SEPA Migration Needs Commitment from All Stakeholders
Significant progress has been made during thefirst year of the single euro payments area (SEPA), but the lack of an end date is causing a climate of uncertainty and stagnation that doesn’t allow banks to achieve the real benefits, like standardisation, centralisation and consolidation.
The use of SEPA Credit Transfers (SCT) has steadily increased month-on-month since its launch, but so far it seems to be mainly aimed at cross-border transactions in euros. Domestic payment instruments are still widely used, and thus fragmentation continues, even if some communities are starting to commit to migrating their payments to SEPA platforms.
In this regard, the Luxembourg and Finnish financial communities can be held up as an example of those that have already decided to move their domestic payments to the EBA Clearing STEP2, the first and only pan-European automated clearing house (PE-ACH). Starting in December 2008, EBA Clearing STEP2 increased the flexibility of the procedures, settling the SCTs into Target2 and further facilitating the SEPA adherence process for any bank.
Nevertheless, critical mass has not yet been reached for SEPA and the extension of the duality period is generating further costs for the banking sector – at a time when it is facing a global financial crisis and needs to limit expenditure and gain efficiency.
Obviously, completing SEPA migration requires the commitment of all the stakeholders. Promoting the use of new SEPA services and setting a deadline for the migration as soon as possible can facilitate this process.
There are many discussions surrounding a number of issues still to be solved, in terms of regulation and features of the new instruments. Among the main issues are: SEPA Direct Debit (SDD) mandate management and migration and the multilateral interchange fee (MIF) structure; the extent of the Payment Service Directive (PSD) transposition in November 2009,which is subject to different national interpretations by the 30 countries (EU27 + European Economic Area); the requests issued by corporates and their complaints about their inadequate involvement in SEPA products definition; and finally, the thorny issue of the commitment level of public authorities.
The SEPA implementation has already incurred huge costs for banks and, in the current situation, the overall project has gained an even greater strategic importance for banks to make business choices that allow them to seize the opportunities of SEPA to both capitalise on their investments and cut internal costs.
Information and communications technology (ICT) service providers play an important role as they can help banks, corporates and public administrations by supporting them with innovative and time-to-market products and services compliant with SEPA.
One of the main goals is to support banks both in the migration to the new pan-European instruments, by minimising the cost and organisational impacts during the duality period, and in the development of new value-added services, facilitating the business opportunities derived from SEPA.
SCT is already a reality, for example SIA-SSB is working alongside EBA Clearing on SDD in anticipation of the launch of this service in November this year. Additional optional services (AOS) will be likely needed to complement the SDD core features in order to ease the migration of domestic payment instruments.
Despite the fact that SEPA has not as of yet reached a critical mass of volume, as a technological provider of EBA Clearing STEP2 SIA-SSB can consider 2008 as a satisfactory year. In December 2008, the combined daily average of payments processed by the STEP2 SCT and XCT Services exceeded 550,000, with an increase of 48% since January 2008.
The STEP2 SCT Service processed an average of 281,578 payments per day, while the STEP2 XCT Service processed a daily average of 269,744 payments. In terms of volumes trend, the XCT Service has registered a small decrease of payments processed, mainly due to the migration towards the SCT Service.
In fact, statistical data show that the average daily volume of STEP2 SCT increased from 32,741 in January 2008 to 281,578 in December 2008, while XCT volumes went from 371,223 in January 2008 to 269,744 at the end of the year.