Wednesday, September 17, 2008

Who is piloting the SEPA plane?

I walked into this morning's payments session at Sibos on SEPA expecting the European Payments Council and the banks to pat themselves on the back for the 'successful' launch of SEPA Credit Transfers (SCTs) on 28 January.

But the panel was not in a self-congratulatory mood. No surprises really because if one peeks under the bonnet of SCTs and SEPA in general, all is not as it seems. OK 4,300 banks may support SCTs, but they constitute less than 1% of total credit transfer volumes.

So to use the 'plane' analogy that was the theme for today's Sibos session, the 'plane' (SEPA or SCTs) has taken off, but its course is unclear, customers (corporates, SMEs) did not get to choose a seat, the flight is short on cabin crew and no one is sure who is actually piloting the plane.

Jean-Michel Godeffroy, director general, Payment Systems and Market Infrastructures, European Central Bank, appeared to be under the impression that the European Payments Council (EPC), the group of European banks led by Gerard Hartsink of ABN AMRO, were piloting the plane. While the SCT 'plane' has taken off, Godeffroy said that a clear flight plan for SEPA Direct Debits (SDD)was missing and that the European Commission and the ECB would come to the rescue by drafting a SEPA Action Plan, scheduled for completion by the end of 2008.

A bit bloody late isn't it? Shouldn't the ECB have stepped in sooner when the banks wanted them to and drafted an action plan for migration to SEPA with more definitive deadlines in sight?

Hartsink seemed somewhat miffed by Godeffroy's suggestion that the EPC was the only SEPA pilot. "Key bodies such as ECOFIN (Economic Affairs Council) and the [Eurosystem] Governing Council are not always aligned and change the rules during the flight," said Hartsink.

Hartsink seemed to be passing the buck, saying there were more pilots (the ECB, public authorities, corporates) that needed to influence the direction of SEPA. It is all good and well to say that now, but when it comes to corporates and SMEs, banks in general and the EPC have not done a good job of selling SEPA or communicating its benefits to potential end-users.

"There is no public sector participation [in SEPA]," Hartsink said, adding that the EPC was in the process of publishing information to better educate the different end users about SCTs and SDDs. But why didn't the EPC do this sooner, and more importantly, is publishing a few documents going to really change anything, given the banks' poor job of marketing SEPA?

The only corporate on the panel, Olivier Brissaud, chairman of the European Associations of Corporate Treasurers, could have been more scathing in his assessment of SEPA to date, but instead he said that SCTs were almost there (corporates still want more information such as bank statements to be included in the messages), and as for SDDs, well no one is quite sure where that plane is headed.

"The SEPA plane needs a co-pilot, a first officer and a cabin crew to service the clients," exclaimed Michael Steinbach, chairman of the board of directors of Dutch payments processor, Equens. "To be successful, it needs strong collaboration between all parties; the EC, the ECB, clients and banks; working together."

Hmmm. Well isn't that what should have happened from day one? In its bid to self-regulate the EPC, which drafted the SEPA rule books for credit transfers and direct debits, has ended up "serving coffee" to the regulators, but forgot about all the other customers on board the plane.

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