from transaction-based fees. That is much closer to the US model (percentages of 33, seven and 60 respectively) than many other European countries, such as France (15, 49 and 36 per cent). In developing countries, there is likely to be much less reliance on benefiting if the customer messes up so in Brazil, for instance, only three per cent of fees came from penalties and incidents, with 65 per cent from maintenance and 32 per cent from transaction-based fees. In Japan, by further way of contrast, one per cent came from penalties and incidents, 18 per cent from maintenance and 81 per cent from transaction-based fees. The lack of a firm end-date for SEPA has been an ongoing topic. Deadlines tend to focus minds, otherwise things drift, and SEPA has been a prime example of this. The national implementation of SCTs has been slow and that of SDDs has been even worse. On a wider scale, doubts about the euro per se in light of the economic, financial and political problems in 2010 and into 2011, clearest in Greece and then Ireland and Spain, have not helped matters. The most recent extension came in early 2014 when, in the face of considerable


lack of readiness, the deadline was pushed back again. It came in January, just weeks ahead of the deadline, and saw a delay of six months. All domestic and intra-European credit transfers and direct debits were supposed to be migrated to the new SEPA instruments by the deadline but, realising that migration would not be completed, the EC introduced a ‘grandfathering clause’, allowing for the continued processing of non-SEPA transactions until 1st August 2014 (there were, however, no further extensions past this point). The EC cited the latest take-up figures, which were 64.1 per cent for SCTs and 26 per cent for SDDs in November 2013, and noted that ‘in view of this legal end-date, banks and other payment service providers are likely to refuse from that date onwards to process legacy payments’. ‘In the absence of full migration to SCT/SDD, payment incidents leading to delays in payment or market disruptions cannot be excluded,’ it noted, referring to ‘potentially severe consequences for citizens and companies’. In terms of loss of revenue, the ECB has tried to soften the blow by pointing out the opportunities for banks. Top of these is meant to be the ability to offer services more readily to any customer in the euro area. It also touted improvements in efficiency associated with cross-border payments, an ability to offer value-added services and the chance to negotiate better terms with service providers due to heightened competition. However, by causing the end of many local payment schemes, SEPA will reduce competition in some areas, completely contrary to what was meant to be achieved. Speaking at the Next Generation Cards & Payments show in Brussels at the end of November 2010, ECB board member, Gertrude Tumpel-Gugerell, admitted as much when she called for a third card scheme to offset the duopoly that was taking shape as local schemes were switched off. Innovation is meant to be part of the SEPA roadmap. The EC and EPC are seeking to champion this and a SEPA Progress Report by the ECB stated: ‘The provision of innovative payment services [online and mobile] ... are key elements of the success of SEPA.’ In some areas, SEPA will encourage innovation, in others it might hamper it, but in most it would appear to be irrelevant. Innovation is certainly happening, but there are greater forces at play than regulatory ones. In reality, much of the innovation that is going on is detached from SEPA and is


on a national or, at best, regional level. For instance, the largest banks and operators in the Netherlands were working jointly on mobile and Near-Field Communication (NFC) standards, although the plans were dropped in mid-2012. In France, the three


Payment Systems & Suppliers Report | www.ibsintelligence.com 5


market overview


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