Gertrude Tumpel-Gugerell: Corporates in the Single Euro Payments Area
- business as usual?
Speech by Ms Gertrude Tumpel-Gugerell, Member of the Executive Board of the European
Central Bank, at the "Panel discussion: Cash Management in 20 years", at the 20th
Finanzsymposium, Mannheim, 17 April 2008.
* * *
Introduction
It gives me great pleasure today to take part in the 20th Finanzsymposium, which has
brought together some of the main corporates active in Europe. The main topic of this
session is the major changes that have been observed in the financial industry over the past
few years, and the changes that may occur over the next two decades.
After many years of economic and financial integration, I would like to address an issue that
has so far received little attention from the corporate side: integration in the retail payments
market. In this panel session, let us discuss the extent to which the most recent payment
developments are having a positive impact on your businesses.
Since the launch of the Single Euro Payments Area (SEPA) in January this year, it is no
longer simply "business as usual". Through SEPA, a single European market place has been
created, which will be of great benefit to corporates.
The SEPA project will bring about a comprehensive, pan-European harmonisation of
payment instruments for euro payments.
In January 2008, the banking community successfully launched the SEPA credit transfer, as
well as a common framework for card payments. These will be followed by the SEPA direct
debit before the end of next year. The new Single Euro Payments Area enables customers to
make payments anywhere in the euro area as quickly, safely and easily as they can in their
own country. Within SEPA, all euro payments are treated as domestic payments and are
carried out using a single set of payment instruments.
The Single Market also stands to benefit considerably from the wide range of new
opportunities that have been opened up through the launch of SEPA, as it will promote
competition and innovation, as well as improve conditions for customers. In this context, I
would like to draw your attention to a recently published study on the economic impact of
SEPA, which was carried out by the ECB in close cooperation with a number of European
banks.
The study clearly shows that it depends on the interplay between two forces. On the one
hand, greater competition resulting from the abolition of cross-border barriers will determine
banks' earnings. On the other hand, an electronic, fully automated SEPA environment means
that banks will benefit from efficiency gains and potential economies of scale.
The ECB's study also reflects banks' expectations that, in the future, more use will be made
of more alternative, innovative payment methods than cash.1
The ECB, as well as the national central banks, are striving for more integration in the
financial markets. Public authorities are responsible for providing an adequate framework
that is conducive to such financial integration, i.e. legislation and rules for cross-border
transactions that guarantee a level playing-field for all market participants. The adoption of
the Payment Services Directive in 2007 was a major step in this regard. Now it just needs to
be transposed into national law.
The impact of SEPA
The impact of SEPA is expected to be substantial. A recent study conducted on behalf of the
European Commission2 mentions that banks and their customers are expected to benefit
from SEPA. It is calculated that these benefits could reach €123 billion (cumulative over six
years). However, the study also clearly points out that, if stakeholders are reluctant to
embrace SEPA and if the migration towards SEPA does not take place in a timely and
comprehensive manner, there are likely to be fewer benefits for customers and banks and
corporates could even record losses - for example if participants have to run systems in
parallel due to a slow migration process.
For corporates, SEPA will have an impact in three areas in particular:
•
First, SEPA will simplify payments. For their incoming and outgoing euro payments,
corporates will be able to use a pan-European, single set of instruments and
arrangements based on the latest international standards. Pricing is expected to be
competitive and services will improve due to the competition at the pan-European
level.
•
Second, SEPA provides greater clarity and will enable corporates to manage and
transfer their liquidity
in a cheaper and faster manner. SEPA provides clarity on the
timing of payment processing cycles and possible revocations. For example, thanks
to SEPA, corporates are aware of the maximum processing time for payments, as
well as the maximum amount of time customers have to revoke a direct debit in
Europe.
• optimise
Third, additional standards are being created to processes, as well as to
facilitate better interfaces between the financial management systems of corporates
(i.e. enterprise resource planning systems) and the systems operated by banks.
New standards will allow account-related information to be handled more efficiently.
Corporates will also receive additional information on their bank statements thanks
to SEPA.
Let me now turn to those issues that need to be addressed by corporates in order to ensure
that SEPA is implemented successfully.
•
First, corporates will have to migrate their databases, which still contain national
account numbers, in order to incorporate the international bank account numbers.
Most euro area countries have agreed on a migration procedure aimed at assisting
the corporates to do this.3
•
Second, corporates will have to contact the banks in order to be able to better
evaluate the benefits that SEPA will bring to their organisation. Banks will provide
information as to how products and payment cycles may be improved, but you could
also contact your provider directly with regard to better products.
