11 March 2013
ECB: Financial turmoil is temporary, SEPA is here to stay
This is the second part of two articles in which Wiebe Ruttenberg, Head of Market Integration Division at the European Central Bank (ECB), is interviewed regarding the role of the ECB in the transition to SEPA.
Ruttenberg believes that the current economic climate has had its effect on the preparation pace. “Especially from a bank’s perspective, SEPA is a huge project which affects certain revenue streams. In other words, the move costs a lot of money now and the benefits will only follow later. Currently board of directors of banks are often more occupied with solving day-to-day problems due to the financial turmoil than with establishing a strategic view on future service offerings. This makes it hard to get commitment. On the other hand, we see examples of banks that are capable to succeed in this. The current financial turmoil is only temporary and cannot serve as an excuse for not planning and preparing for tomorrow. Therefore it’s impossible to even think that we postpone the start of SEPA. The migration end date has really helped to push things forward, so there is no reason not to stick with it.”
Ruttenberg believes it will be more difficult to reap the benefits of SEPA when organisations delay the transition until the final months. “There is a tendency to wait. But SEPA is not only about implementing new systems, but also about getting used to new procedures, which takes time. For example, some countries are not used to dealing with the new direct debit features and XML messages. Introducing new processes means a change in behaviour. Maybe your clients or suppliers will be concerned that payments cannot be processed in the way that they are used to.
On the other hand, a lot has happened in recent months. The percentage of SCT transactions has jumped from a relatively low level to above thirty per cent. But especially for SDD there is a need to move forward, since this was not used on a cross-border level.”
Straight to e-invoicing
Some countries are quicker in adopting SEPA than others. What are the most important success factors for a fast implementation? “This of course depends on many different elements. For example, Luxembourg’s success story is easy to explain, they already work with IBAN, which forms a large part of migration efforts. Luxembourg, similar to Finland, is a relatively small community with only a limited number of banks. Besides, Finland has no plans to really use SDD; instead the country will make the next step to e-invoicing, which makes it easier to migrate. Other countries with a similar banking infrastructure deliberately decided to prepare in time, but to migrate at a later stage. You can be fully prepared for SEPA and still have zero per cent SCT payments, when ‘all’ you need to do is push the button. The Netherlands are an example of this, there is still quite a low percentage of SCT, but preparation is very thorough.”
Setting a trend to ISO 20022 XML
Although SEPA is essentially a European initiative, it also affects the payment industries in other geographical regions. “The ECB’s formal responsibility is the Euro area and – as long as the Euro is concerned – the rest of the European Union. However, we think that other countries and regions could learn from the European experience and already some have shown interest. Deliberately the European schemes are based on international ISO standards, so it is relatively easy to implement similar instruments in or across other countries. The European developments have been – and still are – open and transparent. Other regions interested in an integrated retail payments market are always welcome to take advantage from the lessons learnt with SEPA. The emergence of the International Payments Framework Association (IPFA) is a prominent example how the SCT rulebook and the adoption of ISO 20022 standards can facilitate an efficient exchange of retail payment transactions, even at a global level.”
Behaviour and innovation seem to be the key success factors of SEPA in the eyes of the ECB. “We do not only want to harmonise what we already have, but more importantly SEPA can trigger innovation. National borders are disappearing because of the Internet, so it only makes sense that there will be one European market for retail payments. The retail payments industry has all characteristics of a network industry, like telecom and/or energy, and this is enforced by the fast growing importance of the Internet and – more specifically – e-commerce. In a network industry where everyone is connected, it is only logical that people communicate in the same way and work with the same basic set of standards and business rules.”