According to new research published today by LogicaCMG, the expected benefits of SEPA are high within banks and corporates yet there is still a lack of planning by the corporates and understanding of its commercial implications. This along with the absence of clear bank strategies will be a major obstacle to progress.
The researchÂ¹ polled banks and corporates across Europe and the US to uncover attitudes to and readiness for the introduction of the Single Euro Payments Area (SEPA). The study found that two thirds (66%) of corporates have not yet started on their SEPA strategy, compared with just 6% of banks.
Almost three quarters (74%) of corporates and 66% of banks expect a positive business impact from SEPA, while the majority (85%) of banks and 66% of corporates expect to see processing efficiencies. One in five corporates and 8% of banks donât yet know what impact SEPA will have on their business â despite the fact that the use of the first instruments is planned for 2007.
Simon Bailey, payments director, global financial services, LogicaCMG explained: "The results of the poll demonstrate that while the potential benefits of a single payments structure across Europe are well-understood, many corporates and banks have yet to start work on the business changes need to exploit SEPA. A number of banks believe that there is still a lack of clarity about SEPA: what it is, how it will work across the eurozone, and the steps that they and corporates need to take today to take advantage of the new regime."
The study also indicated that there is likely to be a split in the industry, with the big players in-sourcing the payments functions from smaller banks who will struggle with the business case to process SEPA payments in-house.
Simon Bailey continued: "We found that many banks are finding it difficult to define a business case for SEPA because of uncertainties on timings, standards and the degree of regulatory pressure. The banks see a negative impact on revenues and a requirement for a high level of investment. This is affecting progress on their commercial proposition for corporate clients. Banks can benefit from SEPA if they adapt their payments business. Not getting involved is a high risk strategy given the effect on the economics of the payments industry."
The research also highlighted that what the banks need to do is to clearly articulate what SEPA means for their customers as well as the banks themselves.
"The prevailing rationale is that payments will be more automated and cost-effective, with higher levels of straight through processing and that this will benefit the users of payments services," says Simon Bailey. "However, all end customers will face some upheaval. Businesses will also have to spend to achieve benefits just as the banks will have to spend if they are to maximise any opportunities in the new world. There is a real danger â highlighted by this research - that customers are forgotten about in the process of introducing SEPA."
Â¹ The SEPA poll was carried out with 155 respondents between August 1 and August 12, 2005 and was complemented by one to one meetings with senior product managers with SEPA responsibilities from 16 banks doing business in Europe, including the big six payments banks (three US) and banks representing nine European countries.