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The danger that SEPA may not happen

I was invited to a conference this week and given the title of the talk as: “Why there’s a very real danger that SEPA may not happen”.

As a good European who believes in the PSD and SEPA, I declined to discuss this and invited my long-time acquaintance Sir Jonathan Brit to speak on my behalf.

Sir Jonathan “Johnny” Brit is the eighth generation of Brit’s to Chair Fusty Bank UK plc, which recently appeared in this blog talking about mobile telephones.

He is one of the old guard, highly bigoted and patriotic, anti-European British people, normally referred to as an ‘old fart’ … although not normally to his face.

I wrote most of his speech down for readers of the Finanser to see what a typical British old fart thinks about SEPA.

However, before you read his speech, please note that the views he expresses are not my own.   For example, he seems to think that that it's purely a political plot by the French and Germans to take over Europe's financial infrastructures via the EBA and ECB respectively which is why no-one has any urgency to implement.  This is why nothing's happened yet, after ten years, and that the lack of leadership, corporate inclusion, end-dates and more, means it is not working.

Not sure I agree with these views so, if you are interested in my views, the Financial Services Club is conducting research into bank, corporate and national readiness for the implementation of SEPA and the PSD during the summer for a publication to be released in September 2009.

If you are interested in participating or sponsoring this research, please contact admin@balatroltd.com.

Meantime, over to you, Sir Jonathan.

Biography: Sir Jonathan “Johnny” Brit is the eighth generation of Brit’s to Chair Fusty Bank UK plc since its founding in 1842, as a bank serving the colonial empire of Britain. Johnny entered the bank as a mailroom errand boy in 1972 and rose through the ranks to take over from his father, Sir James “Jimmy” Brit the Third in 1988. Now, Johnny has handed the reins of the bank to his son, Gerald “Gerry” Brit in order to take the Chairmanship role this year. Johnny is married to Jenny Brit, and has three boys, two German Shepherds, an estate in the country and several mansions overseas in the Windies and India.

Good afternoon.

My name is Johnny Brit, Chairman of Fusty Bank UK plc.

Of course, we’re not actually based in the UK for tax reasons, but it makes sense to have a registered office there as our people trust us more that way.

Now then, I’ve been asked here today to talk about this SEPA thing, which stands for Silly European Payments Agenda I believe.

I’ve got to be careful when I say that, as I ran this past our PR and legal folks and they’ve made sure that everything I’m going to say is politically correct.

That’s why I need to get some things out in the open before we start as I know that you all take this thing very seriously but I ask myself, after almost ten years of all your faffing about trying to work out what it is, whether you are really serious about this stuff.

I don’t think so.

Now we all know why, don’t we?

Yes, because it’s just a Stupid European Political Agenda isn’t it?

It's politics

This SEPA thing and all that stuff about a Payment Services Directive was only dreamed up by the poor political eurocrats in Brussels because they couldn’t pay for their books and cups of tea without incurring cross-border charges.

That’s why this thing came about and that’s why it’s here.

It’s nothing to do with saving costs and increasing efficiencies, which is what the politico’s claim … but only because that sounds good. No.

It’s just to reduce their own unnecessary expenses of having to live in boring old Brussels whilst paying for a nice penthouse villa on the Riviera or chic bordello in Bermondsey.

That’s the truth of it.

I know it’s true, you know it’s true, and as a political agenda we can pretty much ignore it can’t we because, by the time they get around to realising we haven’t done it, they’ll no longer be MEPs and the new lot come in and we can mess them around too can’t we.

Now certainly that’s what we’ve been doing over here in Blighty – ignoring it that is – and I thought most of you European Johnny’s had been doing the same which is why nothing has happened.

But then I cannot believe how much of a dust-up there has been about this over the past ten years.

I mean you’ve had conferences, meetings, committees, working parties, conventions … you name it and you’ve had it. All about this silly euro thingy and these associated SEPA and PSD bits.

And for how long have you been doing this?

Ten years!

A decade of what?

Pwah! This all began ten years ago for god’s sake and what have you got?

Sure, there’s been the Regulation 2560 which banned razor blades and biro’s.

Sorry? Oh I didn’t realise. I thought you said “I ban BIC”, not IBAN BIC.

