*The article has been updated
According to the recent announcement by Gert Jan Koopman, Director-General of the European Commission’s Directorate for Neighbourhood and Enlargement Negotiations (DG NEAR), Montenegro is poised to become the first country in the Western Balkans to join the Single Euro Payments Area (SEPA), as early as on 1 January 2025.
However, North Macedonia, Albania and Serbia also hope to become SEPA members as soon as possible. The central banks of these three countries explain for the European Western Balkans that they submitted the applications for SEPA accession and all measures are being implemented in order to achieve this goal.
The Single Euro Payments Area is the initiative of the European Union, established with the aim of making bank money transfers as simple, fast and cheap as possible. According to Koopman, Albania and North Macedonia could soon join Montenegro when it comes to SEPA accession, “while Serbia and Kosovo are also very interested in the membership, and, hopefully, it will not be long before Bosnia and Herzegovina become part of SEPA”.
What is SEPA and what are its benefits to citizens and businesses?
The Single Euro Payments Area (SEPA) is a pan-European initiative, launched in 2008, to simplify, accelerate and harmonise electronic payments, while reducing costs as much as possible. The initiative was primarily designed for the European Union market, but SEPA area now has a total of 36 countries, not just all EU member states.
The backbone of SEPA is a set of rules and standards for making cashless payments. In order for a country to join SEPA, it must comply legally and technically with the regulations of the European Union in the domain of payment systems, and a very important role in such a process is played by national banks, which, on behalf of the countries, submit applications for accession of SEPA States.
As the National Bank of Serbia says for the EWB, according to the World Bank’s analyses, the cost of cashless transactions for small, micro and medium-sized enterprises between the economies of the region is six times higher than their counterparts within the EU.
“Joining the SEPA area and technically connecting the payment systems of the Western Balkan economies with the payment infrastructure of the European Union will contribute to reducing these costs,” the National Bank of Serbia said.
According to the NBS, there is an estimate that if the digitalization of payments is increased, i.e. payments are digitized by 10 percent at the regional level, this will lead to a reduction of the gray economy by about two percent.
“SEPA and related activities should also lead to lower remittance costs and, according to the World Bank, if the cost of remittances is reduced by about three percent, it will lead to savings of half a billion euros at the level of the Western Balkans region”, the NBS points out.
In addition, Andrija Jovović, a Director of the Payment Sector of the Central Bank of Montenegro, points out for European Western Balkans that SEPA membership “will bring increased inclusion in electronic payments, with significant positive effects, since about 20% more adult population in the EU uses digital payments compared to residents of the Western Balkans – 99% in the EU versus 76% in the Western Balkans countries”.
Similarly, the Bank of Albania stresses for EWB that the benefits of being included in the SEPA schemes are important on many levels – political, financial, and economical.
“Politically, SEPA provides an opportunity to enter the European market long before the EU membership really happens. Economically, by being included in the SEPA scope, Albania would gain access to a broader European market, facilitating cross-border transactions, and enhancing trade and investment. The inclusion of Albania in SEPA would promote financial integration and strengthen our cooperation with European Union member states. This has positive spillovers in our economy supporting further economic convergence with EU, by facilitating the movement of capital, making Albania an attractive destination for foreign investors and businesses by providing less complex payment solutions”, the Bank of Albania explains.
European Commission: Countries aspiring to join SEPA must comply with EU rules
Explaining the rules on the accession of countries to the single area of payments in euro, the sources in the European Commission states for the EWB that “decisions on the membership of SEPA schemes are taken by the Board of the European Payments Council (EPC), which is an international not-for-profit organization”.
“Applicant countries must demonstrate that they fulfil the criteria set by the EPC, including alignment with the relevant EU acquis, for instance in the area of payments, banking and anti-money laundering. The EPC assesses the formal application of an applicant country. As part of the process, the EPC asks the European Commission for its non-objection before taking a decision on whether the applicant country can join the geographical scope of SEPA schemes”, the EC clarifies.
Commenting on the ambitions of the Western Balkans countries to join SEPA as soon as possible, the sources in the EC stresses that they “acknowledge the work done by interested third countries”, but “cannot comment on the EPC’s timeline for decisions on any third country’s application”.
Jovović: We expect a positive decision on Montenegro’s application to join SEPA
Andrija Jovović, Director of the Payment Sector of the Central Bank of Montenegro, states for the EWB that the Central Bank of Montenegro, on behalf of the state, has submitted an official an application for Montenegro’s accession to Single Euro Payments Area.
He underlines that “the submission of the formal request, as a result of close cooperation and synergetic action of the Central Bank of Montenegro and other regulators with the government and Parliament of Montenegro, was preceded by significant achievements in harmonizing the regulation with the Acquis Communautaire, and in the adoption and effective implementation of laws in the domain of payment services, business of credit institutions, prevention of money laundering, free movement of capital and personal data protection”.
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In anticipation of the positive decision of the EPC, the Central Bank of Montenegro is implementing a series of activities to ensure full operability within SEPA payment schemes, and the plan is to form a national body in the near future that will help the integration of the SEPA project at a wider level, Andrija Jovović points out.
Jovović stresses that the recent statement by Gert Jan Koopman, “which recognised Montenegro’s efforts to join the SEPA area, as the first member from the Western Balkans, on 1 January 2025, further encourages and motivates all efforts to be made at the level of the state of Montenegro and the banking system in order for our institutions and banks to be ready to welcome the EPC decision on the expansion of SEPA to Montenegro”.
