SEPA; a spectacular failure of misunderstanding

SEPA's vision of creating a single market wherein EU participants can make and receive payments in euro within Europe with the same conditions (pricing and legal) regardless of location is a good vision. 

In my opinion, a spectacular failure of misunderstanding is half-way true. It is a spectacular failure but I don't believe that it's a failure of misunderstanding. As you point out, "A blind man could see that despite SEPA looking great on paper, there was no motivation for banks or corporates to invest in building systems or changing their business.".

It would seem to me that if the EU Commission wants to achieve their goal, that they can just easily set the guidelines for cross-border fees (for credit transfers and direct debit) and penalize banks that charge consumers more. Banks will then naturally find the most efficient way to do these credit transfers.

Essentially, this is what happened with cross-border card interchange fees (note VISA's MIF and Mastercard's fee structure).

Additionally, card payments present a competition to credit transfers and direct debits.  For example, consumers do not have to pay fees when paying with cards. Consumers do pay for making credit transfers. Currently, card payments are more convenient than direct debit. Direct debit has great potential but not from the point of view of banks if they remain free of charge. It's quite understandable if banks prefer to promote the use of card payments than direct debit since they earn each time their issued cards are used, not so with direct debit.

Fees are another topic of conversation. I'm not saying that direct debit should remain free. We all know that although banks say that they can not charge their customers for services, that they eventually find a way to charge them.