EC sets Sepa migration deadlines

So what now? Banks are currently still operating with dual payment processes - one for cross-border and another one for domestic payments - and the introduction of the SEPA payment system for both cross-border and domestic payments will remove costs associated with these dual payment systems. This should accelerate competition in the payments market and corporates should shop around to get the best possible service from their bank. As part of this process, we might see corporates putting pressure on their banks to pass on the cost savings made from changing to a universal payment system. Now that the end-date for migration has been announced, there are some actions that need to take place in order for banks and corporates to meet this deadline. As part of the migration to SEPA, banks are required to replace their dual payment infrastructures while corporates need International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) in order to initiate validate payment instructions, as the mandatory international ID for all payments. Therefore, if corporates want to be ready for SEPA payments, they need to be able to collect their IBANs and BICs to update their customer and supplier databases. If domestic details are not updated by the set end-date, incorrectly formatted payments might lead to errors in transactions and additional costs. Unfortunately, obtaining the correct IBAN and BIC is up to the corporate and whilst many banks are happy to provide these details for their own customer accounts, most banks are reluctant to contact other banks in various countries, to obtain and generate the details. However, corporates shouldn't be thrown in the deep end completely, and banks should be communicating with their customers to familiarise them with the upcoming changes and support them throughout the migration process to minimise correction and rejection charges of failed payments. Ultimately, the more proactive the banks are, the more attractive they are for the corporates - a win/win situation for both parties.

Just to clarify. A Regulation is the legislative instrument used by the EU if something is not happening quickly enough or in the manner intended.

This proposal must now be approved by the European Parliment and the member states in the form of the council. The council can take several configurations and I suspect that in this case its the ECOFIN version(Finance Ministers). This can happen relatively quickly, particularly with the broad level of support that exists.

Officials expect mid 2011 for completion according to the FT article today. The revised Regulation is then published in the Official Journal and comes into force in relatively short order eg. Reg 924 was published on 09/10/09 and came into force on 01/11/09. We can expect something similar with this regulation.

On the one hand, PayPal and other alternative payment providers are making it easier to even put through cross-border payments by using only the email address or mobile phone numbers of a recipient. On the other hand, if the proposed EC measures go through, banks would be forced to ask payers to enter at least twice as many keystrokes to initiate a domestic payment via SEPA.

While Mr. Barnier might believe that "...making payments cross-border will become as easy as making them at home", I somehow can't escape feeling that "making payments at home will become as hard as making them abroad".

I hope this doesn't result in an overall drop in e-payments adoption and a return to cheques! Why am I suddenly reminded of a recent Finextra article that said that UK's Payments Council is planning to introduce a paper-based alternative to cheques? 

The whole point of SEPA is to support a true single market.  The overwhelming majority of domestic payments are B2C (or strictly C2B).  In the UK this is dominated by Direct Debit bill payments.  If the breakdown in Euro-in countries is anything similar it will take an extra decade before the amount of cross border traffic reaches even 20% of domestic traffic.  Does the prospect of buying my gas or my phone service from Germany or Spain appeal?  Well, maybe but it will be a while before a large slice of the population does that.  We shall see.