SEPA Direct Debits falter in France

Creditor banks often charge fees to corporate clients for executing direct debit payments. But under SEPA, participating banks have been told that a MIF (multilateral interchange fee), otherwise a charge per transaction restricts competition between creditor banks and is therefore not aligned with the European Commision's Article 81(1) EC Treaty (antitrust rules).

Currently direct debits are considered free of charge in many member states as this service is often bundled in a package. In the context of Article 81, the possibility of a bank charging its own customers for such services via account fees or direct charges is not affected. In close analysis, this means that competiton is shifted towards the debitor banks and debitor banks can opt to charge their customers. And this presents a problem to french banks who have offered this service for free. 

This is similar to what happened to UK banks, but with cards. It was business as usual for UK banks to offer cards without annual charges. But with the decrease in interchange fees and credit being tightened, UK banks had to shoulder the implementation of EMV and the decrease in interchange fees. French banks were quite ready for EMV as they always charged their consumers an annual fee (average of 120 euros) for their (predominantly) issued deferred debit cards.

Perhaps the dilemma for french banks with SEPA is how they can charge their customers for direct debits without prompting massive cancellation of direct debits. Thus, the need for "for further investigation and clarification of the economics of new interchange fee levies". What is also interesting is the explicit involvement of Banque de France which jointly chaired the French National Sepa Committee and who issued this 'communique' to delay the SEPA Direct Debit launch.

With regard to ongoing SEPA progress, last month it was reported that 66 major banks from 16 European countries have registered with EBA CLEARING for the future Core SDD Service. Amongst them, 44 banks have as well signed up for the new B2B SDD Service. Both services are scheduled to start their operations on the official launch date of the SDD Schemes (2 November 2009).

By setting a definitive launch date for the SDD Schemes and starting the adherence process in May, the EPC has provided the necessary certainty for the banks to finalise their preparations in view of the November live date. The major payment banks across Europe are now committed to joining one or both of the STEP2 SDD Services and are ready to start testing.