Recently the European Central Bank came out with the 6th progress report on SEPA.

When we talk about SEPA most people think about the SEPA Credit Transfer, but SEPA is also about card payments and direct debits.

It now looks like that the SEPA Direct Debit will be in place for the November deadline, but let us see whether the current banking crisis will delay this.

In the past, most eyes have been on the SEPA Credit Transfers that are only being used in 1.5% of Euro payments. This is disappointingly low and much lower than expected prior to the launch of SEPA.

What are the reasons behind this? And what that can be done about it? The report outlines some of initiatives that have already been suggested by a number of other bodies in the past, these include: :

A deadline for when SEPA Credit Transfers are mandatory for all euro payments

Public administrations should become early adopters of SEPA

Banks should have a clear product offering and communicate better with their customers.

Some may argue: “what does it matter if SEPA fails”?

SEPA is part of the Lisbon Strategy, the aim of which is to make Europe the most competitive environment in which to do business. SEPA will lower the costs of making cross border Euro payments and therefore SEPA matters.

It may be a cost to the individual bank and sometimes also to the individual corporate, but for the citizens of Europe it is an advantage
So what is the best way to get the SEPA donkey moving?
To get anything done you basically have two methods:

You can use force (the stick)

Or

You can use reward (the carrot)

Clearly the deadline is the stick.

Just like with any other law, you have to comply with it, whether you like it or not and regardless of the costs incurred. If the deadline is a realistic target it could succeed, but it will likely meet lots of resistance from large corporates and the banking community.

The other way to get things moving is to make sure that corporates have business cases to implement SEPA payments. This is far more difficult. One way of kick starting this is to let public administrations become early adopters.

This will create demand for SEPA solutions and consultants with SEPA know how. Once this pool has been created they will go out and look for more work elsewhere and the multinational corporates will be their natural next target to sell their services to.

Once the sales people get on the case they will be able to help the multinational corporates creating internal business cases for implementation of SEPA payments and we will see the donkey moving forward, albeit slowly.

However, what really stops the corporates adopting SEPA is the lack of an easy and failsafe way of converting national bank account numbers into IBAN and BIC codes. Despite initiatives from SWIFT to enable checking of IBAN and BIC codes there is no secure method to convert all national bank account numbers as there are so many special cases.

The lack of interest in SEPA from the multinational corporates can also be seen as an early success of SEPA. Clearly if the costs of cross border Euro payments were much higher than domestic payments the corporates would have already changed to the SEPA payments whenever possible.

All in all this leaves little hope for the carrot method, thus we are left with the stick to get the SEPA donkey moving.

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