Tuesday, January 16, 2007

Standing out in the crowd

Gerard Hartsink chairman of the European Payments Council's comments that banks are unlikely to meet the 2008 deadline for SEPA direct debits because of European lawmakers failure to pass the Payment Services Directive legislation by the end of 2006, hardly comes as a surprise.

Doubts have been cast for months over banks' ability to meet the 2008 SEPA transition deadline anyway and there are still question marks over corporate and SME uptake of these new SEPA instruments. Now at least the banks have an excuse for a slower phasing in of SEPA direct debits, which were considered the most challenging given the different standards that exist across Europe.

In a payments magazine entitled "Speed", which seems somewhat of an oxymoron in the context of SEPA, Hartsink stated that existing national laws would work for SEPA credit transfers and cards but not direct debits. He says perhaps the earliest SEPA direct debits could be delivered is Q4 2008 if the current German EU presidency passes the PSD before April 2007.

Hartsink was mainly referring to the fact that the banks will not be offering pan-European direct debits from the 1 January 2008, but what about the PE-ACHs like STEP 2, which is geared up to have its SEPA Direct Debit Service in place in 2007, ahead of the European Commission deadline after seven leading Italian banks and 52 of the leading banks in Europe, agreed to develop a SEPA Direct Debit platform in partnership with EBA Clearing and SIA.

Equens (formerly Interpay) is already advertising its SEPA direct debits capability, which its promotional literature says will be available from the 1 January, 2008. Is it a case then of the banks finding an excuse to drag their heels on SEPA direct debits?

Given that banks will have to run legacy payments in parallel with the new SEPA instruments during the SEPA transition period from 2008 to 2010, which is a costly undertaking, is it any wonder that banks may welcome a delay of a few months in launching SEPA direct debits? The reason why I say that is because once all banks offer the new SEPA pan-European payment instruments, it will become increasingly difficult for them to differentiate themselves.

David Barrow, vice president, vision, solutions & architecture, Chordiant, likens SEPA to a town market where everyone is selling the same thing. “SEPA will utterly destroy a bank’s ability to compete on cross-border products by price or product type. For those that do continue to offer cross-border payment products, competition will have to be around more subtle areas such as customer service and efficiency," he says.

So the only way to stand out in a crowded marketplace, he says, is to provide a unique customer experience, which means leveraging customer and transaction data that resides in silos in such a way that each customer is treated like an individual.

It is the old CRM edict rearing its ugly head again, but one wonders whether this is factored into the banks' preparations for SEPA or if the need for good old-fashioned CRM has got lost in the overriding focus on the provision of SEPA payment instruments from 2008.

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