SEPA – too important to fail?
SEPA, the Single European Payment Area, is the area where ‘companies will be able to make and receive payments in euro, within Europe, whether between or within national boundaries under the same basic conditions, regardless of their location.’ Put another way, euroland will be one big happy payment area with all euro payments being transacted as if they were domestic payments and at minimal cost. Or at least that is what the EU Commission would like to see and that is what it has told the banks to provide.
Only one problem. There are a lot of banks that derive a lot of profit from the ‘inefficiencies’ in the current system. Some estimates are that 30-40% of European banks’ payment revenues are derived from the existing systems which process cross border euro payments like any other foreign payment. So significant are these vested interests that 62% of the mixed banking/corporate audience at IBC’s recent International Payment conference thought that the banks were not moving fast enough and that ‘current planning was not enough for there to be a seamless implementation of SEPA by the target date of 2008’. More importantly, 73% thought ‘further regulation would be required’.
So is there a major confrontation between the EU and the banking industry? Not if you listen to the quiet rhetoric from the banks and the EPC (European Payments Council), which is the decisionmaking and coordination body of the European banking industry in relation to payments. But if you listen to what representatives from the Commission and the European Central Bank are saying you hear another story. SEPA is ‘too important to fail’ and ‘we will be the regulator of last resort if there is no market-lead SEPA solution’.
So what should a corporate do? Sit and watch and wait to see what happens? Or get more involved? The EACT (European Association of Corporate Treasurers) has decided to get involved and has made some very thorough and well thought out responses to the Commission, thus representing corporate interests in the SEPA debate for the first time. So now is the time for individual corporates to start getting more involved. And as you do, enjoy watching the confrontation and the jostling for position amongst all the banks as one of the most dramatic changes in the European banking system happens before our eyes.