Well, either way, IBANs and BICs haven’t happened have they?

Certainly, most of the corporates we deal with haven’t implemented these … but that’s because we do it for them as it is a sure-fire way to keep our business customers locked into the bank.

In fact, I don’t want them to change their SAP and ledger systems to work with IBANs and BICs as they will then have portability of their bank account.

That may be what the eurocrats want, but I don’t want that so they can just go and stuff their standards up their rears, as I’m keeping my customers locked into Account Numbers and Sort Codes. We’ll handle the IBAN and Biccies.

I guess that is why, after ten years, less than 2% of all potential Eurozone credit transfer payments are migrated onto these new SEPA Credit Transfer (SCT) services, as there is no critical mass or need for this amongst the people we serve.

Funnily enough, fewer than 2% of all credit transfer volumes in 15 months would mean that to get to the total market space SEPA is meant to reach would take 100 years.

A century to achieve critical mass?

Sounds about right to me as that means SEPA won’t happen in my lifetime.

That’s also why in ten years, there’s no legal structure in place, no movement of other electronic payments, and just an inconsistent idea that there might be some sort of standardised direct debit thingy.

Ten years and I think that you, like me, have just been ignoring this thing hoping that those Brussely Eurocrats will go away and stop worrying about their travels around Europe and bank fees.

Trouble is, they haven’t gone away, have they?

That’s why we are all eagerly waiting the Payment Services Directive in November or, as we call it, the Psssttt or the Okey-Kokey Directive. Y’know, you put your left leg-in and your right leg-out, so no-one knows which leg is which and then we can charge lots for it.

< /p>

November 2009

Now everyone thinks that we have all been waiting for the Psssttt, because then direct debits can come in on November 2nd and suddenly there will be lots and lots of volume.  That's because all the businesses and authorities of Europe will place all their payments and transfers electronically through standardised systems and infrastructures.

Complete baloney of course, as most of our corporate customers haven’t been consulted about this. I mean, we did allow them in the room didn’t we, but only as long as they didn’t say anything or for as long as we could ignore them.

That’s why corporates had no representation on any of our committees and discussion groups, but we are here to serve them of course … just as long as we can keep them locked in to our bank and not someone else’s.

So now we have these deadlines, with 1st November 2009 looming large as the date when things really things start … but then things won’t finish as we have no end dates, do we?

We have no end dates because no-one can agree on this euro thing – who’s in and who’s out – and because we have no leadership.

No-one is forcing this through because the leadership has to come from the politicians, and the politicians don't want to rock the boats in their home countries over something that's not a domestic issue.   

After all, how many cross-border payments do we make?  Less than 2%!

That's why the politicians don’t want to upset their home countries and create a backlash.

It's a French and German plot

The Germans may want SEPA as they have the European Central Bank but German banks don’t want it because they have no central infrastructures; the French want it because the EBA is based in Paris and offer a PEACH, but French banks don’t want it because it will damage their fee rates; the Italians are trying to work out what a Euro is; the Spanish are asleep and saying 'manana'; and the rest of Europe are trying to work out what the hell the other guys are up to.

Meanwhile, the Dutch are leading the whole thing because they’re the only people who speak the main languages of Europe. It would have been the Swiss otherwise, but they’re not in Europe so they had to bow out by default.

Typical jolly European beanies.

And even with all of that, they can’t agree.

I mean, the PSD is meant to be a hard deadline date for implementation by 1st November 2009 and the Swedish, who will have the Presidency of the European Union by then, have already said they cannot implement it.  But at least the Swedish are honest, as the rest of the countries are just keeping quiet and pretending.

For example, look at the French.

They go and push for all this stuff and put all the infrastructure in Paris – yes, the EBA who run all this SEPA stuff, where are they based? Paris! – and then, after all that, what do the French go and do? They say “non” and totally ignore it all.

Oh yes, and just in case you missed it this was the announcement of France not bothering with SEPA Direct Debits until November 2010.

Typical francais I say, especially as they announce this the day after the European Payments Council agreed all the banks of Europe would have these direct debity thingies in place by November 2009.

Sacre Coeur, mon dieu and grande m*rde.

