Incentives needed to push SEPA implementation

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LONDON – The required amount of SEPA payment instruments is unlikely to be in place by the end of 2011, unless regulators provide incentives to mobilise European public administrations and corporations to adopt them, says the third annual World Payments Report 2007(2), published by Capgemini, ABN Amro, and the European Financial Management & Marketing Association (EFMA).

The Single European Payment Area (SEPA) initiative – which comes into force for credit transfers from January 1, 2008, with critical mass being attained by 2010 – aims to harmonise national payment systems to provide an efficient and simple means for making cross-border credit transfers, direct debits, and credit and debit card payments in euros from any country in the European Union.

The report, which considers world payments trends with a particular emphasis on SEPA, says that if the public sector contributed 29% of the required volumes to reach critical mass for the new SEPA credit transfers and direct debits, and if corporate payments volumes for these instruments were added, the required critical mass of SEPA transactions could be reached or even exceeded by 2010.

"Many domestically focused corporations are reluctant to work towards SEPA implementation, arguing that it should be the responsibility of banks and regulators to fulfil their business requirements. Regulatory as well as business incentives are therefore vital to attract these parties to act," says Patrick Desmares, secretary general of EFMA.

The report analysed SEPA implementation and migration plans published earlier in 2007 for the 13 current eurozone countries and found that none expects to achieve a critical mass of SEPA payments before the agreed deadline in just over three years. Some countries would even like to retain legacy payments as long as demand exists.

Report analysis and interviews conducted with European banks for the 2007 report confirm last year's findings: that banks will see direct payments revenues decline by between 38% and 62% in some parts of the market by 2012.The report suggests that, to stay competitive in the new payments landscape, banks will need to reassess their operating models in Europe, and it says many banks will need to outsource at least part of their payments activities. Around 58% of banks already plan to, or are, outsourcing all or part of their payments activities in the next five years, and 68% plan to offshore this activity as well.

The report also found that: cash remains the predominant payment instrument in Europe; there are still no clear initiatives to replace cash to reduce the cost of cash to society; Europe needs a solution that allows any card to be used at any terminal; the card market is growing at over 10% year and will remain the leading non-cash payment instrument; banks should consider forming a new European debit card scheme to replace existing national schemes; the payments institutions created under the Payment Services Directive are unlikely to present a serious competitive threat for banks until 2011; the top 10 banks in the 2012 European market will each process around five billion transactions a year; and banks are repositioning their business models and turning to open architectures to enhance product offerings, outsource/insource payments and provide integrated services to their clients.

Copies of the report are available for download at

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