SEPAration or Unification: The unfolding story of Single European Payments
The Eiffel Tower, the Riviera, the Canals of Venice, the Beer of Germany (well, Belgian Beer may be!) - come to mind when one thinks of Europe. I love to travel and the sights and tastes of the great continent are arguably, among the best in the world.
Another reason to love the EU: the Euro. It is so convenient to be able to carry one form of currency while visiting so many unique locations. While the Euro does wonders for the traveler, it also makes life much easier for businesses across the European Union.
A common currency is great, but until recently credit, debit and other electronic transaction standards were different for every country. To fully take advantage of the common currency system, the Single Euro Payments Area (SEPA) initiative was launched in January.
SEPA’s goal: the creation of common payments standards, procedures, financial instruments and infrastructure for the Euro area. Soon it will be possible (proponents hope) for individuals and companies to make cross-border payments as quickly, safely and easily as domestic payments.
Though many in the payments and banking sector are excited about SEPA, Corporations have been slow to begin the conversion to SEPA formats. Why? At a conference in April, ECB board member Gertrude Tumpel-Gugerell spoke on the subject:
“So far, not many Corporates have actively started preparing themselves for SEPA, as for them, the precise impact of SEPA is not entirely clear. This is probably related to the initial reluctance of banks and software providers to communicate on SEPA, as some of their products are still in the pilot phase.” (Read full transcript here)
In order for SEPA to be successful, it is important for banks to communicate effectively with their Corporate clients, the many benefits that the initiative brings to the table. Despite the IT costs that Corporations will incur during the migration to SEPA, it should be easy to convince Corporate treasuries that the initiative is in their best interest.
In short, SEPA will provide a new level of standardization, providing corporations the opportunity to automate reconciliation, consolidate back offices, and hold fewer bank accounts. In the long run, this should mean lower costs and increased efficiency.SEPA also makes it much easier for Corporations to enter new markets and target customers across the European Union. Most importantly, the flattening of the payments space further integrates and strengthens the EU’s economy. So SEPA is both a "volume" and an "efficiency" play.
For a detailed analysis of the ever changing Payments sphere, be sure to check out the next issue of FINsights, Infosys' Thought-Leadership journal on the financial services industry; for past issues, click here.To learn more about the current status of SEPA, check out another speech from Ms. Tumpel-Gugerell here.
For more information on SEPA, check out the Wikipedia entry here.
