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This house believes that SEPA does matter … or does it?

We had a great debate at the FSClub the other day, with the provocative title: “this house believes that SEPA (the Single Euro Payments Area) does matter”.

The evening was chaired by the more than capable Bob Lyddon, who coordinates the IBOS Association secretariat, and four panel members who ‘played’ parts in being proposes and opposer of the motion.

Proposing the motion were two leading European Proponents: Gilbert Lichter, CEO of the Euro Banking Association (EBA) Clearing Company that runs STEP2, a Pan-European ACH; and Fred Bär, Managing Director for Euro Services at Vocalink.

Opposing the motion were two devilish Brits, set up in the form of Paul Smee, Chief Executive of the UK Payments Council; and Simon Bailey, who is currently starring in 'The Phantom Of The Opera', at Her Majesty's Theatre where he plays the role of Raoul.


Whoops, sorry, it’s not that Simon Bailey. It’s Simon Bailey of Logica … an easy mistake to make.

On the night, Bob kicked off the motion by making clear that there
are four immutable facts about SEPA which were not up for debate. These
are that there is no end-date set as of today (although I think one is
coming); the Core and B2B SEPA Direct Debits schemes are in production;
the fact that there is no requirement for central bank reporting for
transactions under €50,000 is good for efficiency; and cross-border
direct debit and credit transfer euro transactions must now cost the
same as domestic transactions.

With those four foundation points, Bob then asked Gilbert to take the floor.

SEPA debate

Gilbert gave a resoundingly balanced view, stating that the old days of cross-border margins and operations were a luxury. The way correspondent banks worked and the form filling required for cross-border payments were a big issue in inhibiting trade across Europe, and those days are now gone as European Commission Regulation 924/2009 makes it clear that every bank in Europe must now be reachable for SEPA Direct Debits.

As these changes will alter the behaviours of payments processors and payments users, innovations will follow, as innovation follows buying behaviours. By way of example, Gilbert cited Spain where SEPA payments have increased from 3.5% of transactions to 13.6% in the last quarter.

All of this means that SEPA does matter, because it is fundamentally changing European commerce and pushes banks to the management table.

Paul Smee responded with a worrying opening line that SEPA reminded him of the old Samuel Johnson saying that ‘a woman's preaching is like a dog's walking on his hind legs. It is not done well; but you are surprised to find it done at all’.

There was a sharp intake of breath as, in today’s politically correct world, Paul should really have substituted the word ‘dog’ for ‘bitch’ [editor: stop there!].

Paul’s comment was far more relevant to SEPA than the incorrectness of the statement however, in that if SEPA were that needed, then how come there haven’t been any SEPA street parties yet to celebrate. Again, I would claim that there have been a few … but then SIBOS, EBA Days and IPS aren’t exactly street parties are they, as we all celebrate inside bars of the world but, there you go.

Paul continued by saying that the reason for the lack of celebrations is down to the fact that:

  • SEPA is not critical and nor are payments. No-one wakes up thinking about how important any of this is, unless you abolish cheques;
  • SEPA doesn’t matter because it has been a top-down process driven by politicians with no user involvement. The European Payments Council (EPC) must engage with the user communities, such as those represented by the UK Payments Council, for this to succeed; and
  • SEPA is not working because, based upon the UK’s experience with the Faster Payments Service, if you have a regulatory mandate involving technology change, IT will support this but the business community will not. In other words, SEPA needs a business requirement to succeed, not just a technology change.

A few heckles raised meant that it was time for the seconder of the motion, Fred Bär, to respond to Paul’s comments.

Fred began with comments that banks do innovate, with the direct debit being a good example, but it can take a long time to be pervasive especially when there are so many constituencies, groups and actors involved (was he referring to Simon?). That is why it will take twenty years for a baby of this size to be born. Nevertheless, the fact that it is so difficult – with IBAN and BIC usage being a good case in point – does not make it worthless and SEPA is worthwhile and does matter.

However, it could have mattered more if the launch of the infrastructure was supported by a regulation that mattered. Unfortunately, this regulation – the Payments Services Directive – lost all credibility just as things were moving forward, and when we were at a point when the regulation needed to be more credible than ever before.

Then the Phantom that is Simon stood up and delivered the most damning attack on the program of all of the evening’s speakers who, remember, are all playing ‘a part’ in the program and do not necessarily believe the views they are presenting.

Anyways, Simon began by asking what exactly is SEPA, and to whom exactly is it supposed to matter for? His point is that there is no common definition of SEPA, as demonstrated by some referring to it as the Single Euro Payments Area and others the Single European Payments Area.

There is no clarity of ownership, which is why there is no ownership; there is no legal representation and the legislation meant to provide clarification is unclear; there is no business case for SEPA with users, the ACHs, the corporations or the banks and, where there is a business case such as with einvoicing, it has nothing to do with SEPA.

All in all, it is just a political need that is driving SEPA and nothing else. So what is SEPA? No-one knows, so how can it matter?

Bob then opened the evening to an open discussion with the audience, who asked intriguing questions, such as: “where are the imperatives for SEPA? What will make this happen?” and put the provocative point, such as: “SEPA doesn’t matter because there are far more important things taking over the agenda today, like Obama’s banking reforms, balance sheet capitalisation and liquidity”.

I think my favourite comment had to be from one panel member though, which was that SEPA seems to be moving in ever decreasing circles “having started with a vision and ended with a committee”.

Anyways, we concluded the evening with a vote and, surprisingly, the motion was carried by a single vote.

SEPA debate1

So yes, this house does believe that SEPA matters … just.

Meantime, returning to the theme of the Phantom, the sequel to the Phantom of the Opera comes out soon. It’s called: Love Never Dies, and I wonder if that’s what we’ll see with SEPA.

SEPA Never Dies; it just goes on and on and on and on and on and on and on and on and on and on and on and on and on and on and on and on … bring on the end-date

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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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