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SEPA could it have been done better?

Having recently attended IPS, I can’t help but feel a sense of déjà vu when it comes to SEPA. During one of various Q&A sessions one gentleman stood up and claimed, “I have been out of the industry for 18 months, and yet we still seem to be going over the same things from when I was last here.” I’m glad I’m not the only one.


When SEPA was first discussed, its main attraction was allowing European organisations the ability to make cheaper, and in time, faster payments in Euros. This was seen to revolutionise the payments industry. However, it hasn’t played out this way.


When the Euro was introduced, similar arguments were used for a single currency to streamline the previously fragmented currency markets of each individual country. SEPA was seen as the next step in the evolution of the Euro, as it set out to eliminate the current differences between national and cross-border payment instruments. With a number of other regions considering a single currency approach, they should look at SEPA as the guinea pig for a single currency payments scheme.


In the Middle East there is the potential adoption of a GCC (Gulf Cooperation Council) single currency as a way of eliminating the risk of exchange rates and enhancing transparency and financial discipline at a regional level.  Japan, China and South Korea could also see a common currency between these three collectives as a way of boosting regional investment, thereby reducing the global imbalance between Asia and the US. Even West Africa is looking to get in on the act with the proposed single currency across Economic Community of West African states. This is designed to help integrate the West Africa sub-region and to facilitate trade and other economic activities.


These are very exciting opportunities and we could dare-say that they will one day lead to a one world currency, but for now we should look to learn from our mistakes. My advice for countries looking to propose a similar scheme would be to address the following:


-          SEPA is not a national system: During IPS an interesting point was made and it’s one I support. SEPA is a regional system, not a national one. In order for it to work a set of standardised rules must be adhered to by all countries involved. It can’t be a case of one rule for one, and one for another. 


-          The need for an end date: As I stressed in my post SEPA Migration - set the date, a finishing line is needed to make the scheme truly effective.


-          Split implementation: The launch of SEPA Credit Transfers saw banks implement one system, only to have to implement another for SEPA Direct Debits. If a long-term strategy had been put in place, implementation could have been done all at once.


-          Education: If you stop anybody in the street and ask what SEPA is, nine times out of ten they won’t have a clue – more needs to be done by governments to educate people about SEPA. One way they can do this is by governments getting behind the scheme themselves.


-          Finally, the consultative process was not extensive enough between all parties involved. More should have been done to ensure that this would work for all countries before it was launched.


Will there be a world currency? Time will only tell, but one thing is certain, SEPA has been a learning curve for everyone involved!


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