2014 finally saw the completion of the SEPA process that was some ten years in the making. As of the 1st August, the majority of European Banks are now compliant with SEPA guidelines. So, what does this mean for banks now living in a post-SEPA world? In theory, banks should now be in a position to reap the benefits of years of compliance to meet the SEPA deadline. All the benefits of a European cross-border unified payment system, leading to a reduction in developmental costs and increased efficiencies in cash management and other transaction banking components.

Yet before the benefits can be fully realised, a cost-benefit analysis for the banks and corporates that have gone through this process should be conducted. Given the concept of SEPA was created a decade ago, the true value of what we are now left with cannot ignore the fact it has taken a considerable amount of time to accomplish.

However, there are still questions that need answering: How many business transactions are being completed, in which countries and with which banks? Can time be saved by using best practices and real “low cost routing”? Can institutional costs that are still being used by payments departments for international, cross-border European payments be reduced? That we are ten years down the line and this uncertainty remains will likely provide all the answers we need, but it is worth raising them regardless.  

Yet one of the undeniable benefits of the SEPA process is the move to IT harmonization, which has huge potential for reducing costs of internal administration, IT interfaces and the move away from legacy systems. These systems, which previously required new bolt-on developments for each individual domestic format, would be simplified. In the past, vast amounts of hours were being spent on internal developments to keep up with domestic legislation. SEPA will certainly make it much easier to use non-localised IT to do the backend technical work.

Another area where we will see SEPA have an impact is in various banks’ ability to truly offer payments capabilities for every country in which their clients operate. Many banks claim to be global players, but have been limited by national geography. Now, with fixed cross border policies, we will see the ability of banks to operate more globally increase. And this could potentially lead to a period of consolidation within the market, as takeover targets become more viable because they can now properly operate internationally. Additionally, a centralised repository for IBAN / BIC numbers for all branches will reduce the need for keeping individual directories, enhancing a bank’s ability to work in new markets.

SEPA will also begin to affect corporate treasurers. Once they are sure they are not risking causing operational problems, they can begin using SEPA as a launch pad for wider improvements. Companies with sophisticated payments can take that next step more easily. Many corporates have already created payment factories, and many others are moving in that direction, resulting in improved transparency and efficiency, which benefits the entire market.

While there’s still many unanswered questions, one thing for sure is that we're seeing many large banks’ clients keeping the project going, even after the deadline. However, the business case for SEPA will have to change in order to increase treasury efficiency rather than merely meet compliance requirements. SEPA needs to go from burden to benefit pretty quickly to capitalise on a decade of work.