Anyways, the French SEPA Committee, made up of the Banque de France and the French Banking Federation, are probably following Monsieur Sarkozy’s lead and thought: "C*sse-toi".  And at least I’ve read "La Princesse de Cleves".

Anyways, this is normal French thinking and short of bunging a few tractors across the Channel Tunnel to block electronic payments moving across borders, the French can only stick to their guns and try to ignore this silly political agenda.

Which brings me to another thing.

What is SEPA for anyway?

All it does is create a nice large zone for the Germans and French, who don’t want it, to control the finances of the Spanish, Italians and rest, which is a good reason for not being in the euro isn’t it?

I mean this SEPA thing is only good for 2 countries isn’t it?

Sure, there are 16 countries in the Eurozone but, after the recent credit crisis, you’ve got the Germans controlling interest rates, the French controlling the infrastructure, and the Spanish, Italians and rest all suffering with crippling unemployment and stagnation with no hope of getting out of it.

That’s why there are no end dates because we all want to keep our national infrastructures in place just in case. Just in case we have to go back to French francs, Italian lira, Spanish pesetas and Deutsche marks.

And the British?

This is why we British are not in the Eurozone for very good reasons, the utmost of which is our right to retain our sovereignty. The Queen is very important to this island and represents our long heritage of ruling the world which is why everyone speaks English, even the French.

So, we need to retain our sovereignty and stay out of the euro for this reason.

In summary, after ten years we’ve got a little bit of something and a lot of nothing.

No end dates, no leadership and no mandate to make this change happen.

Ten years!

The Americans put a man on the moon in six years. Their moonshot was announced in 1963 and achieved in 1969.

In six years, Americans can put a man on the moon and in Europe in ten years we can’t even get an agreement on a direct debit.

That’s why we here in Fusty Bank UK plc are outsourcing all of our Eurozone payments to our trusted allies … NACHA.

Thank you and goodbye.

Please note once again that the views expressed in this blog entry are not my own but Johnny Brit's.

If you are interested in what is happening with SEPA and the PSD, the Financial Services Club is conducting research into bank, corporate and national readiness for their implementation for a publication to be released in September 2009. If you are interested in participating or sponsoring this research, please contact admin@balatroltd.com.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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4 comments

  1. Does Fusty Bank have, or seek to have, customers who have family, assets or business relationships beyond the borders of their home country? The World Bank reports that remittances out of the UK are $4.6bn p.a., which is unsurprising – and that remittances into the UK amount to $7bn p.a., which is rather more food for thought, or perhaps deposits to drive liquidity. The BBC reported in ‘06 that about 1 in 10 Brits elects to live overseas. Savills reported in ’08 that there are 425000 UK-owned properties overseas. A favourite topic for UK retirees abroad seems to be the reliability of their pension payments (but maybe that’s because the weather is too boring to be top of the list). Annual imports to UK amount to about $250bn, a fair proportion of which must be to and from SMEs, who need much the same payments services as P2P. Whether or not joining the Euro makes sense, it makes no sense to ignore cross-border payments because they are less than 2% of the total by volume. That statistic underplays their economic importance. If we go back to what SEPA was supposed to address, i.e. the Lisbon Agenda – it benefits us all if we make it happen. SEPA is predominantly about linking bank back offices, significant benefits from which are only likely to be realised when those back offices are made totally efficient. SEPA is not the only way to address international payments, and its scope is only Eurozone, where established private sector payments services have global reach and are consistently delivering STP rates above 99%. Perhaps Fusty Bank might want to think about adopting one of these models, and hence leveraging its brand name.

  2. Would be very interesting to compare STP, related actual cost and fees in Eurozone and non-Eurozone countries for cross border payments.
    Phonecalls, in majority, have been 100% STP for more then 100 years; an interesting objective for international payments?

  3. Of course the landing on the moon by the Americans is subject to a conspiracy theory that this was all make belief. Can we have a make belief SEPA. Who is going to know? Definitley not the corporates as no one told them about it in the first place!

  4. @Neil – agreed
    @Frank – I’ve not got a lot of info that is up-to-date on x-border fees. Will incorporate in the summer study of PSD/SEPA.
    @Peter – was that a shadow I saw behind Neil Armstrong? and yes, make x-border payments free to appear compliant, but ramp up charges elsewhere (interchange … kerching!).

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