SEPA slippage

After much stalling and compromising, the Payment Services Directive (PSD), which is the legal framework for the Single Euro Payments Area (SEPA) has finally been passed. But when you think that the PSD was first published in 2005 and it has taken two years to agree on the content of it, there appears to be some 'slippage' around SEPA.

The PSD will now be transposed into national law by 1 November 2009 instead of November 2007, but the transition to SEPA will begin from 1 January 2008. The 'slippage' is even more apparent when one considers that SEPA as a concept has been on the table since 2000, and what has the industry got to show for it?

Apart from STEP2, some ACHs with pan-European ambitions and talk of SEPA-compliant instruments, not a hell of a lot says some banks, who according to a knowledgeable industry source, are starting to draw comparisons between SEPA and that other much-talked about EC regulation, MiFID.

The Markets in Financial Instruments Directive had leading investment banks announcing the development of Project Boat, a pre- and post-trade reporting service for off-exchange equity trades, and Project Turquoise, a multi-lateral trading facility.

No such announcements have been made by the leading payment banks for SEPA. However, according to the same knowledgeable source, there is talk of a Project Turquoise for bilateral clearing between banks. This would effectively mean that some of Europe's major payment processors could club together to provide cross-border clearing for their own pan-European direct debits instead of using the pan-European ACHs; STEP 2, VocaLink and Equens, which are hoping to capture a share of this business.

But given the different competitive dynamics between the worlds of payments and investment banking, and the ability of investment banks to move much more quickly, none of us are holding our breaths when it comes to the payments' equivalent of Project Turquoise emerging any time soon.