Monday, October 01, 2007

Regulation as an opportunity?


Guest blogger, Gareth Lodge, analyst, European payments, TowerGroup, gives us his thoughts on some of the 'juicy' and not so 'juicy' announcements he expects to see at Sibos this week in Boston.


I'm writing this mid-afternoon on day one of Sibos, just as I'm about to dash to the opening plenary. This has increasingly set the tone for the event, so all eyes will be on Ken Lewis in a few moments.

One of the reasons I think why the keynote is so pivotal is that Sibos has grown to be so important to the industry and that everyone uses it as a platform for announcements. I sat in my hotel room late last night just trying to keep up with the embargoed releases that have been shared with TowerGroup, and they are just the tip of the iceberg. As a result, it's often not until a week or two after the event when the dust has settled that some of the more significant releases become apparent.

I think that's one of the reasons why we've seen some releases before Sibos as pre-emptive strikes, with the news of Equens and Seceti merging, Deutsche Bank "shielding" corporates from SEPA, and an expected statement from the EBA that JPMorgan and Deutsche Bank will be using the EBAs' STEP2 platform as their single channel for all SEPA payments, at national and cross-border level alike.

So what am I really expecting? I'm not sure that we'll see the big announcements that the industry is hoping for. That said the Microsoft announcement that it is rationalising the payments platform for Santander though is very significant. I'm a stronger believer that if one large bank radically changes how it processes payments, then it will set off a chain reaction.

But whilst there are plenty of conversations, there seems to be less appetite for taking what is perceived a potential risk - if it ain't broke.... This announcement will cause a number of banks to re-visit this area. I've coined a phrase SEPA 2.0 to address this and it has two aspects. Firstly to cover the Web2.0 like aspects of the innovations that will result from SEPA schemes - mobile and internet payments will become easier.

But the second point is that SEPA is first and foremost part of a bigger political vision which won't be allowed to slip. Just as MiFID is a second attempt, a second iteration of SEPA is becoming increasingly more likely.

TowerGroup is seeing that banks are beginning to look at SEPA in a more strategic, longer term way. SEPA Direct Debit is such a radical change for many, both in scheme and potential impact, that it is forcing them to move from a tactical point fix, to a bigger strategic response, such as systems replacement or outsourcing.

As a result we might find that there are only a handful of significant announcements over the course of the few days. Yet as an analyst, I'm torn between wanting lots of big, juicy announcements now and not wanting any yet, as it would indicate that banks are actually starting seeing regulation as an opportunity, rather than fighting it. We live in interesting times
!

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