The Single Euro Payments Area will harmonise and unify financial infrastructure across the EU, compel change and, in doing so, open up new windows of business opportunity. By Francesco Vanni d’Archirafi.
The EU’s efforts to create a single financial services market necessitates a series of fundamental changes to how banks and businesses operate. Initiatives such as the Single Euro Payments Area (Sepa) are forcing the industry to challenge historical business models and embrace change as market infrastructures are unified and, ultimately, made more efficient. These sweeping changes will have an impact not only in Europe but also across the world.
The underlying forces compelling industry change are, in fact, even more fundamental and universal than what is on the agenda of the EU. Technology is changing consumer expectations and influencing innovation. Consumers want faster systems, real-time information, more control over transactions, increased visibility and accessibility –
all at a lower cost.
The globalisation of commerce is placing demands on banks to move funds efficiently across borders, across time zones and across continents. The quest for operating efficiency continues to be a business imperative, and the need to adapt to the new world order with the increasing emphasis on regulatory compliance through transparency and control is a prerequisite to doing business.
The shifting global regulatory climate, coupled with more demanding consumer expectation, is accelerating the adoption of new technology, and fuelling the impetus for banks to re-tool and revolutionise their internal infrastructure in order to keep pace with the changing world.
In truth, the transformation of business is accelerating. Citigroup has had a longstanding involvement with our corporate clients’ efforts to standardise and integrate their financial and commercial processes, and increase efficiency across all of the markets in which they operate. In recent times, we have seen the emphasis shift from cost reduction to value generation as companies seek to radically transform the way they structure and operate their business. The realisation of the Sepa vision will augment these initiatives, and give smaller companies access to similar opportunities to streamline their banking and treasury functions.
Similarly, financial institutions are compelled by competitive and cost pressures to focus on their core client franchises, and to challenge traditional infrastructure arrangements, such as for cash clearing, given the competing demands on scarce capital.
Sepa is forcing banks to take a fresh look at margins and we see the trend towards payments processing consolidation continuing as banks enter into ‘co-opetitive’ arrangements with transaction processing specialists and best-in-class solution providers in the marketplace as an alternative to building and maintaining these capabilities
in-house.
Further across the value chain, we are bearing witness to exciting innovations as banks develop new ways of delivering services to their clients through unconventional alliances with mobile telecommunication service providers, card issuers and acquirers, and technology specialists.
These partnerships have tended to be country-specific to date, but the convergence of technology, distribution and communication will accelerate the pace of evolution, and breakthrough applications will rapidly transfer across borders as inter-operability of market infrastructures and common standards become the order of the day.
Regulatory efforts such as Sepa, which harmonise and unify financial infrastructure across the EU, will compel change and, in doing so, open up new windows of business opportunity for the industry participants that have anticipated the outcome and taken
pre-emptive measures by establishing competitive new business strategies, re-engineering their operational models, and remaining at the forefront of service innovation.
While Sepa seeks to unify payments infrastructure across the EU to achieve lower costs and greater transactional efficiency, we believe the implications go far beyond achieving inter-bank efficiency within the EU.
Sepa will ultimately be a catalyst for global change. It provides a common framework, language and standards as the banking industry mobilises and evolves in response to the prevailing market forces, compelling fundamental change to how we conduct business and deliver services to our customers around the world.
Francesco Vanni d’Archirafi is chief executive officer of global transaction services for Europe, Middle East and Africa, at Citigroup.
