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PSD and SEPA research results

The research results into the Payment Services Directive and Single Euro Payments Area are now officially released. 






Major research project reveals the flaws in Europe’s ambitions

European payments are about to be dramatically changed through a new European Directive for Payments and the completion of the Single Euro Payments Area scheme for direct debits, but there are alarming differences in country interpretations and implementation, as revealed by the largest research study of this market to date

London, September 8th, 2009 – With the Payment Services Directive (PSD) due to come into force on 1st November 2009 and the Single Euro Payments Area (SEPA) Direct Debit (SDD) scheme to follow on 2nd November, Europe should be at the start of a transparent, harmonised and integrated market for payments and payment processing. Instead, Europe’s policymakers, banks, corporates and infrastructure providers have become increasingly frustrated with 58% of them saying that the PSD is being transposed inconsistently and 63% stating that this is because of different interpretations at the country level. Only 13% believe it is being implemented correctly, according to a major European research report published today by The Financial Services Club, sponsored by BT, Earthport and Logica.

The research surveyed over 350 global payments professionals about SEPA and the PSD’s progress, as well as conducting over 25 in-depth interviews with the key organisations involved, including the European Commission, European Central Bank, European Payments Council, Euro Banking Association and European Association of Corporate Treasurers, as well as leading banks, infrastructures, payment institutions, corporates, vendors, consultancies and more.

In particular, the following personnel agreed to be quoted in the final report:

  • Ashley Dowson, Chairman, the SEPA Consultancy
  • Daniele Danese, Payments Manager, Banco Populari de Verona
  • Dermot Nolan, Head of Payments Strategy, Planning & Change,
    Bank of Ireland
  • Frank Taal, General Manager, Wholesale Banking Product
    Management, Payments and Cash Management, ING
  • Gerard Hartsink, Chairman, European Payments Council
  • Gianfranco Tabasso, Chairman, the European Association of
    Corporate Treasurers (EACT)
  • Gilbert Lichter, Chief Executive, EBA
  • Harry Newman, Head of Banks and Payments Market Infrastructures, SWIFT
  • Jad Khallouf, Chief Executive, STET
  • Lázaro Campos, Chief Executive, SWIFT
  • Leon Isaacs, Chief Executive, the International Association of
    Money Transfer Networks (IAMTN)
  • Martin O’Donovan, Technical Director, the Association of
    Corporate Treasurers
  • Martin Wilson, Chief Commercial Officer, VocaLink
  • Massimo Battistella, Manager, Accounts Receivables,
    Administration, Finance & Control, Telecom Italia
  • Michael Steinbach, Chairman, Equens
  • Paul Smee, Chief Executive, UK Payments Council
  • Vincent Brennan, Head of Group Payments, Bank of Ireland
  • Werner Steinmuller, Head of Global Transaction Services,
    Deutsche Bank

for which we thank them.

The conclusion of the research is that European member states are implementing the Payment Services Directive in a completely inconsistent manner which threatens to derail the progress of the Single Euro Payments Area. Certain member states were particularly cited as at issue more than others, with Germany and Italy seen to be a particular issue.  Sweden are also at issue, as they cannot implement the PSD until April 2010 due to skills issues.

On a more positive note, participants do expect new payments institutions to gain market share, particularly money transfer service providers, and that these changes have motivated many banks to look for more innovative services for their clients, particularly around corporate information services, e-payments, m-payments and e-invoicing.

Overall, the findings suggest that Europe’s payments program is moving in the right direction, but is still too slow and fragmented to achieve the objectives of true harmonisation without more co-ordination and management between the Commission, ECB and EPC, with the member states banks, policymakers, corporations and citizens.

For example, Werner Steinmuller, Head of Global Transaction Services for Deutsche Bank, states that: “Efficient markets need efficient payments systems. If it’s not happening, then it’s a crossroad for SEPA and the PSD, that may stop these changes succeeding.”

Chris Skinner, Chairman of the Financial Services Club and leader of the research project, adds: “European payment initiatives have come a long way over the past seven years, in the bid to achieve a harmonised financial market.

However, the time, cost and gradual process has slowed to the point of boredom and frustration for many involved and there is now a big concern that a further period of static vacuum, as the PSD irons out its inconsistencies, could undermine the achievements of the SEPA program.”

Key Findings

58% of survey respondents say that the PSD is being transposed inconsistently and 63% state that this is because of different interpretations at the country level; only 13% believe it is being implemented correctly.

64% of banks and 67% of infrastructure providers believe the interpretation at country level is an issue.

61% of respondents believe this program is ‘critical’ (18%) or ‘very important’ (43%) to Europe’s future.

35% believe the benefits are that it will make European commerce ‘seamless and simple, with less banks and fewer barriers to cross border trade’, whilst 18% felt the major benefit was to ‘allow international corporations to rationalise their bank relationships’, and 13% that it would create a Eurozone as ‘large and competitive as America or China’.

14% said the main driver of the harmonisation program is for the ‘benefits’, with 19% voting for the ‘cost savings’ and 15% for ‘increased competition’; but the single largest group were the 38% who believe this is purely ‘politics’ being driven out by the European Commission’s agenda.

58% of Germans saying it is political compared to 23% of Italians. Equally, 42% of the banks state it is political compared to 25% of the technology firms. In fact, the only group that had a wildly different view were those from outside Europe, with 23% of the non-European voters believing that the changes are focused upon ‘benefits’ and 18% for ‘innovations’.

37% of respondents believe the biggest barrier to the PSD’s success is ‘national protectionism’.

28% of respondents say their banks are leading the way or being supportive of SEPA, and a further 55% say their banks are implementing SEPA according to the rules; 17% believe their banks are either avoiding or delaying SEPA.

