Sepa is intended to improve the efficiency of cross-border trade within the European area by creating a single standard for cross-border payments. However, Ruth Wandhöfer, head of regulatory and market strategy EMEA at Citi is concerned that individual countries are incorporating local payment systems into the use of Sepa payments.
Italy, for example, has traditionally treated public-sector and private-sector payments very differently – where it to retain such a distinction post-Sepa then it could create problems for non-Italian based payment service providers to cater for such specific local non-harmonised requirements.
“Different countries are importing their own individual flavours into use of Sepa payments, which means that the system may not be as harmonised as was envisaged. I think that it is important that we harmonise on the highest common denominator, not the lowest,” says Wandhöfer Failure to properly harmonise standards could lead to Sepa failing to deliver much of the functionality that it was intended to introduce. If local requirements are maintained then it could be the case that the expected increase in cross-border competition may not materialise.
Wandhöfer suspects that the lack of a push for real harmonisation may stem from stakeholders’ feelings that harmonisation may not be of great benefit to them, particularly when the upfront monetary costs that come with Sepa compliance are taken into account.
“It can be hard for stakeholders to see the advantage of harmonisation, particularly when we are dealing with individuals and SMEs. Harmonisation tends to make things cheaper in the long term, but it is expensive in the short-term,” explains Wandhöfer
The key seems to be convincing stakeholders that the long-term savings that Sepa can bring about are worth the up-front costs incurred during the harmonisation process.
“Sepa is worth the monetary cost. Cost could be high for banks and users, depending on the outcome of the regulation – particularly for SMEs – but it is a one-off cost, and it is useful to harmonise payment systems,” notes Wandhöfer.
Wandhöfer feels that regulation can play its part by enforcing compliance with the IT systems that are necessary for Sepa to operate, but that the industry also has a role to play through inter-bank cooperation over what standards should be used.
“Regulation will hopefully make banks ISO XML compliant, which should at least get everyone on a common curve and pave the way for greater harmonisation. However, the industry must strive to help regulatory dialogue. The industry must be aligned.”
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