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Does SEPA matter?

We had a good meeting of the financial services club this week to debate SEPA, and whether it matters.

It was a repeat of last year’s meeting, with Fred Bar of Vocalink and Gary Wright of the SEPA Consultancy putting the case for SEPA opposed once again by Paul Smee of the Payments Council and Simon Bailey of Logica.

This year the debate had moved on a little bit, with the view that SCTs doubling in volumes from just over 5% in 2010 to 10.4% today showed that SEPA was irreversible and moving forward with momentum.

This was countered by the view that the EPC hoped to have SEPA fully in place by 2010 back in 2002, and then irreversible by 2010 in 2005. The reality is that SEPA still has a long way to go.

No way, say the supporters of SEPA. It’s here and you cannot refute it is succeeding, especially now that there is an end-date likely to be implemented for early 2013 for SCTs and 2014 for SDDs.

“Sure, sure”, say the naysayers. You have an end-date, but it’s a totally chaotic transformation when you throw in the fact that you have ISO20022, XML, BIC, IBAN and more as part of this process which is a problem for everyone, particularly those countries that are not in the EU for example.

Get out of here, say the SEPA-leaders, who believe that we are past the point of no return and that debate should be more about how to exploit SEPA as the American banks are moving into this market big time and, if anything, European banks have been slow to exploit the opportunities that SEPA offers.

Nein, state the SEPA-ratists, who note that the vision is lacking and that the machinations of SEPA have been just that: a bureaucratic machine. SEPA needs some excitement if it is to work, they claim.

The debate raged on for a good hour or so, with the audience lobbing in a few points including:

SEPA seems to be key for the banks, but for the customers?

Is there a raison d’etre for SEPA?

Does anyone need it?

Where’s the consumer and corporate requirements?

A couple of points I particularly noted is that SEPA or, more importantly, the PSD is important for corporates as the commercial clients of banks can now register as Payments Institutions (PI) potentially. As a PI, a corporate can then circumvent the bank if they want … an opportunity that some will take in the future they believe.

The other point is that the Euro debate that has raged for the past few months is a key burning platform in the SEPA and PSD debate. Does SEPA matter if the Euro implodes, or moves from a single Euro to a hard Eurozone and a soft Eurozone, whatever that means.

None of these questions are easily answered of course, but the debate is fun to have and, like last year, the final vote of whether this house believes SEPA matters was split firmly down the middle.

The vote was carried against the motion however by the voice of the Chair.

So this year, this house believes that SEPA doesn’t matter.


Because, as the Chair, I think that the Euro matters far more.

The debate right now should be whether the Euro matters and whether it can be maintained.

Once we get through that debate, then SEPA will obviously matter once more, assuming that the debate is won by the Euro supporters of course.


UPDATE – 10th February 2011, 07:55

Just got an interesting note from a friend that reads:

I read your SEPA blog of today and I can see that the progress is slow in most places.

The Finnish market (banks and customers together) decided to put a target end-date for SCTs for 31.12.2010 and a final end-date (banks stop receiving old transactions formats ) for 31.10.2011.

These deadlines got the customers moving.

By the end of 2010 we had close to 50% of all credit transfers in SEPA format from the customers (when it was below 10% in the beginning of the year.

We do not have yet the statistics for January but the growth will probably be in the range of 10-15% more of converted volumes.

By this development Finland has become the largest SEPA-country in the EBA STEP2 ACH-service.

So with a good planning and dedication the conversion can be done in a reasonable timeframe.

You can read more at: http://www.fkl.fi/www/page/fk_www_4065


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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  • Chris, I disagree with the chair’s conclusion. I voted in favour. SEPA does matter. Since Europe is the major exporter of financial services globally, the Lisbon agenda ‘make Europe the most efficient e-economy’ is important. ‘Without a vision, my people perish‘, to quote one participant. We need to move on, towards a redefined goal – which in my view should not be limited to one currency (so back to ‘European’, not ‘Euro’). Cross-border collections and payments, e-invoicing, supply chain, receivables reconciliation initiatives are important to corporates; speed, transparency, certainty are important to consumers. The PSD begat a large number of PIs (not all of which exist to disintermediate banks – some aim to re-intermediate banks), which introduce new ways to address these issues; 2EMD will bring more. Credit due to the regulators.
    If the end-date becomes the end of SEPA, we lose momentum towards the far bigger prize, which would be a shame.
    And there is no better (or other?) community than this one to drive forward.

