Extended SEPA deadline may keep German electronic payment system running

German banks may meet an extended deadline for introducing SEPA-format credit transfers, but adoption of SEPA direct debits is still slow

A six-month deadline extension could be enough to keep Germany's electronics payment system running, new German Central Bank figures on SEPA payment adoption showed Monday.

The schedule for the creation of the Single Euro Payments Area (SEPA) mandates that, from Feb. 1, banks and businesses within the area should only accept instructions for euro payments that meet the specifications for SEPA Credit Transfers (SCT) or SEPA Direct Debits (SDD).

But faced with sluggish adoption of the new norms, particularly in Germany, and the risk of businesses facing serious difficulties if non-compliant payments were rejected, the European Commission proposed on Jan. 9 to extend the deadline by six months.

The Commission's proposal to allow processing of non-SEPA payments until Aug. 1 requires approval from the European Parliament and the Council of the European Union, composed of the ministers of member states.

The Council is scheduled to approve the proposal without discussion on Wednesday, a Council official said. The European Parliament's Committee on Economic and Monetary Affairs has already approved the proposal, which should be voted through at the parliament's next plenary session, in Strasbourg on Feb. 3, a Commission spokeswoman said in an email Monday. The proposed extension can, according to the Commission, be applied retroactively if adopted after the Feb. 1 deadline.

An extension would certainly help Germany, one of the biggest economies in Europe, where the switch to SEPA payments is progressing slowly.

In November, around 32 percent of credit transfers there were SEPA Credit Transfers, but that had risen to over 45 percent in December, said Deutsche Bundesbank, the central bank, in a news release on Monday. If adoption continues to grow at that rate, Germany should be able to hit the SEPA target for credit transfers within the six-month extension.

The switch to SEPA Direct Debits has been much slower though. About 18 percent of Germany's direct debits were SEPA-compliant in December. While this is an increase compared to November when the adoption rate was just above 10 percent, it is still low, the Deutsche Bundesbank said.

The switch to SEPA should have the highest priority for all participants, said Carl-Ludwig Thiele, executive board member of the Deutsche Bundesbank responsible for payment systems. A possible six-month extension should be no cause for participants to postpone their projects, Thiele said, adding that completing the switch in a timely manner is in the interest of all.

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, open-source and online payment issues for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

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