As SEPA nears its January 2008 live date the industry is still engaged in high debate,
with heavy users of payment services still unaware of what new services banks are offering for SEPA and at what price. There
are concerns about a number of the design features in SEPA that are deterring corporates from taking part. One of the most
contentious issues for corporates is the identification codes the banks had assumed would be taken up by their corporate customers.
The proposal was to use a combination of BIC and IBAN codes, although there was still some debate regarding this solution,
where the length of the code was a big issue.
However, any view that the corporates would accept BIC codes as part of the identification
is well short of appreciating their concerns about being forced into the SWIFT network. Most of the corporates wish to maintain
flexibility of choice of their preferred network and are concerned about the expense of joining a closed network that has
its focus on the banking requirements and is operated mainly for the bank-to-bank space. The development cost for the corporate
joining the network is also seen as an unattractive element so there is not much likelihood of a mass migration into SWIFT
by corporates in the future.
Many corporates have not yet embarked on their SEPA project and Craig Ramsey at ACI,
one of the software houses leading the way for SEPA, views the corporate market as divided into thirds, those that have started
a SEPA project, those whose status is unclear and those who have not yet begun the process. This sad position on the corporates
buy side is not much better on the banking sell side, with Ramsey optimistically estimating that only 25 banks have any sort
of strategic SEPA project underway.
A number of different research reports appear to substantiate the views of Ramsey with
several showing even worse figures. This all adds up to a very low volume of SEPA transactions next year and possibly for
years to come.
Of the 25 banks Ramsey believes may have begun their strategic projects, ACI has already
engaged with five of the largest and is therefore well placed to give an objective view of the market position. Indeed, Ramsey
makes the point that ACI’s approach to SEPA has been highly consultative, rather than simply designing functionality.
This is an astute strategy by ACI as the banks are floundering with the SEPA solution to the payments services directive (PSD),
so any solution must push SEPA from a compliance project into a business opportunity. It must also be acknowledged that it
is a banking threat. ACI has already qualified the technical solution and is ready to go; it understands the threats and can
see where business opportunities can occur. This will surely bring not only rewards to ACI but also their lucky banking clients
If the payments industry is struggling with credit transfers, the issues around direct
debits appear to be of mountainous proportions, but there is more time to work out a solution. The June 2008 time frame allows
project plans to be created and systems solutions found. ACI, having cracked the credit transfers nut for SEPA, has already
embarked on its direct debit solution. However, the banking industry and its customers face a harrowing time getting to a
cost-effective result. The ACI consultative approach could bear fruit once again as it has an almighty grasp on the problems
the industry faces, with sufficient imagination to deliver a solution the market needs.
B.I.S.S. Research’s recent white paper highlights the flaws in the methods of
creating directives and drafting its articles to be transposed into law across all EU states. One of the major weaknesses
exposed is in the shortfall of industry consultancy at an early enough stage before the directives are transposed into law.
The missing ingredient was customer views and ideas of requirements. The corporates were not consulted until after transposition
of the directive and SEPA had been designed. The missing customer requirements are what are causing the debate at this late
stage of the project and have deterred corporates from starting a SEPA project. This was a calamitous approach by the politicians
and the banks, which may prove extremely costly in the end.
ACI notes that corporates are aware of SEPA but many are hardly bothered by it. This
is not surprising if the banks have not yet sold their new services and prices. If the corporates are not being sold to by
the banks, are they meant to take the initiative and lead the banks to their requirements? That would be a strange turn of
events!
The payments industry can learn from the software suppliers and the ACI approach, where
it embarks on an analysis of the problem, defines possible solutions and measures them against its customers’ business
requirements. Any gaps are analysed and prescribed solutions found. This very consultative approach looks like it is almost
leadership! Something the payments industry needs and which can be found in abundance at ACI.
Gary Wright, MSI
