The uptake of SEPA has been a rather
slow one, but now, considering the crisis Europe is in,
stakeholders from the payments industry have called for a final
end-date to restore faith and confidence in financial markets.
Duygu Tavan reports

 

Question: “Do you SEPA?”

Answer: “Well, frankly, not really.” Or, “Not
yet.”

This, or a similar scenario of conversation,
is still taking place around Europe.

The uptake of SEPA has been a rather slow one,
but now, considering the crisis Europe is in, stakeholders from the
payments industry have called for a final end-date to restore faith
and confidence in financial markets.

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It could be no better time to discuss the
European payments landscape and the evolution that has taken place
recently – and still is taking place. According to
industry stakeholders, innovation and regulation and all the
features associated with these two terms (technology,
infrastructure, security) as well as the relation between the two
are the key to solving Europe’s payment problems.

Carlo Tresoldi, chairman, SIA and Giacomo
Vaciago, economist at Università Cattolica del Sacro Cuore argue
that a stronger focus on technology infrastructure would restore
competitiveness and stimulate growth in the payments industry as
well as the wider economy.

With the ongoing debate within the payments
industry whether SEPA is actually going to become  a reality
and the slow implementation process achieved to-date,
Tresoldi  argues that SEPA is “coming of age” and
that the regulatory directives of payment systems helped the
migration to SEPA.

“Europe can tackle the current period of
instability in the financial markets and re-affirm the integration
process also through the definitive implementation of SEPA,” he
says.

“The current economic and productive situation
requires us to take urgent action in favour of the eruozone not
only through purely financial activities, but also by supporting
important zero-cost initiatives (…), such as the standartisation of
the various payment instruments. We can no longer afford to
postpone the definition of the end-date for SEPA.

“It is important that the EU Commission
issues, without delay, the regulation needed to establish the
end-date by which credit transfers and direct debits harmonised at
European level will have to replace domestic instruments.

“But something is missing, something that
gives the industry certainty that SEPA can be adopted,” he
says.

 

Missing element of SEPA success is
good management

Vaciago’s explanation for this seems to blame
the governments in Europe as he argues that this missing element to
a successful implementation of SEPA is the “capability of managing
the crisis” Europe is in.

The debt crisis has of course affected the
payments industry worldwide, but especially in Europe,  he
says, calling it a “nightmare of binge spending by
governments”.

He says:

“Before the crisis, there was risk appetite
among the governments [to take out bonds]. Now we have risk
aversion, but it is panic-driven – it should not be panic driven.
We have to go back to an instinctive risk aversion.”

Vaciago parises the Dodd Frank Act in the US
and the UK-based Commission on Banking’s reform proposals to
separate retail and investment banking to stablise the economy,
calling these a “modern formula to going back to good risk
management.”

Breaking up the euro would go against the
vision of SEPA, Vaciago argues and says that for the sake of SEPA,
the single European currency needs to remain.

 

SEPA a delicate issue, but also spring
board for innovation

SEPA certainly is a delicate issue.

Jean-Yves Mylle, had of unit DG internal
market and services at the European Commission counts five key
challenges for the cards industry in terms of SEPA implementation
in Europe:

1.     Standardtisation to
pave the way for a pan-European cards scheme;

2.     The introduction of
a pan-Europen card scheme: “We [the Commission] welcome SEPA, but
we need SEPA to lead to an efficient card scheme. New Europe-wide
card schemes would strengthen competition and we welcome
initiatives such as Monet.”

3.     Greater opportunity
for competition and market access, including the elimination of
cross-border acquiring issues and bilateral interchange fees for
card transactions abroad;

4.     Governance for and
of the European cards industry;

5.     SEPA
compliance.

Mylle calls SEPA a “spring board for
innovation” in the payments market and argues that the arising
business opportunities from online, mobile and e-invoicing systems
would “considerably benefit from an integration on
European-level”.

But again, there is a relatively slow progress
in such a migration, which Mylle puts down to four key
challenges:

1.     The lack of
interoperability, especially in terms of cross-border payments;

2.     Standardisation to
actually see “tangible results” instead of proposals, legislation
etc;

3.     Transparency for
merchants to make them aware of different costs involved in the
relationship between payment service providers and merchants;

4.     The lack of
security – the risk of fraud remains the main barrier to the
integration of a Europe-wide online, mobile and e-invoicing system,
he says.

“We [the industry] have a tremendous task to
finalise the migration to SEPA and appropriate regulation,” he
says, adding that finding out what initiatives should be done to
seize these opportunities is another tremendous task.

Mylle argues that therefore, governments and
companies within the payments landscape, including merchants,
telcos, banks, online operators, payment processors and the like,
need to work together “to develop a comprehensive approach and
tackle challenges.”

One such project in terms of eSEPA is the new
pan-European service EBA Clearing announced at Sibos.
MyBank
, which Electronic Payments International
 reported on at the beginning of October, is an online banking
e-payment solution that would enable customers to pay for online
purchases through regular banking interfaces.

 

Despite all the challenges, there is
optimism.

The 2011 SEPA Survey by the ECB and
EC found that 22% of the 350 eurozone-based corporates surveyed
were already using SEPA Credit Transfer for more than half of their
payments and 24% actually stopped using domestic transgfer schemes.
The survey estimated that by 2013, the volume of companies using
SEPA Credit Transfers would reach 57%.

So, what should and will happen after the SEPA
end-date?

The director general, payments and market
infrastructures at the European Central Bank (ECB), Daniela Russo,
says:

“Technology has already changed the amount and
quality of service offerings. Now we need to find efficient
solutions in Europe – otherwise, non-European providers will do the
job. We have to think ahead of time, not chase innovative
solutions.

“Increasingly, the focus is not on the
instrument of payment, but on the method used – so proximity and
remote payments, which drive innovation. Remittances today are made
in cash. If these could be migrated to non-cash transactions, the
risk of AML would be reduced,” Russo argues.

With the rise of the e- and m-commerce
industries, mobile-, internet—and NFC-based solutions are the arms
in the war against cash.

While business opportunities and services
provided for remittances are gaining momentum in Europe, there is
still concern among the regulators about a lack of efficient
legislation.

Technical security, the role of
intermediaries, governance and the issue of enforcement (regulation
vs self-regulation) remain the main barriers.

Considering the slow uptake of SEPA compliance
to-date, there is a risk of a top-down approach. This delay of SEPA
migration end-date, some industry insiders say, may turn into a
crisis. Right now, however, it remains a delay.

The question “Do you SEPA” used to be the
headline for the annual SIA Expo up until last year. This year, the
payment summit was simply called SIA Expo 2011, likely because the
answer to that question was simple – and negative.

At the sixth annual SIA Expo in Milan, the key
message was therefore to set a definite end-date for SEPA – not
because, as one attendee said “it will benefit banks”; but because
it can benefit the efficiency of payments infrastructures in
Europe, thus helping the economy to recover.