a reality to Europe’s consumers and businesses in name only despite
two of its key components having been available for almost a year.
A concerned European Central Bank now threatens to wield a big
stick to bring private sector role players into line.
of failing? While unlikely, the keynote speech at the recent third
International Payments Summit in Milan delivered by European
Central Bank (ECB) executive board member Gertrude Tumpel-Gugerell
indicated that the grand project, encompassing 31 countries, is not
running as smoothly as its designers would wish.
Tumpel-Gugerell’s speech was replete with ominous
statements. “At the moment, SEPA is at a crossroads,” she warned,
adding that contention over “sticky issues” such as SEPA Direct
Debits (SDD) due for launch in November 2009 and interchange fees
for card payments put the entire project at risk of “heading up a
And so far, one of the first two SEPA payments
initiatives to be launched, SEPA direct credits (SDC), if not going
up a dead-end street is following a very tenuous track. According
to Tumpel-Gugerell, six months after its launch in January 2008,
SDC had garnered a mere 1.4 percent of total credit transfers in
the euro area.
SDD pilot projects that have been launched by
banks and other payment service providers appear to be fairing no
“It cannot be denied the SDD is having some
engine trouble,” said Tumpel-Gugerell. The official launch of SDD
is scheduled for November 2009.
Her comments on the cross-border SEPA for Cards
scheme officially launched in January 2008 were equally gloomy.
Although several individual card schemes have adapted their rules
to SEPA requirements, “SEPA for Cards is difficult to perceive and
is even invisible to merchants and cardholders,” said
Highlighting the major stumbling block, she
stressed: “As with SEPA Direct Debit, the main obstacle to the work
towards a European card solution seems to be the gridlock regarding
the future of the multilateral interchange fee.”
Though the ECB and European Commission are
throwing their full weight behind resolving obstacles hindering
SEPA, she emphasised that the payments industry must also play its
“I wish to emphasise that the establishment of
SEPA is a market-driven project,” said Tumpel-Gugerell. “It is up
to the banks to win over their customers and convince them through
marketable and user-friendly SEPA products and services. Likewise,
service providers to banks, such as clearing and settlement
infrastructures, and information and communication technology
suppliers are expected to drive SEPA.”
However, she conceded that with the banking
industry experiencing unprecedented stress it is tempting to slow
down modernisation and innovation of payment services.
Arguing against this she stressed that banks’
payments operations are “rock solid” and a low-volatility source of
about one quarter of the banking industry’s revenue.
“Moreover, there is a need for SEPA at such a
time of distress, as it will contribute to a smooth and safe
underlying payments infrastructure,” she added.
Undoubtedly banks are making progress towards
implementation. But they have many reservations, as Bertrand
Lavayssière, MD of consultancy Capgemini Global Financial Services,
pointed out in late-October.
“The evolution of SEPA necessitates significant
changes in payment services which may impact on revenue and
customer services. Consequently, banks are taking a thorough and
cautious approach, especially as they expect implementation will be
delayed,” said Lavayssière.
His comments were based on a poll of 68 banks
from 14 different countries by Capgemini which revealed almost half
expect the scheduled 1 November 2009 implementation of the Payment
Service Directive (PSD) to be extended.
The PSD, the legislative core of the SEPA
initiative, will regulate payment services and service providers in
the European Union and European Economic Area.
If SEPA is to be a success 68 percent of the
banks polled said a firm date must be set for its final
implementation as the only payments system in Europe. This is a
view with which Tumpel-Gugerell strongly concurs.
“For SEPA to be ultimately successful, it is
important to have a schedule for replacing the national payment
instruments with SEPA payment instruments,” she said. “We all know
that it is inefficient and costly if two schemes continue to run in
parallel for a prolonged period of time.”
She continued that setting of an end-date for
SEPA implementation is being debated and that emphasis must be
placed on the consequences if no end-date is set and left little
doubt that political intervention was being considered.
“A migration end-date, whether it is staggered by
individual instrument or common to both the SEPA Credit Transfer
(SCT) and the SDD, may be achieved through self-regulation by the
banks or through regulation by the authorities,” she stressed.
In a written comment to EPI on the
issue, Paul Styles, business solutions consultant at payments
technology developer ACI Worldwide noted: “Many in the industry
have been discussing the need for a SEPA deadline for some time, so
it is pleasing the ECB has now publicly stated the need for an end
date for the existing legacy systems.”
Styles continued that, in the current period of
economic turmoil and without a cut-off point to aim for, banks and
corporates are struggling to make the business case for a
change-over onto the new SEPA instruments.
“This has been clearly witnessed through the poor
take-up of the SCT services. Such lessons must be learnt before the
SDD go-live which is now only a year away,” said Styles.
However, he warned against the threatened
arbitrary setting of an end-date as alluded to by
“I would emphasise a deadline for SEPA cannot be
imposed from above,” said Styles. “There must be industry
consensus, which admittedly while not easy to achieve, will be
essential if the deadline is to be adhered to rather than just
becoming another regulatory diary date which those involved feel is
impossible to meet.”
Whatever the outcome of the debate between banks
and regulatory authorities, Tumpel-Gugerell is adamant the
migration end-date or dates will be formalised and made known in