SEPA (single Euro payments area) is a massive banking initiative that has taken over a decade to come to fruition. The launch date, which will make cross-border payments between 33 countries mainly in Europe, as easy, fast and cheap as domestic payments, is now tantalisingly close. Like the Year 2000, February 1st 2014 is an immovable date and there’s no opportunity to negotiate a later deadline.
There are clear benefits for consumers, such as the ability to use a debit card anywhere in the euro area rather than credit cards or cash and the convenience of having just one bank account across the region if you are working abroad. There will be no opportunity for hidden bank charges - for example, for banks to hold onto the money before adding it to accounts, or not allowing people to use the money in their account until after a particular date.
What’s in it for banks?
But it’s been a tricky sell internally for banks. After all, the result of all the painstaking hard work and technological investment is a system where banks are actually losing a revenue stream, as they will not be able to justify the cross-border handling charges. It’s not an exciting new product or service and it wasn’t something that was pushed for particularly by banking customers (though it does benefit them). Banks could be forgiven for asking: what’s in it for me?
Partly that depends on how they have viewed the changes. Banks will be SEPA-ready by the deadline, but there will be differences: some have approached this as just another piece of legislation that had to be dealt with, eating up precious time, money and resources. Others have seen this as an opportunity to build their business, streamline or replace legacy IT and to innovate.
And there are benefits for banks: there are opportunities to simplify and standardise cash management across Europe, as well as centralise cash management, payments and collections. Creating a consistent format will also help with the quest for more payment and collection options, particularly mobile and for banks to think differently about executing payments generally.
Perhaps the key benefit to banks is indirect: banks can improve their customer service by making things easier and more transparent for their corporate customers. And customers need help. According to PricewaterhouseCoopers, 21.6% of EU companies contacted did not have a definite SEPA readiness plan and 43.5% would be cutting it fine to make the deadline. In the US, 60% of firms are unprepared to make the switch to the new banking standard. Banks have an opportunity to help their customers and boost their loyalty by helping them cope with SEPA. Improving customer service should be the goal of any bank on its own terms, but there’s the added bonus that loyal customers are more likely to trust you with more of their financial requirements in the future.
SEPA is an opportunity then not only for banks and corporate customers to streamline their payment systems, but also to improve their relationship and trust.