Researchers questioned 47 senior payments experts from major banks across Europe, including 12 of the 26 interbank processors, 26 of the largest 100 banks and five of the largest commercial processors.

Forty percent of bank respondents say they expect to invest between €11 million and €50 million for ACH-type capabilities over the next five years, and 34% will spend in the same range for card-processing systems.

Extrapolating these results indicates a total spend on payments capabilities over the next five years by Europe’s 90 largest banks of more than €3 billion, according to Noel Gordon, managing director of Accenture’s Banking practice in Europe, Africa and Latin America – making it possible that the previous highest estimate (from TowerGroup) of €8 billion across all of Europe will be exceeded.

"The European Payments market is in revolution," says Gordon. "After years with little change and relatively low regulatory mandated investments, initiatives designed to clear the way for seamless cross-border payments in Europe are heavy and expensive lifting for everyone in the industry."

More than a third of respondents (39%) intend to replace legacy payments processing platforms as a result of Sepa, while more than half (55%) plan to update their existing platforms. Only six per cent are undecided or planning other future steps.

While many of the survey respondents view Sepa as a commercial opportunity, more than one in four (27%) describe the initiative as a "high-risk project with unrealistic timeframes".

And with compliance straining resources, more than 60 percent of respondents say they will use temporary solutions to meet the 2008 deadline.

Between 2008 and 2010, countries’ existing national payment systems will co-exist with Sepa payments, before full migration in 2010. Banks which have not upgraded their systems by 2008 will need interim solutions to convert Sepa payments for processing by existing systems until 2010. A quarter (27 percent) of respondents say they intend handle their interim solutions internally and 19 percent intend to use third parties. Another 16 percent say they will consider developing stand-alone SEPA-compliant products.

"I foresee a lot of premature grey hair among IT executives before this is over," Gordon says. "While banks are not required to be fully Sepa compliant by 2008, the fact that nearly two-thirds of respondents say they will seek temporary interim solutions is worrying. They’re incurring extra expense, buying themselves just two years to get to their final Sepa solution. For those using this approach, the ideal answer is to select an interim solution that can be expanded upon to support full compliance later on."

The largest spending geographies include UK and Scandinavia (outside the Euro-zone) with their largest banks anticipated to spend approximately €300 million and €250 million, respectively, and France and Italy (inside the Euro-zone) approximately €500 million each. On average, the banks in the survey predict spending €23 million each on changes to processing of ACH-type payments and €22 million each on their card payments.

Respondents projected that the most challenging business-product change will be implementation of Sepa Direct Debit. More than two-thirds of respondents (71%) rated this as the biggest development challenge to compliance for ACH payments, in part because the new scheme is different than existing national processes in several countries.

Survey respondents also project that consolidation of payment processing is an inevitable consequence of Sepa as national payments infrastructures give way to European ones. Respondents predict:

• On average only seven of the 15 ACHs, and only seven of the 11 domestic interbank card processors, in Europe will survive beyond 2010;
• On average only four national debit schemes out of the current 11 will exist independently by 2010;
• Their domestic debit card schemes were unlikely to exist as independent entities by 2010, and:
• Consolidation may make market entry difficult for new industry players.