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SEPA; a spectacular failure of misunderstanding

Despite what you hear and read about SEPA it is a fact that it has failed to achieve any notable volume since it went live. At a recent conference chaired by yours truly a number of eminent speakers from the upper echelons of banking finally agreed in public under examination that there has only been 2.5% of possible volume of SEPA Credit Transfers this year. That 2.5% mainly come from organisations and the few sources keen to push any volume though. This is a spectacular failure in anyone's language!

For those spouting that this is a long term project and not to concentrate on the immediate volumes, the same people and an expert audience agreed that there is now motivation for banks to take part in pushing up the volume and with the current crisis in finance, the chances of SEPA projects being implemented were slim.

The question has to be asked? How could the banking industry and the European Parliament get it so wrong? Who is to blame for making this expensive error of judgment? A blind man could see that despite SEPA looking great on paper there was no motivation for banks or corporates to invest in building systems or changing their business.

The worry is that SEPA Direct Debits is likely to go the same way once it's implemented. Who is leading the SEPA initiatives and what measurements are there for success and what constitutes failure?

What's obvious to me is that the European single market vision is in tatters and will remain so until the European Parliament decide to work with the Banks to devise plans to achieve their political objectives, without putting the banks and the finance industry in a position where they say yes but actually mean no! 


Comments: (1)

A Finextra member
A Finextra member 15 December, 2008, 11:27Be the first to give this comment the thumbs up 0 likes

SEPA's vision of creating a single market wherein EU participants can make and receive payments in euro within Europe with the same conditions (pricing and legal) regardless of location is a good vision. 

In my opinion, a spectacular failure of misunderstanding is half-way true. It is a spectacular failure but I don't believe that it's a failure of misunderstanding. As you point out, "A blind man could see that despite SEPA looking great on paper, there was no motivation for banks or corporates to invest in building systems or changing their business.".

It would seem to me that if the EU Commission wants to achieve their goal, that they can just easily set the guidelines for cross-border fees (for credit transfers and direct debit) and penalize banks that charge consumers more. Banks will then naturally find the most efficient way to do these credit transfers.

Essentially, this is what happened with cross-border card interchange fees (note VISA's MIF and Mastercard's fee structure).

Additionally, card payments present a competition to credit transfers and direct debits.  For example, consumers do not have to pay fees when paying with cards. Consumers do pay for making credit transfers. Currently, card payments are more convenient than direct debit. Direct debit has great potential but not from the point of view of banks if they remain free of charge. It's quite understandable if banks prefer to promote the use of card payments than direct debit since they earn each time their issued cards are used, not so with direct debit.

Fees are another topic of conversation. I'm not saying that direct debit should remain free. We all know that although banks say that they can not charge their customers for services, that they eventually find a way to charge them.

Gary Wright

Gary Wright


BISS Research

Member since

19 Sep 2007



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EBAday is the annual event for European payments professionals organised by Finextra and the Euro Banking Association. This community has been created to deliver a forum for EBA delegates to exchange views on instant payments, open banking and new developments in payments processing and technology.

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