Financial industry leaders see the creation of the single euro payments area (SEPA) Council, which met for the first time on 7 June and released a statement of intent, as a signal of a firm political commitment from the European Commission (EC) and the European Central Bank (ECB).
At a recent Financial Services Club meeting in London, two senior bankers closely involved in the SEPA and Payment Services Directive (PSD) process saw this development as a political step forward in giving a more public face to the European payments harmonisation initiative.
The new SEPA Council is composed of five high-level representatives from both the demand and supply sides of the market. Members from the demand side include consumers, retailers, businesses/corporates, small and medium-sized companies, and national public administrations. On the supply side it includes the European Payments Council (EPC), co-operative banks, saving banks, commercial banks, and payment institutions. In addition, four national central banks board members represent the eurosystem.
“This is a demonstration of endorsement from the ECB and EC and a tangible commitment to a political vision. Plus, there is buy-in from stakeholders,” said one senior payments strategist. “Although the declaration is mainly symbolic, it is also a positive sign.”
In addition to discussing other issues – such as the end date for legacy payment instruments, countries that have still to transpose the PSD and the possibility of a PSD II in 2012 – the Financial Services Club deliberated the entry of new competitors in the market via a PSD-created legal entity called a payment institution (PI). A PI is defined as “a legal person (i.e. must be incorporated – sole traders cannot be authorised) that has been granted authorisation in accordance with Article 10 of the Directive to provide and execute payment services throughout the European Community.”
This development allows for non-bank entities that have traditionally played on the perimeter of the payments arena to compete with banks head-to-head. As of mid-March, five months after the PSD’s launch, the number of entities that have been authorised as PIs is very patchy across European countries – for example, many countries have had just one application, while there has been close to 50 in the UK. “[The number] has a direct correlation to how mature the financial services market is in each country,” said the other industry expert. Once a PI has been approved in one country, it can passport its services to other countries in Europe.
This is a space to watch in the near future as banks face new challenges to their old business models.
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