Thursday, October 12, 2006

Time to get serious about SEPA

The title of this post may sound like an oxymoron. After all, I have heard nothing but SEPA all this week at the Sibos conference in Sydney and I am suffering from SEPA fatigue. Is there anything left to say about SEPA?

Well it appears there is, or at least I have managed to interview somebody that has something else to say about SEPA that I thought you should all know. My judgement, however, may be clouded by now.

Anyways, as much as there is a strong whiff of SEPA in the air at Sibos, a number of observers believe that banks need a proverbial ... up their ... "The banks have got to get more serious about SEPA, otherwise the regulators are going to step in," says Karen Cone of TowerGroup.

A number of the larger global cash management banks (along with the vendors that all have SEPA solutions proudly on display promising a hassle free migration to SEPA - it is a bit like taking a headache tablet that makes the pain go away); appear to be rubbing their hands together with glee at the prospect of SEPA as the prediction is that it will be all about who has the greatest volume.

A number of these banks are also fairly well advanced in terms of consolidating their multitude of payment systems onto a single platform, which people like Joe Mazzetti of Fundtech believes is key to managing SEPA. "Our mantra is the convergence of payment systems to do one thing," says Mazzetti. The thinking is that low value and high value payments will merge so banks will only need a single platform for all payments.

Some believe, however, there is too much focus on the complexity and 'pain' of SEPA - just one of the hundreds of regulations that banks have to comply with - and not the opportunities it presents. "There should be more of a focus on how banks can take advantage of SEPA to differentiate their services," says Mazzetti.

Easier said than done though when SEPA to most banks constitutes further commoditisation of payments, declining revenues and a strategic re-engineering of their payments business.

Despite the many 'pain points' around SEPA, Ralph Silva, research director, TowerGroup, believes that banks have a "social responsibility" to make SEPA work.

TowerGroup CEO Karen Cone believes it is more about a fundamental cultural shift that needs to occur within banks. Although analyst outfits like TowerGroup hardly paint a rosy picture for the future of the payments business - by 2016 it predicts that 80% of the world's payments processing will be concentrated in the hands of 25 banks - it is not just about the big banks hoovering up the small fry.

Cone says it is much more about banks really coming to grips with the concept of white labelling to the extent that outsourcing their payments business to their competitor or another bank is a 'no brainer'. Banks can still compete but on the front-end customer channel, not the back end. It has been said before, but banks don't seem to have got their heads around this. It is time for some of them to eat humble pie.

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