Skopje, 9 July 2024 (MIA) – The National Bank is preparing to submit an application to the European Payments Council for the country’s entry into the Single Euro Payments Area (SEPA), which will allow citizens and businesses to access cheaper and faster cross-border transactions.

SEPA is an initiative of the European banking and payments industry represented by the European Payments Council, supported by the European Commission and other EU institutions, as well as the Eurosystem, aimed at increasing the efficiency of euro payments and further developing and deepening the single European market.

Citizens and business in SEPA member countries can make cashless euro payments via credit transfers and direct debit to any SEPA member state in a fast, safe and efficient way, just like national payments.

With the country's accession to SEPA, citizens and businesses will benefit from lower costs for cross-border transactions, which can be completed within one business day, and with instant payments, funds will be transferred in no more than 10 seconds at any time of the day, including weekends and holidays.

“For citizens and businesses, joining SEPA will primarily mean a cheaper, faster, safer, simpler and more efficient way (just like national payments) for cashless euro payments to SEPA member countries. A key benefit is the expected significant reduction in costs for cross-border transactions with these countries, which is especially important for remittances from expatriates and temporary workers abroad, as they are crucial for the Macedonian economy. The standardized regulations applied in SEPA also contribute to higher levels of consumer protection and transparency, ensuring equal access to all payment service providers at competitive prices,” National Bank Governor Anita Angelovska-Bezhoska told MIA.

By joining SEPA, domestic banks will become direct participants in the payment systems that operate within SEPA, which means that the complex correspondent arrangements currently employed by banks will be eliminated, resulting in cheaper and faster fund transfers. Currently, banks maintain so-called correspondent accounts with foreign banks where they keep liquid funds. When a client wants to make a transfer to a recipient abroad, the transfer is made from these accounts if the recipient has an account with that foreign bank. However, it is often the case that recipients have accounts with a different bank than the correspondent one, which means that the correspondent bank uses its correspondent relationships with other banks to transfer the funds to the final recipient.

“This necessitates the continuous maintenance of highly liquid assets by banks, which generally do not generate any revenue, and also leads to increased time and costs for banks to complete payments, resulting in higher costs for citizens and businesses,” Angelovska-Bezhoska said.

For businesses, SEPA will mean enhanced access to the EU market, as they will be able to more easily engage in cross-border trade in goods and services within the SEPA area. The efficiency of payments in the SEPA area also reduces the use of cash, promotes digital payment methods, and supports the transition to a digital society.

“Our country’s economic flows are closely tied to SEPA member states. In 2023, over two-thirds (71%) of the values of the country’s total foreign trade was with SEPA members, amounting to 101% of the country’s GDP. Most of our country’s payments to other countries are made in euros. In 2023, 87% of the total outgoing payments and 77% of total incoming payments through domestic banks were conducted in euros. By joining SEPA, the procedures for these payments will be made simpler and faster, thus reducing costs for citizens and businesses,” as emphasized by Angelovska-Bezhoska.

Submission of the application for SEPA accession is a historic step

According to the National Bank, the submission of the application for SEPA accession is a historic step for the country that will provide new and better conditions for international cooperation, trade, and investment.

According to Angelovska-Bezhoska, the application itself is the result of years of efforts and inter-institutional cooperation within the country, as well as support from international institutions.

“These efforts have already led to significant achievements in aligning domestic regulations with EU standards in the areas of payment services and payment systems, anti-money laundering, free movement of capital, and data protection, as well as in the effective implementation of these regulations,” the National Bank Governor noted.

The country’s SEPA accession activities began in 2021 under the Western Balkans Payments Modernization project, which is based on the Berlin Process initiative. The project aims to advance financial and economic relations among Western Balkans countries and to support the region’s integration into the European Union.

According to the Governor, the National Bank’s intensive activities to begin the process of integrating the country into SEPA actually started with aligning the domestic legal framework in the payments sector with EU law, which resulted in the implementation of the Law on Payment Services and Payment Systems at the start of last year.

Last November, the European Commission unveiled a new Growth Plan for the Western Balkans, which includes SEPA membership for the countries in the region as one its priorities.

The expectation is that, after the application is submitted, the European Payments Council will provide a formal assessment and make a decision on the country’s SEPA accession.

“Besides expecting a positive decision on accession, banks in the country will need to adjust their systems to meet the technical requirements for joining the SEPA payments. Therefore, effective accession to the SEPA area will only take place after receiving a favorable decision from the European Payments Council and the inclusion of domestic payment service providers in the SEPA payments,” the National Bank Governor said.

Since its launch in 2008, the SEPA network covers a total of 36 European countries and states, including all 27 EU member states, non-EU countries such as Switzerland, the United Kingdom, Andorra, San Marino, Vatican City, Monaco, and the three EEA (European Economic Area) countries.

Biljana Anastasova-Kostikj