The Single Euro Payments Area (SEPA) aims to eliminate national divergences in cross-border payments by enabling cashless payments from a single payment account anywhere in the euro zone. It calls for one set of standardized instruments for credit transfers, direct debits and card payments. While SEPA is an initiative of the European Payments Council, supported by the European Central Bank and the European Commission, the Payment Services Directive (PSD) is legislation that provides the legal framework for implementing SEPA. Together, SEPA and PSD are the building blocks of a harmonized European payment market that will benefit European consumers and businesses as well as U.S. companies with European operations.

T&R: How are U.S. companies affected? Boden: The mandatory deadline for banks to be able to process SEPA payments is November 2010, but some, like the Royal Bank of Scotland, will be ready on Nov. 2. U.S. and European companies may continue using legacy payment instruments, but should check to see if their banks in Europe are accepting SEPA payments now. Also on Nov. 2, European banks must follow the PSD directive in every European state.

T&R: When do U.S. companies need to be SEPA-compliant? Boden: Currently, there is no end date for decommissioning legacy instruments. Since the first SEPA instrument, credit transfers, launched in January, now accounts for just 4% of all payments, it's unclear when a mandatory date will be set. There is no doubt, however, that SEPA will become reality at some point, and while it may seem that companies have time on their side, the ramifications of SEPA are complex. Timing will be critical in the overall success of a company's SEPA strategy. It may also take as long as 18 months to execute a SEPA migration strategy, so companies should start planning now.