• plan
Third, corporates could ahead. Several initiatives are under way, which are
focusing on corporate-to-bank connectivity and a standardised way of transmitting
remittance information with the payment.
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. By the end of 2010, we expect the vast majority of
payments to be executed as SEPA payments. However, it is becoming increasingly clear that
there is a need to specify an end date on which the current payment instruments will be
phased out.4
Discussions have already begun and I hope that progress will soon be made in this regard.
Of course, the SEPA project is by no means complete. Other topics, which are currently
being worked on in the banking industry, include future payment instruments, such as the
SEPA direct debit5 and an additional European card scheme. The European Payments
Council (EPC), in collaboration with the Eurosystem and European Commission, is currently
looking into different ways of ensuring that the new services are ultimately at least as good
as the current ones and that they meet customers' requirements. For example, all direct
debits will have to be changed so that they comply with the new Payment Services Directive,
which will have been transposed by the end of November 2009.6 In terms of cards, the
Eurosystem is contributing to the clarification of the economic and political rationale for an
additional European card scheme, and is identifying practical steps that could be taken in this
direction.
I expect that the details on the SEPA products and the migration times will soon become
clearer, and that stakeholders will become more actively involved in the SEPA debate.
Indeed, I have been informed that some forward-looking corporates have already started to
prepare themselves for SEPA credit transfers.
They have started to introduce the new SEPA standards, have improved their connectivity
with banks - and all this in the light of a more competitive service (and more competitive
pricing behaviour).
The role of corporates over the next few years
Finally, I would like to turn to innovation and the role of the corporates over the next few
years. In general, innovation occurs on different levels. It could lead to
•
improved goods and services (such as SEPA instruments);
•
improved organisational processes (such as supply chain innovation);
•
improved production processes (such as specialised payment factories or
outsourcing).
Regarding the first level of innovation, i.e. product and services innovation, I assume that,
with SEPA, the new payment instruments for Europe will be at least as efficient, easy and
secure as they are today in your own countries.
Furthermore, the banking industry is already thinking about expanding its range of SEPA
instruments to include pan-European online and mobile payments, which will lead to a further
broadening and deepening of SEPA.
The second level is process innovation. The assumption is that SEPA will lead to a better
organisation of processes and constitute a first step towards the end-to-end straight-through
processing (STP) of payments and collections.
Corporates will then be able to interact better with their counterparts and conduct their
financial transactions more easily, irrespective of where they are located. The banking
industry (e.g. via the Euro Banking Association) has also started to look into electronic
invoicing (e-invoicing), and the European Commission is currently analysing the legal issues
with regard to e-invoicing (such as electronic signature). In addition, the ISO (International
Organization for Standardization) has started work on harmonising procedures for reporting
and bank statements. Ultimately, the entire supply chain will be improved.
Third, the production process will be improved. For payments, this could mean that more use
is made of outsourcing and payment factories, which, thanks to economies of scale, can also
be offered by non-banks. Banks could even set up their own "non-banks" to whom they could
outsource some of their payment functions. It remains to be seen to what extent outsourcing
could be expanded.
Corporates have two important roles to play in these different levels of innovation. On the
one hand, they are playing an important role, together with the banking industry, in the
creation
of these new payment solutions and the related processes. On the other hand, they
are also key players in the implementation of the European solutions.
Let me now conclude.
Conclusion
Since January 2008, payment services have been offered at a pan-European level. Within
SEPA, there is no longer any difference between domestic and cross-border euro payments
within SEPA when using the SEPA credit transfer.
SEPA has triggered an entire process of reforms which will further improve the functioning of
the financial system. I am confident that corporates will play a role in creating a more
innovative and integrated market.
My "fellow countryman" Joseph Schumpeter coined the phrase "innovative entrepreneur"
(schöpferischer Unternehmer). There is now demand for future-oriented corporates who will
use SEPA as to drive the optimisation of processes and thereby provide the necessary
requirements for innovation, which will encourage economic growth and social change.
It is encouraging to see that some entrepreneurs are already very active in the debate on the
future SEPA instruments. A forum has been created at the European level to enable
stakeholders to be more closely involved in the SEPA project. This is called the Customer
Stakeholder Forum. There are also forums at the national level that are working on
improvements and innovation for the next 20 years. I hope that many corporates will join the
discussions in the forums and thus improve the European launch pad known as SEPA.
Thank you for your attention.