At this year's International Payments Summit (IPS), there were discussions of many areas including social media, mobile, cloud, regulations and innovations. These have all been summarised in a wonderfully short overview document available to paying attendees.
However, given my interest in SEPA and the fact that we are just closing our fourth annual survey into its impact (have you taken part yet? if not, click here as it closes this Friday!), I felt compelled to extract the IPS summary of the SEPA debate at the conference and replicate here.
Despite the February 2014 SEPA migration deadline getting ever closer, it is likely the harmonisation initiative will be a subject of intense discussion at IPS for years to come.
This year much of the debate focused on SDDs and whether they will be fully operational by the migration deadline.
One of the key issues is that when SEPA was envisaged and designed, counterparty credit risk was not top of the agenda; post-Lehman Brothers crash and it is.
Ruth Wandhofer, global head of regulatory and market strategy at Citi Transaction Services, highlighted the issue: “Migration to SEPA is a national issue that is not controlled by the EPC or the European Commission. I see a high level of risk in that because we don’t have a scheme company that manages the risks between participants in SDDs. We have debits between banks that don’t know each other.”
Another concern about SEPA is that there is no “plan B”.
Peter Frambach, head of international payment services at Ages Maut System, said this lack of an alternative could “severely damage the economy. Not being ready for SDDs will be very dangerous for corporates and could affect liquidity and credit solvency”.
He said his company settled 1 million DDs per year in ten countries and ten different formats.
“Under SEPA, not even the SDD core is available with every bank – there are 970 banks in the euro zone that are not registered for SDDs. Some people think SEPA is too complex and are waiting for a solution or are postponing integration until as late as possible because they see no benefit in it.”
Massimo Battistella, manager AR at Telecom Italia said SDDs required a new way of collecting mandates and there were no business opportunities for corporates in moving to SEPA in the short-term. “We can see benefits in the future, but we are very far from those opportunities today.”
There were plenty of defenders of SEPA.
Pierre Petit, a deputy director general, payments and market infrastructure, at the European Central Bank said the initiative was one of the very few projects that had not been derailed by the financial crisis. “We think European integration of financial services will generate cost savings and increase productivity. But there are two challenges for SEPA; migration is going relatively smoothly except in a couple of cases such as the SDD and that is a serious concern. The second area is card payments, where a common set of business rules is required.”
Barbara Sacchi, head of electronic payments development at Unicredit said SEPA migration would vary across countries, and while the business model is so fragmented now, she was unsure whether the promised standardisation of SEPA would materialise.
Kirstine Nilsson, SEPA and PSD coordinator at Swedbank, said one of the challenges in implementing
SEPA is that in each country, payments professionals feel they have very efficient payments infrastructures that are true to their country’s needs. “But we need to move from a domestic payments environment into SEPA. There are many decisions that have to be made and the road to
SEPA will be bumpy. SEPA is necessary for creating an innovative platform that is better than what we have today.”
SEPA was of course discussed during the dedicated corporate stream. Andreas Resei, European treasury director at Mondi, welcomed the reduction in payment formats and the opportunity to use a single system for payments that SEPA promised.
But he said many companies would require support to ensure they met the 1 February deadline and that there was a need for more dialogue between corporates and banks.
SCTs are about managing the IBAN, said Telecom Italia’s Battistella. But SDDs are more complex and change the whole business model. “It touches 30 systems we use to collect mandates. These systems have worked for decades without any problem.”
Telecom Italia has more than 8 million direct debit mandates that will be affected by SEPA. It will spend tens of millions of euros in order to comply. “If I went to top management and asked for €30 million for SEPA a few years ago, they would have killed me,” he said.