“Montenegro’s membership in the SEPA system will bring numerous benefits for Montenegrin citizens and the economy, including lower transaction costs, Faster Payment execution and simplified cross-border transactions within the European market. Montenegrin companies will have better access to the European market, which will enable them to expand their business, increase competitiveness and innovation. SEPA membership will have a positive impact on sectors such as tourism and trade, as well as attracting foreign investment,” Jovović explains.
The National Bank of North Macedonia: The official request was submitted in July
The National Bank of North Macedonia also confirms for EWB that “in the capacity of a regulatory and supervisory institution for the payment service providers in the country” it submitted a formal request for the country’s accession to SEPA in July 2024.
“SEPA brings multiple benefits to citizens, the economy and payment service providers. Citizens will be able to receive and send money in euros in the SEPA countries in more cheap, fast and simple manner. For them, the accessing also means lower fees, as well as improved cash flow management, considering that SEPA transfers are usually processed within one business day, and with instant payments, the transfer of funds will be carried out in 10 seconds at most, in any time during the day, i.e. within normal working hours, but also outside working hours, as well as on weekends and holidays”, the National Bank of North Macedonia clarifies.
The National Bank of North Macedonia adds that “with the access to SEPA, the domestic payment service providers will have the opportunity to participate in payment systems in the SEPA area, which will ensure direct relations with many foreign payment service providers and reduce their costs arising from correspondent banking, which will contribute to faster and cheaper payments in euros for citizens and companies in the country”.
The Bank of Albania: Albania is quite advanced in meeting the criteria for joining the Single Euro Payments Area
The Bank of Albania underlines for the European Western Balkans that Albania was the first country submitting the Application in EPC for an access to SEPA geographical area, on 12 June 2024, and that the submission of the application was preceded by an extensive consultation process with the relevant institutions (EPC and DIGI FISMA) for drafting the application and evaluating the alignment of the Albanian legislation with SEPA requirements.
“Based on the World Bank evaluation, Albania appeared to be the most advanced country in meeting SEPA requirements. In this context is mentionable that Albania was the first country in the region transposing PSD2 in its legislation, which together with SEPA 1 regulation are the cornerstones of SEPA requirements. Furthermore, in the beginning of 2024, Albania has intensified the efforts for further aligning with SEPA requirements by drafting and approving of Regulation on the establishment of requirements for credit transfers and direct debits in euro, which transposes SEPA regulation in the Albanian regulatory framework”, the Bank of Albania states.
The Bank of Albania adds that it is also “paving the road for the market actors in terms of technical standards”, by upgrading the Albanian Electronic Clearing House, “to be fully SEPA compliant”.
“We evaluate that Albania is quite advanced in meeting the criteria for joining the Single Euro Payments Area and expresses full commitment to undertake any further step needed for achieving this national objective”, the Bank of Albania concludes.
The National Bank of Serbia: We are looking forward to getting the official feedback from the European Commission on the Draft application soon
In a similar vein, the National Bank of Serbia explains for EWB that the “Draft application for the accession of the Republic of Serbia to the SEPA area has been sent for a preliminary opinion to the European Commission and the European Payment Council”.
They stress that “in the previous period, the National Bank of Serbia undertook a whole series of activities and measures aimed at the development and improvement of payment transactions in the country and abroad”.
“The process of improving the payment services market in the Republic of Serbia began in 2014, with the adoption of a modern legal framework for the provision of payment services – the law on payment services, and its amendments in 2018, as well as amendments from July this year, we achieved full compliance with the regulations of the European Union in the field of payment services”, the NBS says.
According to NBS, the Republic of Serbia has also harmonized its regulations in the field of banking, as well as prevention of money laundering and terrorist financing with relevant EU directives, regulations and international standards and recommendations.
“This is evidenced by the fact that after last December’s session of the Council of Europe Committee of experts for the assessment of measures for the Prevention of money laundering and terrorist financing (Manival), Serbia received recognition of the compliance of our regulations and practices with all 40 international recommendations, which only a dozen other jurisdictions in the world achieved at that time,” the NBS says.
The National Bank of Serbia adds that “all this has contributed to fact that the Draft application for the accession of the Republic of Serbia to the SEPA area, which we sent to the preliminary opinion to the European Commission and the European Payment Council, was assessed as the most detailed and complete by our colleagues from the World Bank who had an insight into the drafts of applications sent so far by the economies of the Western Balkans”.
“Having in mind such an assessment of colleagues from the World Bank that our draft application is the most complete, we expect to receive official feedback from the European Commission soon”, the National Bank of Serbia concludes.
The Central Bank of Bosnia and Herzegovina: Current state of legislation in BiH does not meet the requirements of SEPA
The Central Bank of Bosnia and Herzegovina says for the European Western Balkans that the current state of legislation in that country does not meet the requirements necessary to access SEPA, and, therefore, the application for the membership has not been submitted yet.
“As we all know, the European Payments Council has established clear and transparent criteria for accession to SEPA, and the conditions for accession are met accordingly. The current state of legislation in Bosnia and Herzegovina does not meet the requirements of SEPA, it is an active process that involves the transposition of the necessary legislation”, the Central Bank of BiH clarifies.
According to them, the Central Bank of Bosnia and Herzegovina coordinates the SEPA connection mechanism and, together with the relevant institutions in BiH, with the support of our long-time partners USAID and the World Bank, is actively working on preparatory activities, including the legislative and infrastructure ones.
“The exact date of Bosnia and Herzegovina’s application should be fixed in the following period,” the Central Bank of BiH adds.
The Central Bank of Bosnia and Herzegovina notes that it is “aware” of the importance of entering the SEPA area, and that this implies harmonization with EU regulations.
“Also, entering SEPA can significantly affect the increase of digital payments and the reduction of the use of informal payment channels, thus contributing to economic development and closer integration with the European market,” the Central Bank of BiH concludes.