After demolishing trade barriers for everything from melons to machine tools, the European Commission has financial services firmly in its sights. Its Single Euro Payments Area initiative - SEPA - aims to turn fragmented national markets for payments processing into a single domestic market across all member states. The objective is to give consumers a better deal by promoting competition on a Europe-wide scale, with more choice, more transparency of pricing, greater efficiency and lower costs, writes Liz Benison Vice President - Global Director of Operations, aqt the Capgemini Financial Services Business Unit.
It is clear that for the banking sector SEPA will be one of the biggest challenges of recent decades. But its impact is by no means limited to banks and other financial institutions. Major businesses in all sectors - manufacturing, retailing, telecommunications, for example - also need to be aware of these developments, and of the opportunities they offer for saving very significant sums of money. The same applies to the public sector. Any government department or national, regional or local authority with a significant payments regime will be impacted - even if payments are largely or wholly domestic.
SEPA also aims to benefit private consumers who need to move funds around Europe for whatever reason - planning a holiday, buying a house, taking out insurance, opening a savings account - and who are looking for a good choice of low-cost ways to handle the transactions involved.
So how ready is the European financial services industry in general, and UK banks in particular, for the challenge? Given that Phase 1 of SEPA is about to pass into UK law via the Payment Services Directive (PSD) in November, the question is both urgent and topical. Some important answers can be found in the publication, launched in September 2009 of the latest World Payments Report, an annual report based on interviews with major banks and their leading corporate clients, produced by Capgemini in collaboration with the European Financial Management & Marketing Association (EFMA) and RBS. (The full report is available free of charge at www.wpr09.com)
The report shows that despite the worldwide credit crunch, the political drive for a unified payments system across Europe has remained strong in 2009, and the EC's timetable to achieve that aim has remained aggressive. However responding to such profound change within the anticipated timescale is clearly a major challenge for UK banks. And competition is making that challenge more acute. Competitors and potential competitors are hungrily eyeing the profit potential of the European payments processing market - estimated to be worth up to €100 billion per annum in throughput terms - making it even more important for established players to respond urgently.
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