21% of this survey’s respondents think that the date for the SEPA vision to be fully realised could be as soon as 2012, but most think sometime thereafter with 23% saying 2015 and 11% sometime after 2018.

When asked why SEPA Credit Transfers (SCT) are taking so long to take-off, the clear answer (27% of respondents) is that it is because there is no motivation because there is no end-date. A further 22% felt it was because everyone is unsure of the benefits that can be gained from SCTs.

When asked who was most supportive of the SEPA agenda, bankers voted for the European Commission (46%) first, rather than themselves (27%).

When asked: “how ready are your banks for the implementation of SDDs in your country?”

  • Belgium: 13 out of 15 respondents said ready (87%)
  • Germany: 20 out of 24 respondents said ready (83%)
  • Austria: 10 out of 12 respondents said ready (83%)
  • Italy: 10 out of 12 respondents said ready (83%)

  • Spain: 6 out of 8 respondents said not ready (75%)
  • Ireland: 11 out of 18 respondents said not ready (61%)
  • Sweden: 4 out of 8 respondents said not ready (50%)
  • France: 4 out of 8 respondents said not ready (50%)
  • UK: 36 out of 78 respondents said not ready (46%)
  • Netherlands: 4 out of 9 respondents said not ready (44%)

When asked: “How well prepared do you believe your national authorities are for the implementation of the Payment Services Directive on 1st November 2009?” the survey found that only 15% of country-based respondents felt their country was ‘very ready’; 23% felt ‘quite ready’; 30% ‘just about ready; 27%, ‘not really ready’; and 6% ‘not ready at all’.

When asked: “How is your country implementing the PSD?”

  • 7% of respondents say their country is implementing the full PSD with no changes;
  • 60% state they are implementing the full PSD with changes that are permitted;
  • 19% are implementing part of the PSD, but the important parts (10% with no changes and 9% with changes that are permitted);
  • 10% are transposing with changes that are not permitted; and
  • 4% are not implementing the PSD at all.


The Payment Services Directive is flawed in both its drafting and transposition

The 23 Additional Optional Services (AOS) along with derogations (the ability to interpret legal terms for local implmentation) mean that Member States have inconsistencies over how currencies are treated and whether they are in or out of PSD’s coverage (the ‘leg-in’ / ‘leg-out’ issue); how small businesses are classified as consumers or corporates; how payment accounts are defined; how direct debit products are defined; and more.

Every country is using AOS and derogation to protect historical products, services and infrastructures.

This inconsistency means that there is no harmonisation across Europe’s payments instruments, even though this is a maximum harmonisation directive.

It is highly likely that 2012, when the European Commission review the transposition and implementation of the PSD, that a revised PSD will be drafted eliminating AOS and other anomalies, such as multilateral interchange fees on cross-border direct debits.

The result is that the PSD will not support an integrated and harmonised European payments marketplace until 2013 or beyond.

The Single Euro Payments Area is progressing but too slowly.

SEPA’s clearly gained momentum as banks convert core systems to use the new schemes and formats; by way of example, SEPA Credit Transfers have more than doubled in volume from under 2% of all credit transfers in the Eurozone in May 2009 to almost 5% by August 2009.

SEPA is still progressing far too slowly to be convincing however, and when SEPA Direct Debits come into play in November 2009, if the new schemes are not demonstrating critical mass within an eighteen month timeframe, then the SEPA program will be deemed to have failed.

SEPA has strong support amongst the banking community, but not amongst corporates and other end-users; this support needs to be promoted through political weight of force by ensuring all member state public authorities and utilities migrate to the use of SEPA instruments during 2010 and by the introduction of an end-date for SEPA migration as a regulatory mandate.

The SEPA end-date is expected to be around the end of 2013, but the migration of end users (corporates) and obsolescence of existing national infrastructures is not expected to happen until the end of the next decade (2018 or thereafter).

Ultimately, Europe’s payments program is definitely off course. How far off course is just dependent upon which way you look at it.

Three reports are now available that substantiate this research:

“The State of the European Payments Marketplace: the progress of SEPA and the PSD, a Qualified View”, provides a summary of the survey results, alongside all the commentary received from both those persons interviewed, and the survey respondents. This document is suitable for those who want a pure view of the results and commentary of the markets. Report: 186 pages.  

“The State of the European Payments Marketplace: the progress of SEPA and the PSD, a Quantified View” presents the survey in presentation format, with in depth analysis at an institutional and country level. This document is suitable for those who want PowerPoint slides that give them the detailed analysis of the survey results at an institutional and country level. Only a small part of this data is included in the Qualified view. Report: 170 pages. 

“The State of the European Payments Marketplace: the progress of SEPA and the PSD, a Data View” presents the survey in spreadsheet format, with in depth analysis at an institutional and country level. This document is suitable for those who want all of the data that went into the Quantified View’s slides so that they can make their own charts. Only a small part of this data is included in the Qualified view. Report: 210 pages.

Free copy of management summary of qualitative analysis (19 page pdf, 300kb)

Download Survey Summary

Free copy of key answers to quantitative views (27 page pdf, 1.5mb)

Download Results Summary

For the full reports, with several hundred pages of further analysis, the reports can be purchased individually on a single user licence basis.  A 20% discount per report is provided on the purchase of two reports and 33% for the purchase of all three.

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The reports can be purchased without VAT. This option only applies to purchasers outside the European Union, or EU customers outside the UK who email a valid EU VAT code to admin@balatroltd.com.

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A corporate licence is also available if you require a multi-user licence for these reports to share amongst staff internally.  If you would like to purchase a corporate licence, please contact admin@balatroltd.com.

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.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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