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The introduction of SEPA will energise the dream of a unified payments market that began with the introduction of a new single currency in 1999.

The banking industry has had plenty of advance notice to consider what 28 January will mean for them and their customers, though no one will know the true impact until many years after the launch. 

While there is not expected to be a flood of SEPA payments on the first day, when looking back in ten years, “day one” is likely to be viewed as seminal in a true re-architecture of the payments landscape in Europe.

We can only muse on what the post-SEPA payments landscape will look like. A landmark change such as SEPA raises a number of questions about what the lasting impact will be:

• Will SEPA shift the way we look at the payments market in Europe?
• Will SEPA’s success be contagious and spread to other regions?
• Will payments in Europe really be consolidated, and will SEPA reduce costs?
• Will it stimulate intra-regional trade within the Eurozone?
• Will it enhance the financial value chain?

The answers to the above questions are either “yes” or “probably.”  Before the “probablies” can become “yeses”, however, the banking industry and regional payment infrastructures need to fully embrace and institutionalise SEPA.

Only by doing this can we shift how we look at payments, spread the wisdom of the benefits of a single payments market to other regions, consolidate European payments, and hopefully, reduce costs and stimulate intra-regional trade. 

Once banks and infrastructures have made SEPA a priority, corporate customers will benefit. Once the end customer benefits, the answer to the last question – will it enhance the financial value chain - will become a “yes” rather than remain a “probably”.

The financial value chain has a number of components and for it truly to be enhanced from today, a few things must first happen.

Efficient and sustained payment models must emerge, which means the number of clearing and settlement mechanisms (CSMs) needs to reduce drastically.

There are currently more than 30 CSMs, but corporate clients won’t care which remains after SEPA goes live as long as the much-heralded benefits are realised.

If the above happens and SEPA is executed properly, compliant payment services should bring significant benefits to corporate customers by doing the following:

• Banks must offer the highest-level of capability not the lowest common denominator.
• There needs to be a single set of standards on which all payment services are based, whether they are direct debits or single credit transfers. The urge to create country-specific rules must be resisted.
• SEPA will enable customers doing business in Europe to consolidate bank accounts across Europe, facilitating a more accurate view of their cash situation.  They will be able to put their consolidated cash to work, rather than leave it sitting in numerous bank accounts and potentially earning to a lesser degree. That will be significant progress from where we are today.
• The services offered through SEPA must be broadened to address requirements such as payroll, tax and extended remittance information.
• The industry must set an end date for duality and closure of domestic payment solutions. National solutions must close down otherwise SEPA will not fulfil its potential and will be too expensive for customers to take up. Simply put, SEPA will not work if there are 30 national clearing systems still in operation.

Until now, customers have often felt passive toward these impending changes and have adopted, or felt they have had to adopt, a wait-and-see attitude. 

This should not be the case.  A Corporate should feel that they have a major stake in the success of SEPA.

Not only does it have an impact on their company’s payment efficiency, reconciliation, issue resolution, and maximisation of liquidity – in short, overall financial well-being – but it can help ensure that they are competitive throughout the region.

They should feel, therefore, that they have a right as the “voice of the customer” to a say in how SEPA develops. 

Only when all of these pieces fall into place will the true value of SEPA be realised. It shouldn’t be difficult; it just needs the banking industry and payment utilities to work toward providing what is best for the end customer.

Only once banks and utilities embrace SEPA for what it is – the convergence of a single payments market – will this aspiration that started with coins and notes eight years ago come true.

Related articles

• Single Euro Payments Area goes live
• An introduction into the Single Euro Payments Area (SEPA)
• SEPA means a sea-change for European banks
• SEPA – the new payment transactions champion?
• SEPA and consolidated IT systems
• Will SEPA deliver on its promises?

Related links

• JPMorgan