Related article: 10 Corporate Concerns About SEPA
A lack of communication around the single euro payments area (SEPA) between banks and corporate clients will continue to hamper adoption around the European payments initiative, according to a whitepaper by B.I.S.S. Research (London). Because corporates have not prepared their systems or altered their processes, SEPA is not likely to gain much volume on its live date on January 28.
This lack of preparedness, however, was primarily caused by banks' failure to offer their corporate customers their SEPA solutions and even notify them of the nature of their modified commercial pricing. Consequently, corporates have been unable to move toward SEPA usage.
This situation was created because corporates were left out during the initial stages of the production of the Payments Services Directive (PSD) and the resulting SEPA solution. Research carried out by B.I.S.S. found that an overwhelming majority of corporate treasurers support SEPA. However, they are not willing to proceed to SEPA implementation with an open checkbook. The original SEPA project was mistakenly believed by the European commissioners to be a bank-to-bank project. This assertion has produced a SEPA solution that is out of touch with the requirements of corporate users.
Most of the solutions to corporates' concerns are dependent upon agreement between the corporates and their banks. However, the banks appear to be intransigent in moving toward solutions that appease their corporate customers. Many of the banks' SEPA solutions require fundamental changes to corporate systems and processes -- which is not acceptable to corporates.
At the time of B.I.S.S.' research, with only months until the January go-live date, there had been virtual inertia concerning the banks providing their corporate customers with enough information to push SEPA toward use. The banks appear to have engaged in activity to meet the regulatory requirements of SEPA without actually providing the services and solutions that their corporate clients want.
Banks need to engage their corporate customers to gain consensus as to what SEPA services are being offered and at what price. Although many of the SEPA problems are of an industrywide nature and require wholesale market resolve, individual banks are not prevented from developing a SEPA business model. Indeed, this is a great business opportunity -- if banks can look past the threats.
In the future, European directives need to have wider consultation. Successful implementation requires far more direction for the market and its users. There is an urgent need for closer monitoring of all users' projects, enabling problematic areas to be investigated and resolved prior to implementation. This will increase the confidence of market participants in making the necessary changes, even if they are not obviously beneficial to their businesses.
Our research concludes that SEPA is highly unlikely to be much of a success in January. The banks and their corporates must work together under a more involved political management and direction. This could be accomplished by establishing a new organization with recognized power to impose solutions to European directives. The latest information from Brussels indicates this suggestion has been accepted and announcements may be imminent.