SEPA the catch 22

I thoroughly endorse the European Payments Council’s call for the EU authorities to get behind SEPA. However, as duly noted by Gerard Hartsink, public authorities – which focus predominantly on domestic payments – simply don’t have enough incentive to make the transition to SEPA without an end date for full migration.  So here we have a catch 22. With public authorities generating more payments than any other organisation – accounting for around 20% of payments in the EU, they are in an even stronger position than corporates to drive SEPA volumes and get this initiative truly underway.

A good example of the impact that governments can make on SEPA’s success is Belgium. Belgium generates approximately a third of SEPA transfers, which is a direct result of its government going SEPA last year. Given this, imagine how strong the scheme would be by now if all governments in the EU followed its lead. For example, if the French government converted its pension payments to SCTs, volumes would substantially escalate – further incentivising the market and creating awareness.

Interestingly, while the public sector could be accused of dragging its heels, according to the EPC, 2,607 banks will be ready to roll-out SEPA Direct Debits  from 2nd November onwards. Again, this is very welcome news, but before we herald SEPA a success we need to be cautious. There is a clear distinction between SEPA ‘reachability’ and actually being fully ready to handle high volumes in an automated environment. If the level of consolidation in the payments market is anything to go by, my guess is that most banks are actually in trial mode and won’t be at this full readiness stage until this time next year.

This leads back to the predicament that without the SEPA end date, public sector support remains low, and without public sector support, volumes remain low, and without volumes to be had, banks lack the sense of urgency to wholly embrace the scheme. Increased signs of commitment from banks are reassuring, but they must be encouraged by the governments getting behind this rather than simply imposing the regulation. Most importantly, we need the end date – this is the real catalyst for adoption.