Today the Single Euro Payments Area (SEPA) initiative will be formally launched with the aim of simplifying and standardizing the vast and fragmented payments market in Europe and reduce cross-boarder hindrances to payments processing.
SEPA will impact on banks, processors and their consumer and corporate customers.
There are two major milestones for the establishment of SEPA. Pan-European payment instruments for credit transfers, direct debits and debit cards will be available, in addition to nationals ones, once SEPA is launched.
By the end of 2010 SEPA will replace national systems so that people can authorise money transfers, direct debits and use payment cards anywhere in the Eurozone from a single bank account.
SEPA impacts all banks operating in 31 countries: the 27 EU member states, the Liechtenstein, Iceland, Norway and Switzerland. As a result, banks throughout the SEPA area will need to invest heavily in technology with the capacity to support SEPA payment instruments.
It should be noted that of the European microstates, the Vatican City, San Marino and Monaco will all be part of SEPA, whereas Andorra will not, despite its de facto adoption of the Euro as its currency.
The introduction of SEPA will increase the intensity of competition amongst banks and corporates for customers across borders within Europe. It also provides a business opportunity for a range of other organisations, including payment processors such as VocaLink and Equens and SIA-SSB, to help banks reduce costs and develop new payment services.
Multi-national businesses and banks have the opportunity to consolidate their payments processing onto common platforms across the Eurozone. They will benefit from substantial efficiencies by choosing among competing suppliers offering a range of solutions and operating across borders.
“Payments flows across Europe will dramatically change as corporates consolidate multiple processing centres in different countries to a single location. This increased competition means banks in Europe face losing corporate clients for cash management services; but it also means they have the opportunity to seize customers off banks in other countries. Some of the larger regional banks are already capitalising on these opportunities and over the next 12 months, this could prove to be a rapidly growing area of the business,” says Jeremy Light, senior executive, Accenture’s Banking Practice.
For consumers, SEPA could mean cheaper, more efficient and faster payments transfer when moving Euro from one Eurozone country to another.