The European commissioner for the internal market has been at the forefront of the Sepa initiative since taking up office in 2004. Here, he answers the market’s criticisms of the project and discusses how it has been handled at European level.
Q Is it true that the European Commission (EC) has not provided adequate leadership regarding Sepa?
A This is a slightly surprising question because, although both the EC and the European Central Bank (ECB) strongly support Sepa, it is in fact an industry-driven and self-regulated project. So the question of the adequacy of project leadership is perhaps more correctly addressed by industry.
Having said that, we recognise that Sepa and in particular the Sepa Direct Debit (SDD), requires a harmonised legal environment at EU level. This has been provided through the Directive on Payment Services (PSD). We recognise that it took longer than anticipated to obtain agreement between the Community legislators but we are now working very hard to ensure that the PSD is implemented consistently, rapidly and completely.
Moreover, our Sepa efforts are not limited just to PSD implementation. We are closely monitoring the situation, discussing developments with member states to smooth Sepa migration as well as encouraging public sector Sepa migration, liaising with industry and user stakeholders and generally raising the political profile of Sepa at European level through debate at the Financial Services Committee and the European Financial Committee, which feed into Economic and Financial Affairs Council.
We have also issued a number of joint declarations on Sepa with the ECB, as well as hosting major conferences. We have published a major study demonstrating the substantial benefits of Sepa, carried out surveys on Sepa awareness by corporates and public authorities, and are contributing to debate and increasing general Sepa awareness.
Q Many bankers feel that the EC mistrusts the banking community: is this true?
A On the contrary, we are placing our confidence in the banking community for the delivery of Sepa. In our view, a market solution can be better targeted and is more flexible than legislation. So we are committed to Sepa as a self-regulatory, market-driven project. However, the benefits of Sepa to the wider economy are so large that we have reserved the right to propose legislation should this prove necessary.
Q Will the EC set an official end-date for SEPA?
A I think the subject of an end-date for Sepa is one of the key questions, perhaps even the most important issue, to address at the current time. There can be no denying that an end-date would concentrate minds and increase certainty in the migration process. It would also reduce unnecessary expense caused by the operation of dual- payment systems, i.e: the new Sepa systems, as well as legacy national payments systems. From this perspective, rapid migration makes sense for banks in particular but also for corporate users.
However, from our discussions with member states we know that this is an extremely sensitive question. Furthermore, in some countries, national competition authorities are concerned that Sepa could be used as a pretext for price increase and, unfortunately, there have been a small number of cases where such concerns seem justified.
Therefore, at the current time, I think the right strategy is not to charge in and try to blindly fix some end-date for Sepa migration. Rather, what we need is to have an open and sensible debate on the subject. I also think banks have a role to play here by improving communication with customers on Sepa and providing reassurance on the cost-performance characteristics of Sepa products compared to existing national payment products. This could help pave the way to establishing a possible end-date.
Q Many believe the industry has gone as far as it can with self-regulation: will the EC become more stringent if the industry seems to be delaying on SDD?
A The success of the SDD is particularly important because no universal payment instrument exists for making cross-border direct debits (with the exclusion of the Austria-Germany direct debit). So the launch of the SDD is a real innovation for Sepa.
We understand the importance of finding a feasible business model for the SDD that is compatible with EU competition law. To this end, there are informal discussions taking place between the EPC and the EC to try and clarify some issues. So, we remain hopeful that industry will find a way but clearly, if this proves not to be the case, we will have to review the situation.
