It is unlikely that a critical mass of SEPA payment instruments will be achieved by the end of 2011, unless regulators provide incentives in order to mobilise European public administrations and corporations to adopt the new single euro payments area (SEPA) instruments. This is a key finding of the World Payments Report 2007 published by Capgemini, ABN AMRO, and the European Financial Management & Marketing Association (EFMA). The report, now in its third year, considers world payments trends, with a particular emphasis on developments towards SEPA. The public sector could contribute 29% of the required volumes to reach critical mass for the new SEPA credit transfers and direct debits, and if corporate payments volumes for these instruments were added, then critical mass of SEPA transactions could be reached or even exceeded by 2010, says the report. “Many domestically-focused corporations are reluctant to work towards SEPA implementation, arguing that it should be the responsibility of banks and regulators to fulfil their business requirements. Regulatory as well as business incentives are therefore vital to attract these parties to act,” said Patrick Desmares, secretary general of EFMA. The report’s authors analysed SEPA implementation and migration plans published earlier in 2007 for the 13 current eurozone countries and found that none expects to achieve a critical mass of SEPA payments before the agreed deadline in just over three years. Some countries would even like to retain legacy payments as long as demand exists. Report analysis and interviews conducted with major European banks for the 2007 report confirm last year’s findings: that banks will see direct payments revenues decline by between 38% and 62% in some parts of the market by 2012. The report suggests that, to stay competitive in the new payments landscape, banks will need to reassess their operating models in Europe, and may choose one of three strategies – niche player, low cost producer or industry leader – and it goes on to suggest that many banks will need to outsource at least part of their payments activities.
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