In its Seventh Progress Report on the Single Euro Payments Area (SEPA), the European Central Bank (ECB) reiterated that further action by European legislators is needed for SEPA to be completed successfully. Corporates and banks have expressed their frustrations at the slow uptake of the new SEPA payment instruments with corporates, banks and public sector organisations saying there is currently little incentive to migrate from existing national instruments to the new pan-European instruments created under SEPA.

 

According to the ECB's report, the banking industry’s self-imposed deadline of December 2010 for SEPA Credit Transfers and direct debits to be in general usage will not be met. By August 2010 only 9.3% of all credit transfers processed in the eurozone were SEPA Credit Transfers. Since its launch in November 2009, SEPA Direct Debits remain at a share well below 1% of all direct debit transactions processed in the euro area.

 

The report stated that establishing a SEPA migration end date(s), in which the usage of national payments instruments will be discontinued, is essential for the timely and smooth adoption of SEPA. It also said it was confident that concerns raised by market participants on the envisaged regulation on SEPA migration end date(s) will be properly addressed by the European authorities. The report states that a mandatory time line  should see SEPA migration completed for credit transfers by 2012 and direct debits by 2013.

 

In addition to a migration end date, the ECB also pointed to the provision of innovative payment services (for example. online and mobile payment services), the creation of an additional European card scheme and the enhancement of the security of card transactions by phasing out the magnetic stripe on European cards.

 

“At this stage, SEPA faces a number of specific challenges that only the market and the regulators together can master," said Gertrude Tumpel-Gugerell, member of the ECB’s Executive Board. "I hope that the constructive co-operation between all stakeholders will become even closer in the decisive two to three years ahead, so that our joint efforts help us to achieve the final goal: an attractive integrated and competitive European market for euro payment services.”

 

Commenting on the ECB's report entitled, Beyond theory into practice, Stephen Hawkes, product manager, Experian Payments said without a clear and defined end date, there is a risk that the industry will retain its current attitude of ‘wait and see’, and that SEPA would slip down the agenda as other, more immediate projects took priority.

 

Hawkes added that banks could seize the opportunity SEPA presented to develop relationships with their corporate customers or perhaps even acquire some new ones. "Ultimately however, the banking industry’s ability to take a proactive approach with its corporate customers will be held back until the various European stakeholders are able to agree the exact requirements for SEPA. Until that happens, corporates are likely to remain wary and take up will remain relatively low for the foreseeable future.”

 

The ECB was also keen to point to positive developments under SEPA referring to the 32 European countries are participating in SEPA, more than 4,400 banks have joined the SEPA Credit Transfer scheme, and more than 3,000 banks have signed up for SEPA Direct Debits. It also mentioned the formation of a SEPA Council, which enables a more formalised involvement of high-level representatives of consumers, retailers, corporates, SMEs and public administrations in the SEPA dialogue, although some would say this is too little too late, and that market participants should have been more directly involved from the outset.