Tuesday, October 02, 2007

Will there be a SEPA pricing war?

As we all know the Single Euro Payments Area (SEPA) is forcing major re-engineering in the European payments landscape. This week at Sibos in Boston a number of major vendors (HP, Bottomline, Microsoft, Sun Microsystems) are touting the latest versions of their payment processing systems.

But what is more interesting perhaps is the announcements being made by banks. At Eurofinance in Vienna in late September, Deutsche Bank stirred things up by announcing that it would apply the same pricing to all payment transfers within the eurozone regardless of payment size to try and entice corporates to start using the new SEPA Credit Transfers from 28 January, 2007.

Having invested heavily in its SEPA platform, Deutsche along with other banks that see themselves as major contenders in the post-SEPA payments processing landscape, are eager to see corporates and the public sector move to the new SEPA instruments as soon as possible so they don't have to bear the cost of running legacy and SEPA systems in parallel for too long.

Deutsche said it would also accept payment transfers in a host of legacy formats to try and reduce the pain for corporates of converting their own internal systems to SEPA XML formats.

Today, ABN AMRO, will announce that its systems are "SEPA ready" and that it will provide "fuss-free" conversion of legacy payments to SEPA XML to minimise the impact of the change.

It did not announce anything on the SEPA pricing front, but surely with Deutsche Bank stepping up to the plate and announcing a flat fee for euro payment transfers, it is only a matter of time before there is a 'pricing war' by major European banking providers to try and incentivize corporates to migrate to SEPA as soon as possible.

Meanwhile, banks like Deutsche have made it clear that they will centralise their payments processing of low value euro payment transfers on the EBA's STEP 2 platform, which it considers to the only PE-ACH. Banks like Deutsche are keen to see consolidation amongst Europe's myriad ACHs and payment processors and see this as a way of forcing the issue by making the bank's stance public.

The question is what does this mean for VocaLink, Equens et al which also see an enlarged role for themselves in a post-SEPA landscape?