Commissioned by First Data and carried out by PSE Consulting, the study focuses on SEPA for payment cards. It explores the views and experiences of senior banking executives and key decision makers in 30 leading European banks, across 15 countries.

Chris Skinner, director at TowerGroup, a leading financial services research and consulting firm, comments: "This study makes an important contribution to the SEPA debate, particularly because it involves senior European bankers expressing their views on an individual basis. It is encouraging that some banks are now starting to move on from the ‘is there a business case?’ debate to implementation planning and positive efforts to exploit the benefits of SEPA. However it is clear from the report that a lot of work remains to be done to ensure that the original intentions of the EC in framing SEPA are fully realised."

The First Data study includes banks operating both within and outside the euro-zone and reveals:

Threat of legislation – 70% of banks believe that a combination of self-regulation and market forces should be sufficient to drive banks to deliver the SEPA initiative. However, because of concerns over whether the industry as a whole will get behind the programme, 73% expect that the EC will eventually legislate to ensure compliance. Several believe that a formal SEPA certification process will be necessary to ensure a level playing field.

Inadequate communication - The idea of SEPA has been debated at length for four years and the SEPA programme will move from the design phase into implementation at the end of this year. However, today only 54% of study respondents understand SEPA requirements in detail. Banks are looking for more information and improved communication but there is not a consensus on who should be responsible for its delivery.

Need for greater detail - Many respondents believe that the SEPA Cards Framework (SCF) requires greater detail in a number of critical areas, to avoid individual interpretations of the SCF that may damage the programme’s integrity.

Inconsistent bank implementation efforts - SEPA implementation depends heavily on the activities of individual banks, many of whom are still in the initial evaluation and planning phase. With few comprehensive SEPA change programmes in place in banks, there is a risk to the 2008 and 2010 implementation timeframes.

Focus on costs, not benefits - The SEPA programme aims to deliver benefits to consumers, corporations, retailers and banks. Many banks currently see only the cost of SEPA compliance, rather than the opportunities which market liberalisation will bring. Banks see little immediate benefit for consumers - and some even anticipate higher prices (albeit for enhanced services). Two thirds of respondents believe large retailers and corporations will realise significant benefits.

Expectation of card scheme brand duopoly - Domestic debit card schemes are seen to be the likely losers from the SEPA programme. There are 15 such schemes in Europe and study respondents expect most of these to disappear completely or to co-brand with the international card schemes. Ultimately, most banks expect Visa and MasterCard to have a scheme/brand duopoly across Europe.

Scheme separation and desire for processing choice - A key requirement of SEPA is that all card payment schemes separate the scheme (membership and brand) from the processing infrastructure, opening the market to greater processor competition. One third of banks in the First Data study are sceptical about the extent to which the international schemes will make this separation. In addition, while they expect a duopoly of payment scheme brands, banks express a strong desire to have more choice in processing options. This increased level of choice is seen by banks as a key benefit of SEPA and can only be achieved with real scheme and brand separation.

SEPA Europe - Although the SEPA initiative is focused on the euro-zone, Europe’s banks recognise that market forces will drive those outside the zone also to adopt key SEPA principles. SEPA is likely, de facto, to become Europe-wide rather than euro-zone only.

David Yates, president, Europe, Middle East and Africa, First Data International, comments: "It is clear that the banks participating in our study recognise the European Commission’s intention in creating SEPA and have committed to a programme that will bring significant changes to the European cards industry. It is not surprising that, at this stage, banks are focused on the costs rather than the ultimate benefits of SEPA compliance. While we should not underestimate the costs, there are also real opportunities for revenue enhancement and for genuine cost reduction through the streamlining of processing."

John Chaplin, European payments adviser for First Data International, adds: "We are concerned that, for most banks, there is still a mountain to climb before they are SEPA ready. There are also some key issues that need to be resolved and clarified by the Commission and the European Payments Council, notably the need for greater detail in the SEPA Cards Framework. We believe there is also a strong case for a properly enforced certification process. The overall challenge for all concerned is to maintain pressure for change without creating the belief that regulation is inevitable and that, therefore, the industry should wait for it."