The European Payments Council has voiced strong concerns over the European Commission’s plans around setting end-dates for the euro credit transfer and direct debit schemes.
This comes just as the EU reached a critical milestone for implementation of the Single Euro Payments Area (SEPA) directive – namely the requirement that all banks be reachable by SEPA Direct Debit (SDD) by 1st November 2010.
The EC released a draft paper earlier this year highlighting potential regulatory changes around the European payments market, while outlining end dates for SEPA migration. However in July the EPC criticised the proposals, calling them “the end of SEPA as we know it.”
In particular, the Council highlights the possibility, suggested under the EC’s draft paper, of allowing for competing interoperable euro credit transfer and direct debit systems within the EU. The Council said in a statement: “The EPC does not understand why the European Commission contemplates now a scenario so radically different from the approach it has promoted over the past decade.”
In addition, the EC paper opens up the potential for existing national euro payments solutions to remain active, rather than being phased out, as was the original intent of the SEPA directive. Under the new EC proposals, national payment schemes would be allowed to continue operating and become compliant with “essential requirements” covering domestic payments, forcing the SEPA schemes to operate solely for cross-border transactions. This is known as “Mini-SEPA”.
However, according to the EPC, market participants are happy with how SEPA is developing and the EC should leave well enough alone. It noted that each successive development of SEPA required a three-month consultation period, the result of which was the incorporation of many end-user suggestions into its development. In the most recent development rounds end-user requests have tailed off, which the EPC said shows the maturity of the scheme and its tailoring to end-user wants and needs.
With the 1st November milestone for SDD acceptance bringing the overall scheme one step closer to fruition, the EPC noted that the main hurdle left to full SEPA implementation is a clear deadline for full transition to SEPA payment schemes.
The EC plans a public meeting in November to consult with market participants on regulatory intervention around SEPA.
According to the EPC, this would negate the goal of overcoming fragmentation in the euro payments market and would reduce efficiency increases offered by a single scheme in the European payments space.
For corporates, the advantage of keeping national payments platforms is that they could continue to use current domestic clearing and settlement platforms without the need to migrate all payments to SEPA systems.
However, in a broader sense it would, as the EPC said, reduce the potential efficiencies that a single payments infrastructure could provide – in terms of costs, payments and information automation, and so on. It would undermine the concept of a single, straight-through payments platform for all European payments.
As EPC chairman Gerard Hartsink noted in the statement: “A regulatory intervention based on the European Commission’s considerations published in March and June 2010, would effectively derail the entire SEPA project and eliminate the extensive benefits SEPA offers bank customers.”