16 January 2013
‘German businesses are attached to short payment cycles’ (part 2)
In an earlier blog post, Jochen Metzger, head of the payments and settlement systems department at Deutsche Bundesbank, was asked about the process of the SEPA integration in Deutschland. In this blog post he explains more about the stage of integration Germany is in nowadays.
Is SEPA a hot media topic in your country?
It’s not receiving the attention it should, especially since we only have a little more than one year left. However, public awareness is increasing. Deutsche Bundesbank has launched http://www.sepadeutschland.de together with the Federal Ministry of Finance and the members of the German SEPA council (which consists of banks, corporates, commerce, insurance industry, consumer organizations, welfare organizations and public authorities). We launched the website last summer to inform consumers about SEPA. Moreover, we have already produced a flyer with general information on SEPA and more than ten million copies will be distributed. The Bundesbank will intensify its communication activities this year. We hope this will also impact the media agenda. The first news coverage SEPA received was quite negative; we want to make sure it is more positive by the end of next year.
Many organisations play an important role in the preparations for SEPA: including the government, banks and software vendors. Can you name organisations that lead by example?
One organisation that has played a pivotal role is the federal service agency Deutsche Post Renten Service. It is responsible for the payment of pensions in Germany and decided to switch to SEPA Credit Transfer (SCT) completely. If someone applies for a pension, then the person will have to submit their IBAN and BIC. Of course that resulted in a lot of questions, but in the end the German pension service was successful in the switch because the motivation of the clients is high (e.g. if you don’t use IBAN, you will not receive your pension).
Are there any misconceptions in your country when it comes to SEPA?
The public discussion in Germany was at some point dominated by the length of the IBAN. It was perceived as being too long to memorise. German bank accounts normally have ten digits, now people have to get used to 22.
What made things worse is that many consumers didn’t see the benefit of SEPA in the first place, due to the fact that the German payment market was already working quite efficiently. It is not easy to see the benefits for consumers whose only international payment transaction takes place for example during a skiing vacation in Austria.
But isn’t Germany a typical export country?
This is true. However, the fee for European payments already went down quite recently. This means that it has become much less expensive for corporates to transfer money to a foreign bank account. In fact there is hardly a direct cost motivation for companies to embrace SEPA. For them it is attractive only in combination with organizational restructuring of their payment departments.
Are consumers, corporates and banks convinced of its merits?
We have to start by reversing the order. It’s easier to start with banks, because they already have invested in SEPA. The advantage for large corporates is that they can centralise cash management, which is an obvious cost benefit. For small or medium enterprises the combined effect of SEPA and the Payment Services Directive (PSD) can make payments faster. Most of them are not yet fully convinced SEPA will help, but this is starting to change. In the end we have to convince consumers to start using IBAN and then the adoption will go a lot faster. We expect that communication activities of the Bundesbank will stimulate this.
Are there any other specific rules, standards or regulations that we should be aware of?
– SEPA DD has an optional shorter time cycle in Germany (D-1) from November 2013 onwards
– A very popular way of paying in Germany is Elektronisches Lastschriftverfahren (ELV), which is a card payment resulting in direct debit. There is a waiver for this service until February 1st. 2016 and we expect that there will be a SEPA compliant version after that date. This is a very important signal for German retailers and consumers
– Finally, I would like to mention the Federal Financial Services Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin), which will be the competent authority in Germany for ensuring compliance with the SEPA end date regulation