SEPA: The Beginning of the End or the End of the Beginning?

1st February will be remembered for many things including the end of the Cold War in 1992 and The Beatles “I Want to Hold Your Hand” becoming number one on the US charts in 1964 which many feel was the beginning of a music revolution. 1st February 2014 adds to the roll call of major historical events with the end date for SEPA (Single Euro Payments Area) migration.

The objective, to create a harmonised payments landscape across the Eurozone (and by 2016 for all Euro payments), is not an unreasonable ambition. Fragmentation, high cross-border charges for transferring cash within different parts of the Eurozone, and varying payment conditions place Europe at a competitive disadvantage to the more cohesive world economies of the United States and China.

So why, 10 years since SEPA was announced and 5 years since SEPA Credit Transfer (SCT) was launched are only 30% of credit transfers and 2% of direct debits SEPA-compliant[1]? After all, while it may appear inconvenient, SEPA migration brings advantages particularly to businesses operating across Eurozone countries: cross-border charges are eliminated; cash management, payment and collection processes can be simplified; and account structures rationalised.

Initially, the European Payments Council (EPC) believed that a critical mass of organisations would recognise these benefits, creating the necessary momentum for SEPA migration. This has not happened, for a variety of reasons: continued ambiguity on some key issues, apathy, comfortable familiarity with existing instruments, a dose of national pride and nostalgia, and squeezed budgets among them. Perhaps most important of all, treasurers have had rather a lot to deal with since 2008. Consequently, an ‘end date’ – 1st February 2014 has had to be introduced. This is not a suggestion or a guideline, it is a fixed date. As Etienne Goosse, European Payments Council (EPC) Secretary General said recently in the EPC newsletter, “There is only Plan A”.

However, an ‘end date’ would appear to be the wrong description. The next year should not be seen as a period of terminal decline but the build-up to a more competitive, more straightforward business environment. 1st February 2014 is therefore a start date, not an end date, for greater certainty and simplicity in doing business in the Eurozone.

[1] Experian, 1st February 2013