The timetable for the introduction of the Single Euro Payments Area (SEPA), sometimes known as the Single European Payments Area, may already be slipping, but there are practical steps that could be taken to ensure that the SEPA project remains on track suggests Jonathan Williams, Director of Communications and Product Strategy at Experian Payments.
SEPA - an overview
SEPA is an initiative of the European Commission (EC) that seeks to remove the barriers to the movement of funds across borders and reduce the cost of euro payments to the level of domestic transfers. Facilitating SEPA is the Payment Services Directive (PSD), previously known as the New Legal Framework for Payments. The PSD will provide the legislative framework to license payment service providers and pave the way for the introduction of European-wide payments initiatives for credit transfers and pan-European Direct Debits.
The deadline for the introduction of SEPA-compliant cross-border schemes is 1st January 2008 and for these to be fully operative for cross-border and local payments by 31st December 2010. In recent months there has been growing speculation that the timetable for the achievement of SEPA is already under pressure. The EC expressed its concerns in February and the European Central Bank (ECB) followed in May. Much of this concern focuses on the ability of the banks, through the European Payments Council (EPC), to deliver the technical framework that will underpin the SEPA scheme. In addition, the EC has been tasked with implementing the PSD across the EU by the 2008 deadline.
However, there are two further important communities that appear to have been overlooked in most analysis of the SEPA timetable and both are vital to the eventual success of SEPA. The first are the individual Member States of the European Union. Each state needs to ratify and implement the Payment Services Directive by 1st January 2008. This generally takes 12-18 months which means that the effective deadline for the adoption of the Directive is only a few months away. Even before SEPA is truly underway the timetable is at risk. The second community is the technology vendors that will need to deliver the software and systems required by banks and corporate organisations to implement SEPA.
SEPA - the issues
Currently the key financial and regulatory institutions develop banking initiatives independently of the technology vendor community. Only when the blueprint of a project is complete do vendors learn what challenges they face in designing and implementing compliant systems. This is a serious miscalculation of the contribution that vendors can make to the effective design and implementation of SEPA and to the achievement of the set timetable. If the EPC, ECB and EC directly involved the vendor community in its decision making processes, these institutions could draw upon the considerable skill and experience of the solution providers.
This would have the effect of shortening the overall time required for SEPA to be implemented, thereby helping to ensure that the deadline is met. By leaving the vendor community out of the discussions until the last moment, the banking community may inadvertently undermine the success of its own initiative. Finally, looking ahead to the migration period from 2008 to 2010, there is one practical step the EC could take to speed up the final implementation of SEPA. Currently the rules that apply to the construction of IBANs and conversion of IBANs and BICs from local data, do not allow vendors' systems to contribute to the SEPA process. However if the EC allowed vendors under license to map and convert IBANs and BICs from local data then faster progress would be made in the transition from national Automated Clearing Houses to the pan-European SEPA ideal.
If the legislative stage of SEPA slips beyond 1st January 2008, which is already more than a remote possibility, freeing vendors to contribute to this element of the migration programme may prove fundamental to the achievement of the 2010 deadline. In short, if SEPA is to achieve its objectives, the industry needs a greater sense of collaboration across all the institutions and communities committed to its success. Above all this calls for greater transparency and openness; but isn't this too in the spirit of SEPA?
For further information, see the pages below: