Cost to banks of dealing with failed SEPA transactions

The cost to banks of dealing with failed SEPA transactions will be up to €1.3 billion(1) immediately following the introduction of the Single Euro Payments Area (SEPA) according to a new study by LogicaCMG(2), a leading business consulting and IT services company. The research, conducted by Coleman Parkes on behalf of LogicaCMG, looked at the practical issues of efficiency and Straight Through Processing (STP) that result from the introduction of the new SEPA schemes and services. More than 100 of the leading banks operating in Europe were surveyed. The survey established that 35 per cent of retail banks anticipate problems in the correct addressing and processing of SEPA payments through banks and intermediaries. According to the banks, which together represent in excess of 70 per cent of total payments volumes, the impact on the banks of failed transactions will be the costs of handling exceptions (63%), the increase in the number of payments returned to the originator (60%) and finally the loss of reputation (59%). From the survey, it would appear that the industry average cost of dealing with a failed transaction is likely to be in the region of 6 Euros. Based on banks’ own estimates of SEPA volumes during 2008 this would translate into potential total costs of almost €1.3 billion in 2008. The growth in SEPA volumes anticipated by the industry will drive this cost substantially higher as SEPA adoption and migration occurs. In addition nearly a fifth of banks (17 per cent) expect difficulties in identifying the correct intermediary routing information for receiving banks, accepting that there will be operational failures as SEPA is introduced. Despite the increased complexity of the pan-European retail payments market only just over half of banks in the eurozone (60 per cent) have a formal plan to resolve the issue of IBAN and BIC transaction addressing and routing.


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