The push to create a Single Euro Payments Area (Sepa) by 2012 will fail unless regulators provide incentives to public administrations and corporations to adopt the new payments instruments, according to research from CapGemini, ABN Amro and The European Financial Management & Marketing Association (Efma).
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," says Patrick Desmares, secretary general of Efma.
Bertrand Lavayssière, Capgemini's MD of global financial services, says reaching a critical mass of Sepa credit transfers and direct debits quickly is crucial for keeping payments costs down and managing the revenue impact of Sepa and of the Payment Services Directive
"For banks, slow adoption translates into increased costs as a result of maintaining both legacy and new payments services," he warns.
A European Central Bank (ECB) study into the economic impact of the single euro payments area (Sepa) released last month also found that banks will incur the most costs in the period where national and Sepa payment infrastructures co-exist. The ECB said this period should be kept as short as possible to help banks more quickly achieve economies of scale as payments revenues begin to drop due to competitive pressures.
The 2007 report from CapGemini, ABN Amro and Efma reiterates last year's findings that Sepa could reduce banks' direct payment revenue by between 38% and 62% in some parts of the market by 2012.
In order to stay competitive in the new payments landscape, banks will need to reassess their operating models in Europe. The report found that 58% of banks already plan to, or are, outsourcing all or part of their payments activities in the next five years.
Ann Cairns, CEO, transaction banking, ABN Amro, says: "Strategic sourcing partnerships - including outsourcing, offshoring and white-labelling - will play an increasingly important role as the payments industry focuses on globalisation, regulation and performance."