SEPA: Is the End Date in Sight?

The real challenge for the European payments industry continues to be the finalisation of the end date for the switchover to the single euro payments area (SEPA) instruments, said Gerard Hartsink, chairman of the European Payments Council, at the Financial Services Club on 27 April in London.

This is despite the fact that on 12 March, in a resolution on the implementation of the SEPA, the European Parliament called on the European Commission (EC) to set a clear, appropriate and binding end date, which should be no later than 31 December 2012.

“The end date of 2012 needs to be realised in terms of SEPA Credit Transfer [SCT], SEPA Direct Debit [SDD] schemes and cards,” said Hartsink. “Although the Parliament is convinced of this end date, it will not impose the deadline on ECOFIN [EU Council of Finance Ministers]. It [the proposed SEPA deadline] needs both the EC and ECOFIN’s commitment to make it happen.”

On 24 March, the EC and the European Central Bank (ECB) clarified their position to remove the multilateral inter-bank fee (MIF) arrangement applicable to SDD transactions after October 2012. This means that some countries are confronted with the obligation to adapt their current direct debit business model significantly as of November 2012.

The European Payments Council (EPC) waded in at the end of March, deciding that it will be possible for banks to sign up for participation in the SDD Core Scheme and/or the Business-to-Business (B2B) SDD Scheme as of 1 May 2009. Banks will therefore be able to start delivering euro direct debit services as of 2 November 2009 – a push in the right direction for successful migration within a few years.

So, progress is being made at the European level – but how close are we to the harmonised payments dream that SEPA represents?

This was the main question posed at the Financial Services Club. With just over six months until the go live date of SDD schemes and the Payment Services Directive (PSD), which provides the harmonised legal environment needed for SEPA, many countries are still lagging in terms of implementation.

Most recently, France’s National SEPA Committee has thrown a spanner in the works by announcing 1 November 2010 as its launch date for SDDs, as opposed to 2009 in the rest of the eurozone. Germany is also struggling with direct debits. Hartsink pointed out that political reality is that these two countries must buy into the programme or the project won’t move forward.

Surprisingly, Sweden, a country very proactive with regards to SEPA, has announced that it will not be able to transpose the PSD into law by the deadline of 1 November 2009 deadline – this is seen as a political problem since Sweden holds the EU presidency in the second half of this year.

But the biggest problem is still uptake in term of the banks, corporates and particularly the public sector. In the year since the introduction of SCT, the actual take-up by public administrations represented no more than 5% of all credit transfers performed in the EU payments market annually.

It is the public sector that Hartsink looks to to make a qualitative shift in the uptake of SEPA. “Public administrations account for up to 20% or more of euro payments made in society,” he recently wrote in an article called ‘Missing in Action, mostly’ (EPC Newsletter Issue 2). “Moving this volume to SEPA instruments will create critical mass and trigger implementation by others, such as corporate, SMEs and consumers.”


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