Monday, September 14, 2009

SEPA back on the menu again for banks looking to grab market share

Two hours into the first day of the Sibos conference in Hong Kong and already I am inspired to blog about something, which is pretty unusual. My first meeting of the day was with Sentenial, a direct debit solutions provider to leading European banks looking to prepare for SEPA.

I know the Single Euro Payments Area (SEPA) is so yesterday's news but Sentential believes that some life is being breathed back into the flagging project by those banks that see SEPA and the looming introduction of SEPA Direct Debits (SDDs) as a means of winning new business. At Sibos last year in Vienna, just before the financial crisis claimed some of its more high profile victims, SEPA moved to the bottom of the agenda as banks focused on shoring up their capital reserves.

This year, the guys at Sentenial claim that the focus is back on SEPA with leading banks like Deutsche setting the standard for others to follow. Brian Hanrahan, executive vice president, sales & product management, Sentenial, said leading banks like Deutsche see SEPA and SDDs as core to its payments business and are not just treating it as a compliance issue."Other banks are playing catch up [with Deutsche]," says Hanrahan, "but they don't necessarily understand the mechanisms they can use to catch up." 

Sean Fitzgerald, CEO, Sentenial, says the aggressive "land grab" by leading cash management banks is forcing Tier 2 and Tier 3 banks to start thinking about SEPA and their SDD strategy. "The more aggressive players see SDDs as an opportunity to gain market share," says Fitzgerald. "Payments makes up a significant portion of their operating profits and the refocus [post-financial crisis] is back on payments."

Although the binding date for reachability for SDDs has been pushed back to November 2010, with the French banks saying they are not going to be ready until then, Sentenial says the leading banks are already well on the way in terms of their preparations and see it as an opportunity to differentiate themselves. These "SEPA pioneers", says Fitzgerald, are likely to force further consolidation in the payments space and are likely to dominate SDD flows once corporate appetite for the new instrument takes hold, which is not likely to happen until after November 2010.

While SEPA Credit Transfers were a new way of doing something that already existed, SDDs or pan-European direct debits are a completely new instrument for corporates and Hanrahan says they are looking for banks that demonstrate leadership on this issue, particularly around direct debit mandate management, which is particularly challenging in terms of moving existing mandates over to the new SEPA standards.

No comments: