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SEPA could have been so much better!

As the SEPA fanfares of the 28th January disappear into the distance, it's worth analyzing how all this could have been handled so much better, to achieve the mutual objectives of the banks and most importantly their corporate customers.

After EBA day (organised by Finextra and EBA), last year I undertook some research based from the Corporate Treasurers standpoint. I can't take too much credit for undertaking this aspect as I was enlightened by EACT to the concerns and frustrations of Corporates, Europe wide, to SEPA implementation plans.

The research culminated in a white paper, which detailed the exact problems that were identified consistently by most Corporates across many EU States. Although this white paper is compiled from interviews with corporates, it is also an independent analysis of how SEPA has been badly managed as an industry project. Well, let's take that statement quite loosely; as it's hard to find any management of SEPA! Certainly none from a central point, which you might well expect from a Brussels politically, inspired initiative.

It's this void in the management of directives emanating from Brussels that causes me high anxiety and some frustration. To underline the point SEPA was born out of political objectives and not from the wishes of the payments industry. However, the politicians still expected banks to enthusiastically manage fundamental changes to payments systems, operations and eventually structure.

Politicians expected that industry changes could be effected by using legal and regulatory clout! By creating the PSD and then SEPA, the transposition of each EU State's laws (and subsequently regulations) would be imposed on an eager banking industry. Or so they thought!

It must have come as a shock when the banks dallied and dithered for years, as they tried to find a sensible business case for their boards to invest in for their SEPA projects. This was clearly going to be a difficult assignment for all banks, but for tier two and below especially, as they could almost start writing the obituary to their payment business, as it was likely to move towards the clutches of the tier one banks. By putting the design and implementation mainly with the banks, the SEPA solution was going to become pretty biased towards the more powerful tier one banking objectives.

Banks were very slow talk about their SEPA offerings to their corporate customers and with no central management forthcoming to ensure escalation towards industry wide acceptance, the project has meandered towards its implementation. Of course now its here, there will be a steady plod towards usage. But this is the slowest and most painful approach, which could have been avoided, if more industry representative, (including Corporates) central management of SEPA implementation was in place.

The almost complete lack of communication between banks and their corporate customers of their SEPA offerings has left many corporates high and dry and confused about SEPA. Worse still fundamental design issues which the corporates have; still have not been addressed, as confirmed by various communications emanating from Germany, but I suspect is widespread across all EU states?

My research was carried out between May 2007 and October, during that time very few banks had discussed new prices and new SEPA services with their corporate clients. So not many corporates had actively engaged in a SEPA project, as they had not been given specifications by their banks of what they were being offered.

Corporate Treasurers are not going to invest hugely in new technology unless there is a clear picture of the benefits. They will shy away from investment in SWIFT or new standards if they do not see an end gain. That's not to say that just about every corporate that took part in my study was not totally keen to see SEPA implemented immediately.

I found it absolutely amazing that the Corporate Treasurers were not engaged in the original design of SEPA. Surely Corporates are the main drivers of volume needed to make SEPA a resounding success! Yet it was only belatedly that the Corporate Treasurers were brought into play and way too late to affect SEPA design issues.

Important industry standards around identification of corporates and their accounts will not be achieved by shoehorning the corporate into a corner, because the banks have a regulatory requirement. The banks need to sell their offerings based on their own unique selling points (USP), at a competitive price and allow the corporates to chose!

It's equally not going to be the case that Corporates will rush headlong into SWIFT, but will probably retain a more flexible approach to networks maintaining their ability to choose the best network for their business. Arguably SWIFT are bystanders in this situation and where they should remain, eager to capture corporate business but not front run the banks.

Which all brings me back to the leadership point? I don't think you can develop a new industry based on political agendas and expect laws and rules to be the main creative driver. The old adage business and politics don't mix comes to mind.

Banks should continue to be highly competitive and innovative in winning new business, not forgetting retaining their existing customers. SWIFT should facilitate and Corporate Treasures should be receiving proposals from their banks offering a whole new portfolio of services at a cheaper price.

If all these groups could be brought together under a collective industry umbrella, which has the power to manage industry projects and be the first consultative point, before laws are passed, there may be easier births of directives further down the line.

As we are surely only at the beginning of the new age of European financial services and in my opinion the politicians should stay out and let the industry manage itself!   



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Gary Wright

Gary Wright


BISS Research

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19 Sep 2007



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This post is from a series of posts in the group:

SEPA and European Payments

The Single Euro Payments Area, the Payments Services Directive, the Eurosystem, TARGET2, STEP2, the Euro and related matters.

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