  • Chris Skinner

    You can disagree Mr. Burton, but the vote was split on the night … and my conclusion is that the Euro matters more than SEPA right now, e.g. will there still be a Euro in a year or two. That’s pretty important.
    Mind you, even if the Euro does disappear, SEPA will still be here as I blogged about last year: http://thefinanser.co.uk/fsclub/2010/05/what-happens-to-sepa-chix-etc-if-the-euro-fails.html

  • SEPA matters for all the SME that work, or want to work, on an international basis. Shorter payment cycles, real time processing and low fees are all good for the tangiable part of the economy. More transparant cross-border payments build trust and glue disparate economies together.
    The navelgazing protectionism apparent in these discussions is nice, but what sense does it have to have an EU that is slowly dying of rigidity?

  • Chris Skinner

    “Navelgazing protectionism” … interesting phrase Paul. I think you point to the debating area raised about the opportunities for SEPA and the fact that the some banks are taking them.
    Sit on your ass-ets, and ignore SEPA and you might find it painful a few years from now …

  • Harri Rantanen

    Just start using it (like we in Finland with SCT end-date 2011-10-31) and you notice it really matters. Has made already a big improvement in banks’ and corporate processes towards more STP. And the big thing behind is the ISO20022 business model that is expandable for multiple other purposes too.

  • Chris,
    The way most banks earn a living are quite simple to identify and classify using a systems approach.
    Most act by exploiting either item 9 (relative delays), 10 (flow structure) or 11 (relative buffer size) of the potential ‘leverage points’.
    Sitting on ones ‘ass-ets’ is a form of mixing 9 and 11..
    Some banks are good at 7 and 8 (positive and negative feedback loops), few at 6 (information flow structure), and an even rarer few at 5 (rules of the system itself).
    Of course SEPA means they can’t have these 3 to 7 (or more) days of delay on payments which take less than a second to process, nor can they penalize for a multitude of lost interest for transfers done on actual days instead of ‘registered’/accounting days.
    Having dealt with three Italian banks as a small company, i’ve seen all these tricks being pulled.
    Eventually i moved my whole business to Switzerland just to get rid of this antiquated foolishness.
    As you mentioned a few articles back, i think we’re on the threshold of a shift in defining what money actually is, or represents, and i think we’ll get a level deeper and banks will be more about information processing than anything else.
    One can see this on the stockmarket already how companies use marketing, careful planning of acquisitions, product launches etcetera to boost the value of their stock, and even create positive feedback loops around their ‘brand’. But it is also apparent with the ‘geo-location’ dependent cost of living schemes, which sometimes give a surprisingly different picture than what the currency represents. I guess that’s the whole trouble with the Euro or even national governmental schemes.. they don’t fit the actual social and geographical distribution of the economy, and because we’re inside a technological acceleration where non-realtime processing becomes irresponsible, we’re cutting away the delays and buffers which use to hold it all together. But we have to.. it is intrinsic of the capitalist system we’re involved with.
    The German Euro is not the Italian Euro.. nor is the governmental Euro the same one as i use at the local supermarket. Eventually we’ll be dealing with different temporary forms of valuation, as you already foresee with the rise of social currencies which is an appearance of these information processing ways. So, i think the future of banking lies in the act of valuation, where it started.

  • Nick Wellesley

    This guide provides in-depth analysis of the SEPA schemes, together with helpful checklists and pointers for those embarking on a SEPA project: http://www.fx-mm.com/whitepapers/a-new-era-has-begun-a-guide-to-the-single-euro-payments-area/