29. The Single Euro Payment Area (SEPA): Implementation in Spain

Different legislative initiatives have progressively converged in the creation of the so-called Single Euro Payment Area (SEPA). The main trigger was the professed Payment Services Directive (PSD) in 2007. However, recent developments have driven to the so-called PSD2 as part of what has been generally labelled as SEPA 2.0. This consists of developments that look at innovations and new payment devices as game changers. This chapter specifically looks at the Spanish case within the SEPA. Although cash payments are still highly used, Spain has been characterized for offering one of the world’s largest infrastructures for non-cash payments. Additionally, there have been recent changes in the pricing structure of the payment card industry, causing significant changes in non-cash payments’ adoption and usage. Even though the infrastructure is large, the use of cards still remains at an average EU level. The ATM network can partly explain this evolution. ATM transactions and POS transactions have opposite effects since the use of debit cards at ATMs increases cash withdrawals while the use of debit cards at POS reduces cash holdings for purchasing purposes. Another main feature regarding the setting of incentives for higher card use in Spain has been pricing regulation. This has made Spain an interesting case because the reduction in interchange fees has occurred without the need of a regulatory change but with some mediation from authorities in negotiations between banks and merchant associations.