SEPA: So near but so what?

It seems we have been collectively preparing for the Single Euro Payments Area (SEPA) for quite some time now yet no one seems too pushed about it!

Essentially SEPA is designed to improve the efficiency of payments in Euros both cross-border and domestically. As part of this, new schemes for credit transfers and direct debits will replace existing payment schemes and existing payments will migrate to the new schemes.

With a February 2014 deadline – this actually means there’s only 100 days left for government, banks and businesses to migrate their existing euro credit transfer and direct debit schemes to the SEPA credit transfer (SCT) and SEPA direct debit (SDD) schemes.  According to the European Central Bank the changeover process is now entering ‘a critical phase.’

In the Irish market, it’s been very slow to gain momentum despite these impending deadlines.  An ISME survey from September revealed that only 58% of SMEs are aware of SEPA, 29% were unaware of the 1st February 2014 as the compliance date and little over half of the SME community (54%) have begun early planning or implementation of this new system.  In total just 19% are considered SEPA compliant.

With so many other pressures and challenges facing small business owners it’s easy to see how SEPA fell below the radar.  In light of everything going on for business, it’s not really that compelling - even I struggle to find something transformative or tangible about it.

No doubt consumers are feeling the same; it’s just not clear how it will affect them or indeed if it will benefit them at all.   SEPA promises to offer greater choice of service, competition and flexibility. So a consumer wishing to pay for services within any of the 33 European countries involved in SEPA can now do so using just one domestic account.  They will also be able to use the same payment card for all euro payments within the participating countries, making the use of cards more efficient.  It will also be easier to opt and pay for services provided by European companies such as telephone, insurance and utilities. 

Therefore consumers should enjoy the benefits of increased competition in both the payments and utilities market.  I wonder though, will they embrace these rights post SEPA?  Will we see consumers opening up new European bank accounts?  And what are the risks for consumers, particularly in regards to making cross-border direct debits? 

The ISME report also outlines risks posed by a "big bang" late migration. If everything is left to the last minute, there could be huge capacity issues by providers and software vendors.  Similarly this doesn’t leave adequate time for system testing and dealing with any issues during the changeover phase.  Ultimately this approach could cause operational risks, like disruptions in individual handling of payment orders.  The organization is embarking on a nationwide rally to inform and motivate SMEs to get moving in their preparations for the upcoming deadline.

If life post SEPA offers up increased efficiency, smoother payment processes and greater competitive pricing/choice for both businesses and consumers, why are we so unhurried in our pace to embrace this? It seems there is little understanding or urgency to get moving on this new payments era.

Source: Second SEPA Migration Report, October 2013, European Central Bank and ISME SME SEPA survey, September 2013