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The latest on SEPA

At this year's International Payments Summit (IPS), there were discussions of many areas including social media, mobile, cloud, regulations and innovations.  These have all been summarised in a wonderfully short overview document available to paying attendees.

 However, given my interest in SEPA and the fact that we are just closing our fourth annual survey into its impact (have you taken part yet? if not, click here as it closes this Friday!), I felt compelled to extract the IPS summary of the SEPA debate at the conference and replicate here. 

Enjoy!

Despite
the February 2014 SEPA migration deadline getting ever closer, it is likely the
harmonisation initiative will be a subject of intense discussion at IPS for
years to come.

This
year much of the debate focused on SDDs and whether they will be fully
operational by the migration deadline.

One
of the key issues is that when SEPA was envisaged and designed, counterparty
credit risk was not top of the agenda; post-Lehman Brothers crash and it is.

Ruth
Wandhofer, global head of regulatory and market strategy at Citi Transaction
Services, highlighted the issue: “Migration to SEPA is a national issue that is
not controlled by the EPC or the European Commission. I see a high level of risk
in that because we don’t have a scheme company that manages the risks between
participants in SDDs. We have debits between banks that don’t know each other.”

Another
concern about SEPA is that there is no “plan B”.

Peter
Frambach, head of international payment services at Ages Maut System, said this
lack of an alternative could “severely damage the economy. Not being ready for
SDDs will be very dangerous for corporates and could affect liquidity and
credit solvency”.

He
said his company settled 1 million DDs per year in ten countries and ten different
formats.

“Under
SEPA, not even the SDD core is available with every bank – there are 970 banks
in the euro zone that are not registered for SDDs. Some people think SEPA is
too complex and are waiting for a solution or are postponing integration until
as late as possible because they see no benefit in it.”

Massimo
Battistella, manager AR at Telecom Italia said SDDs required a new way of
collecting mandates and there were no business opportunities for corporates in
moving to SEPA in the short-term. “We can see benefits in the future, but we are
very far from those opportunities today.”

There
were plenty of defenders of SEPA.

Pierre
Petit, a deputy director general, payments and market infrastructure, at the
European Central Bank said the initiative was one of the very few projects that
had not been derailed by the financial crisis. “We think European integration
of financial services will generate cost savings and increase productivity. But
there are two challenges for SEPA; migration is going relatively smoothly
except in a couple of cases such as the SDD and that is a serious concern. The
second area is card payments, where a common set of business rules is required.”

Barbara
Sacchi, head of electronic payments development at Unicredit said SEPA migration
would vary across countries, and while the business model is so fragmented now,
she was unsure whether the promised standardisation of SEPA would materialise.

Kirstine
Nilsson, SEPA and PSD coordinator at Swedbank, said one of the challenges in
implementing

SEPA
is that in each country, payments professionals feel they have very efficient
payments infrastructures that are true to their country’s needs. “But we need
to move from a domestic payments environment into SEPA. There are many
decisions that have to be made and the road to

SEPA
will be bumpy. SEPA is necessary for creating an innovative platform that is
better than what we have today.”

SEPA
was of course discussed during the dedicated corporate stream. Andreas Resei,
European treasury director at Mondi, welcomed the reduction in payment formats
and the opportunity to use a single system for payments that SEPA promised.

But
he said many companies would require support to ensure they met the 1 February
deadline and that there was a need for more dialogue between corporates and
banks.

 SCTs are about managing the IBAN, said Telecom
Italia’s Battistella.
But SDDs are more complex and change the whole business model. “It touches 30 systems we
use to collect mandates. These systems have worked for decades without any
problem.”

Telecom
Italia has more than 8 million direct debit mandates that will be affected by
SEPA. It will spend tens of millions of euros in order to comply.  “If I went to top management and asked for
€30 million for SEPA a few years ago, they would have killed me,” he said.

 

 

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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2 comments

  1. Seems 90% of the SEPA-Enddate issues are related to implementation of SDD – a “product” which was discussed, well known and do exist for the last 3-4 years. Surprise.
    But – what have actually to be done: a new contract between creditor and bank, procure a Creditor-ID from the Bank, give existing (!) debtor-mandates (which stay legally valid) a series-number…. voilà.
    No mandate from the debtor: means you are possibly illegal today
    Large risks between countries: pls show me huge cross-border volumes on SDDs first
    No plan B: there was none for the Euro-introduction neither.
    No benefit: makes no sense to discuss this point which could fills books anyway. But eventually it’s a political decision and – think holistic – should foster the whole European economy 😉
    So what – please stop howling and croaking – simply talk to your customers/to your banks, there are an endless number of informations-sheets and guidelines published… just do it – we’ll make it…!!!
    NB: Dear bank-customer: your bank is not SEPA-ready ? Time enough to change the bank….

  2. Great summary, Robert!

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