Interesting to be in Asia at the moment, which is where I flew out to in case you were wondering yesterday. I’m here at a major payments conference and was sorry to miss the minor "hurrah" as SEPA went live on Monday.
Whoopee-doo! Did you see the celebrations and fireworks? Nope? Neither did I.
In fact, to mark such an important event most of Europe’s payments elite, such as Gerard Hartsink who is the Chairman of the European Payments Council (the EPC are the designers of SEPA), appear to be over here with me at this conference. Maybe we all knew something that others didn’t, like Monday would be a bit of a non-event.
Anyway, Gerard did take some delight in pointing out to me that the European Commission have just released an in-depth research report on the benefits of SEPA. The report is produced by Cap Gemini, and shows that SEPA might create "net benefits to payment markets" of €123 billion in six years. The study (pdf) was published at the weekend on the bit of the European Commission’s website dedicated to the announcement.
SEPA delivers about €20 billion a year in benefits to euro payments. Yowser.
Mind you, this contrasts somewhat with other studies, such as some of the contributions I read in my new book on SEPA. With contributions from a wide range of folks … from the MEP who drafted the PSD, to the EC, EPC and EBA folks, to the JPM’s, Citi’s and Nordea’s, and on to the corporates through TWIST and the EACT, and on to the IBM’s, Sterling Commerce’s, Eiger’s and Vocalink’s, concluding with the SEPA consultancy, UTSIT, Price Waterhouse Coopers and more … the book provides a 360 degree review of SEPA and it’s implications for the future.
So, what the hell are folks like me and Gerard, with our close involvement with SEPA, doing in Singapore in this momentous week?
Well, partly because Asia, like the GCC in the Middle East, may follow our example.
There has already been some discussion here about an ACU – an Asian Currency Unit. The idea is that the ACU would emulate the ECU in Europe, as the precursor to a regional currency. This implies that the Singapore Dollar, Malaysian Ringgit, Thai Baht and others would become the Aseo, or whatever the currency is called longer term.
The challenge however is to think of the size of Asia.
With China and India being so predominant, and Japan’s heritage and historical prowess, through to Indonesia’s mass and Philippines populous, it is hard to see how Asia could ever create a SAPA, a Single Aseo Payments Area. In particular, I cannot see how governments could work together across such a diverse region. Mind you, we said the same about Europe, and look what has happened there.
All it takes is a few key countries to kick off the process and maybe we could see Southern Asia starting this process. For example, Thailand, Singapore, Malaysia, Philippines and a few others could get together and create an economic union and a common currency unit.
This is the thing we have been debating over the past couple of days, as well as the other thing Asia is seeking to do which is to create a Regional Settlement Infrastructure. The aim is to have a regional SSP, like TARGET2 for Securities Asia, and some authorities are trying to play a key role in delivering such services, especially the Hong Kong Monetary Authority.
The thing is though that gaining momentum in the GCC and Asia is hard, and both regions appear to be delaying or even rejecting economic and monetary unions of the type Europe has just installed. It intrigued me that it is actually the banks who seem keener to have this than the governments for example, and some banks are starting to lobby to get regulations drafted to enable this. They cannot just develop it themselves without the political backing you see, as the legal recognition of cross-border products wouldn’t exist.
However, if they did form an Asian Union, what would they call this currency if not the Aseo?
Oh … I am told they would call it the US dollar.
Not sure that’s a good choice as we created SEPA to make euro the intelligent alternative. Personally, I would hedge both ways and invest in the Yuan. Seems like the only currency with some growth potential right now.
Meanwhile, as discussed before, the real vision is to create a single global currency …
… and, one day, pigs might fly.