PSD Breeds European Fragmentation

SEPA credit transfers went live at the beginning of this year and to date can hardly be called a resounding success. What is presented in the media and the party political line spouted by various pundits masks the truth, that there are fundamental problems with SEPA. The problems have a direct line to the drafting of the Payments Services Directive (PSD) and the political objectives that caused its creation.

The folly of the European Parliament is to trust the drafting of the directives to those people and organisations that have a vested interest. Not vested in its success but its failure.

The overall intentions lying behind the PSD are laudable enough as was the design of SEPA but put together for implementation they both lack broad acceptance across all EU States and the banking industry.

The corporates in general are extremely supportive of the PSD and SEPA but have been playing catch up in the political game being played in Brussels, with the banks in charge of the race acting as starter and determining who enters. It is for this reason that their corporate customers were kept on the fringes of SEPA and only had a limited influence in the PSD. Why were they not involved at an earlier stage will be left to conjecture.

The problem now is that each EU State is beginning to alter the original PSD to suit its own desires, thus badly affecting SEPA credit transfer volumes. As each EU State alters the PSD and SEPA the chances are now becoming odds on that the European Union will now have as many versions of the PSD as States and as many different users of SEPA as the banks allow. So much for the European Union and harmony! What we are getting is disharmony, fragmentation and vested interests.

The customers as usual are the ones to suffer as the PSD and SEPA has terrific impacts on reducing payments costs and increased efficiencies across the EU. But the banks are hardly likely to welcome any changes, which cause them increased development costs and a loss of revenue.

As the financial markets lurch from one crisis to another and the confidence of the customers and for that matter, the electorate erodes, how much muscle has the European Parliament got to enforce implementation of its own directives.

So far, I remain very sceptical that the European Parliament knows what or how to manage the banks and each EU State, to solidify just one version of the PSD. Only then can we anticipate a growth in SEPA volume.