Tuesday, September 18, 2007

Pulling SEPA out of the 'doldrums'

With migration to the Single Euro Payments Area (SEPA) compromising banks' traditional payments revenue (the World Payments Report 2006 estimates banks' direct revenues will be cut by approximately 38% to 62%), Deutsche Bank made the bold move of announcing that it would apply the same pricing to all payment transfers within the eurozone regardless of payment size.

SEPA applies to low value payments within the eurozone below the EUR50,000 threshold. However, at Eurofinance's International Treasury & Cash Management conference at the Austria Centre in Vienna today, Marilyn Spearing, global head, trade finance and cash management, corporates, Deutsche Bank Global Transaction Banking, said they would offer a "common price" for any payment transfer within the eurozone, effectively treating all payments the same and removing the distinction between high value and low value payments.

With the World Payments Report 2007 indicating that public sector organisations and corporates may need regulatory incentives in order for migration to the new SEPA payment instruments to achieve critical mass, Spearing said Deutsche Bank was dangling a 'carrot' in front of corporates and financial institutions in order to drive SEPA adoption.

This is quite a bold move given that other payment processors within Europe have not widely publicised their pricing models post-SEPA. Spearing said the announcement was part of the bank's strategy to establish itself as the dominant SEPA payment provider and to shore up payment volumes from both banks and corporates. "We want to get the maximum benefit from any changes we have invested in," Spearing explained, pointing to Deutsche's investment in its new single payments engine for processing all currencies.

Given that there will be no 'Big Bang' migration to SEPA from January 2008, Spearing said SEPA needed to be dragged out of the "doldrums," and corporates needed to act now in order to realise the gradual payment efficiencies that will come from SEPA.

In an effort to incentivise corporates to support SEPA, Deutsche also announced that it would continue to support existing international payment formats such as iDOC, CSV and EDIFACT, and will convert these formats to SEPA compliant XML formats without companies having to invest in and adopt XML themselves.

Deutsche will also accept SEPA payment transfers from any Deutsche account within the eurozone and the UK eliminating the need for customers to open new accounts to process SEPA payments. It will also "re-convert" BICs and IBANs back to national account numbers to aid reconciliation. "Corporates don't need to change their technology or their account structures," Spearing explains. "We want to make SEPA as simple as possible."

Spearing said by taking a more aggressive stance in driving SEPA adoption it hoped to avoid the need for further regulatory intervention in low value European payments.

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