I hosted a dinner last night with a focus upon developments with SEPA and innovation.
What innovations has SEPA introduced?
To be honest, there are some – the ability to cash concentrate direct debits into the most efficient countries using SDDs (SEPA Direct Debits) for example –but the list is real short.
We found the reasons why are multiple.
First, there’s innovation and change in wholesale versus retail, with the former taking much longer than the latter.
Second, there’s cooperative innovation where countries and operators need to work together to agree change and standards, which is why it takes the time.
Third, there’s delivery of a wholesale change across a wide economic area, which is not just eating an elephant but a humongous great Blue Whale.
Nothing is simple in the SEPA game, or end-game.
And is there an end-game?
Sure, we’re talking about end-dates, with a single end-date now mooted for end of 2014.
If 2014 is achieved, then twelve years after the creation of the European Payments Council we might get something implemented … but it’s still ‘early days’ as someone said.
Twelve years and it’s still early days?
Another banker said that “just as we’ve started to deliver innovation with SEPA, it may never happen”.
Hmmm … life is what happens to you whilst you’re busy making other plans, and twelve years after inception, SEPA might be delivering a stillborn infrastructure if the Eurozone implodes, as many appear to be predicting.
If you don’t think they are, then talk to a few banks around the City here and they’ll tell you that they’re seriously planning for a euro breakup, and modelling what that means to their systems, structures and processes.
No wonder when most respected media are now saying we’ve reached crunch time. From this morning’s Washington Post:
“After two years of failed efforts that world markets have swept aside as inadequate, Europe’s politicians face an increasingly sharp divide in combating their financial crisis: either take the sort of politically difficult steps that would tie their economies more closely together, or prepare for the breakup of the euro currency zone.”
So where are we in reality with SEPA?
The EPC’s latest numbers show that, “as of August 2011, the share of SEPA Credit Transfers (SCTs), as a percentage of the total volume of credit transfers generated by bank customers, amounts to 20.12 percent in the euro area”, whilst “the share of SEPA Direct Debit (SDD), as a percentage of the total volume of direct debits generated by bank customers, amounts to 0.13 percent (ECB SEPA Indicators)”.
SCTs have been around since January 2008 (that’s four years near enough) and SDDs since November 2009 (two years).
The reason for the slow take-up of SDDs is down to incompatibilities between country implementations of SDD, and specifically repudiation and revocation rights which have been compromised due to country opt-outs allowed under the rules (derogations).
So we don’t really have any innovation here yet.
Just a slow-burn.
Oh, one thing that was viewed as innovation in this wholesale space however is ISO20022.
“The ISO 20022 standard provides the financial industry with a common platform for the development of messages using:
- a modelling methodology (based on UML) to capture in a syntax-independent way financial business areas, business transactions and associated message flows;
- a central dictionary of business items used in financial communications;
- a set of XML design rules to convert the messages described in UML into XML schemas, whenever the use of the ISO 20022 XML-based syntax is preferred.”
The Nirvana of financial messaging.
And yes, if SEPA delivers a compliance and move to ISO20022 across the Eurozone’s corporations and banks, then yes, that’s good.
According to those around the room, this has to happen as part of SEPA delivery.
But I’m not going to place any bets on this happening.
And, as if to prove the point, put “ISO20022 SEPA” into Google and what you get back is a whole bunch of articles … from 2008.
Finally, about 30 entries down the list, you get a link to the EPC’s website where an article from October 2011 states: “the existence already of multiple interpretations of the ISO 20022 message standards; i.e. multiple domestic SEPA formats, threaten to undermine key objectives of the SEPA initiative.”
Maybe it’s just me but I’m thinking that, after ten years of evolution and little revolution, this thing ain’t working.
Anyone want to argue the toss?