Euro-area residents should now be able to make all their transactions denominated in the single currency from one account as the European Union works to pull down barriers to cross-border payments.
Banks will complete the switch tomorrow to standard euro-area formats for processing payments in a bid to remove any distinction between cross-border and domestic transfers.
The measure“will greatly facilitate euro payments for citizens and businesses and increase competition between banks,” the European Commission said today in a statement on its website.
The move is the latest step by the EU to build a Single Euro Payments Area, or SEPA. While banks have offered SEPA payment services, such as cross-border direct debits, for several years, tomorrow is the deadline for SEPA-compliant systems to fully replace national ones, rather than be an option run in parallel.
This means that all businesses, from gas suppliers to mobile phone operators, must accept payments from their clients in this format.
The European Central Bank and the commission have pushed for more than a decade to ease cross-border payments in euros, seeing it as an essential accompanying measure to the creation of the single currency. SEPA could reduce the number of bank accounts in the EU by 9 million and lead to 21.9 billion euros ($29 billion) in annual savings for businesses and households, according to a commission-sponsored study published earlier this year.
While SEPA began as a self-regulatory initiative by banks, the EU in 2011 resorted to legislation to set deadlines for the project and drive it forward.
The deadline, initially set for Feb. 1, was postponed after the commission warned that some businesses weren’t ready.
While tomorrow marks the full shift to SEPA rules on credit transfers and direct debits, some other parts of SEPA, such as ensuring that debit cards work throughout the bloc, remain a work in progress.
The system also seeks to speed up cross-border credit transfers and improve transparency of bank charges, according to the commission.
EU banks and businesses based outside the euro area have until October 2016 to fully introduce the common SEPA payment formats.