SEPA: for the benefit of Europe

SEPA will be officially launched from 28 January 2008. Banks have invested large sums of money to start the Single Euro Payments Area. The European Commission expects the EU plan to save the EU economy 50 billion euros to 100 billion euros a year by creating a single market for euro payments. SEPA is expected to be beneficial in the end for all parties involved and will quickly deliver benefits to consumers, public administrations, SMEs and corporates. For banks however SEPA transition costs may exceed revenues in the short term. At the same time, SEPA will create many strategic challenges and opportunities for banks to increase their revenues by offering new (innovative) products and business models.

Transition period

SEPA will be launched in January 2008 and replaces over time national euro payment systems. However some parts of SEPA will be later than expected due to late adoption of the Payment Services Directive to allow direct debit, credit transfers and card payments to operate across all member states in all current 15 EU currencies. What can consumers expect from January? Banks in Europe will be able to deliver SEPA credit payments services to all customers who want them from 28 January 2008. They are also expected to be ready to start delivering SEPA Cards Framework (SCF) compliant services from January 2008 and have replaced their non compliant cards at the latest end 2010. SEPA direct debit services however won’t be fully available until November 2009 at the latest.

Intensified communication

Banks have made substantial efforts to be prepared for the timely launch of the new payment instruments, but for SEPA to become a success it will need the support of all users of payment services. To encourage customers they must be persuaded that these instruments will bring value and convenience. Communication on SEPA both by European and national public authorities and banks should therefore be intensified.

Corporates and Public Administration SEPA strategy

SEPA will also have a profound impact on corporate business and public administrations. They will look to their banks for thought leadership and direction on the strategies they should adopt in the post-SEPA environment. Banks are expected to develop and offer new and attractive value propositions for their customers and especially for specific customer segments. Banks should thus not only assist their customers in changing over to the new SEPA payments products but also start informing customers on their detailed product and service offerings for SEPA.

Concluding remarks

Tomorrow’s payment landscape is going to look quite different from today’s. The banking industry has given their full commitment to SEPA and empowered the European Payments Council to support the creation of SEPA. Most banks are ready for the SEPA take off; SEPA, however will not happen without strong commitment of all parties involved. All economic players have roles to play in making the SEPA project a success and it is now time that everybody takes their responsibility. Only that will enable us to turn the SEPA vision into reality for the benefit of the whole of Europe.

About eSEPA

SEPA should also spur new forms of services in the area of e- and m-payments channels and e-invoicing. So-called eSEPA will add additional value to SEPA and is seen to have a large growth and savings potential throughout Europe. It is a big challenge for European banks to co-ordinate the innovation in the co-operative space for these kinds of services. As these emerging markets are still too fragmented with many proprietary solutions, it makes sense that banks should agree on the business rules and standards.