Developing a common platform for the European payments world has been attempted on several occasions and has routinely failed to maximize efficiencies in cross-border transactions. Squabbling between the European Payments Council, national banks and the European Commission has created a dead lock on the issue of how to handle cross-border payments.
However, with the implementation of the Single Euro Payments Area (SEPA), an efficient and workable platform for cross-border payments may become a reality, despite the amount of work it creates for concerned parties.
While it will be years before the influence of SEPA on the payments world is felt, cash management experts expect that by 2010 a large number of European banks will have this capacity.
"SEPA is an enormous undertaking and truly a transformational event for the banking industry," says Charles Bryant, secretary general of the European Payments Council. "SEPA is on track. We aren't saying that every payment in Europe will be on it by 2010, but we do believe a critical mass will have moved to it."
The idea of SEPA was first hatched following the introduction of the single currency in Europe. The move to the euro created the need for a continent-wide integrated infrastructure and a common platform to complete payments transactions ranging fromápayables and receivables to salary payments and direct debits.
As SEPA roles out across the continent, there will understandably be implications for global banks, local banks, foreign banks and corporate customers, which will all need to implementáinfrastructure upgrades to ensure the success of the common platform.
According to panelists at a payments seminar at Sibos in Copenhagen, operating profits originating from payments have been dropping significantly for the past few years and a few large players now dominate the activity.
"We're seeing a reduction in the number of accounts in Europe, which is bound to increase back office liquidity," stresses Andrew England, Deutsche Bank's global head of transaction banking and cash management. "SEPA will be a major driver for the payments business and allows the banks a significant opportunity to reconstruct our business."
The word from the panel discussion also stressed that smaller, more domestic European banks will benefit from the transformation to the common platform.
"The European payment landscape will change dramatically regardless of the fact that there is little possibility to increase revenue from the payments industry," says Philippe Lambrecht, general manager of international management at Belgium's KBC Bank. "The required investment is going to be large, but smaller banks will then find that they are part of the level playing field where the business will be characterized by the service of payments rather than the reach."
While domestic and global banks operating in Europe believe that SEPA and its common platform idea will increase efficiency in cash management and cross-border payments, the non-financial (and also non-European based) corporate world sees things a little differently.
Evidently, the big issue for multinational corporations is the role that common international standards will play in the implementation of SEPA. "Corporations need standards, not only for the Euro zone but also to be extended to the international community," says Vania Ferrat, director of cash management at Danone. "SWIFT can play an important role as a standardization authority and we feel that banks should all be ready on SEPA at the same time. However, corporates will need time to migrate."
