers all 31 states of the SEPA territory.

The European Commission and the ECB are satisfied by EPC’s confirmation that – in the context of geographical coverage - the concept of compliance to the SEPA Cards Framework only requires that cards be technically and commercially capable of being accepted everywhere in the SEPA territory. Therefore, any scheme, even an efficient national scheme, will be able to become SCF compliant, provided that – among other requirements - it is technically and commercially capable of admitting banks from other SEPA countries.

SEPA will thus allow many - possibly national and regional - schemes to develop into 'SCF compliant' schemes, introducing and increasing competition between schemes to the benefit of consumers and merchants.

It is important that confusion on the exact interpretation of this concept of "SCF compliance" is ruled out. Relying on this, work is still needed by the EPC to develop a full set of technical standards allowing any card to be used, for payments in euro, potentially anywhere in the SEPA area. This is a precondition for the expansion of existing domestic debit card schemes across the SEPA countries, for the emergence of (a) new European card scheme(s), for pan-European processing and certification, and for market consolidation.

It is also expected that other not less important provisions in the SCF like a proper separation of scheme and processing are appropriately implemented.

Consumers and retailers need simple, cheap and efficient payment card systems. More competition would be very welcome. The success of new initiatives will depend crucially on banks not simply selling the national debit card scheme to the existing schemes.