McCreevy: How to get the best from Sepa

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DUBLIN – “How we can make the best of Sepa?” That was the question asked by European Union commissioner for the internal market and services, Charlie McCreevy, on Friday. McCreevy was addressing the Irish National Payments Conference on the subject of the Single Euro Payments Area (Sepa).

“Sepa is a tremendous opportunity for Europe and countries like Ireland, but it remains one of the best kept secrets in the single market,” said McCreevy.

“A recent study carried out by Capgemini for the Commission estimates that if we can migrate quickly to Sepa, the potential benefits in payments markets alone are €123 billion over the next six years.

“But this is not the end of the story, if we can use Sepa as a platform for e-invoicing, then the study estimates that a further €238 billion of savings could be achieved. In addition, Sepa could be used as a platform for e-lending and trade financing. In the public sector, Sepa could be used to drive e-government and the development of transactional services in areas such as e-procurement, taxation, and customs,” said McCreevy.

McCreevy went on to outline a number of “next steps” necessary to realise Sepa’s benefits for the European market, including the importance of members quickly implementing the Payments Services Directive (PSD).

“There are many exciting developments taking place in payments markets, such as mobile payments, pre-paid cards, contactless cards and e-invoicing. Our hope is that the PSD will foster market innovation by providing a prudential framework facilitating the access of new players into payments markets,” said McCreevy.

The commissioner then outlined what the market has so far achieved. McCreevy highlighted the 4,000 banks already on board Sepa’s credit-transfer scheme and the hundreds of thousands of daily Sepa transfers, before outlining – as he sees it – what the market still needs to do by 2010.

“We need to avoid a long migration period as this is particularly costly for the banking industry. The longer the transition period, the longer banks have to bear duplicate costs for operating existing legacy payment systems as well as the new Sepa systems. This will result in sub-optimal Sepa pricing.”

The commissioner spoke of the role public authorities can play as catalysts for Sepa’s adoption, citing their 15-20% share of all payments made and the wider consumer benefits. He also conceded the necessity for a balanced cost-benefit approach to Sepa migration.

“We are not arguing that public authorities should blindly adopt Sepa products whatever the cost. On the contrary, early adoption of the new Sepa payment instruments must be subject to respect of the non-deterioration principle as compared to the cost and service level of existing payment instruments. We fully support the non-deterioration principle. Therefore, banks should in the first place develop attractive products and market them actively so that there is a natural momentum for customers to migrate to Sepa,” said McCreevy.

The commissioner also spoke about the European Commission’s ruling against MasterCard’s multilateral interchange fee (MIF), the desire for standardisation in Europe and recent reports of European banks’ correspondence with the EC over the creation of a European alternative to the Visa-MasterCard duopoly.

“Of course, as regards the possible emergence of a genuine European scheme, I fully recognise that where banks are called upon to make fresh investment to create a new EU debit card player, clarity on possible business models and a possible MIF that is compatible with EU competition law is crucial.”

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