Milan, 26th October 2009 - The payments market is still going strong at global level: in 2007 the volume of non-cash transactions (credit transfers, direct debits, cards, and checks) increased by 8.6%, reaching 250 billion transactions, and cards continue to represent the most powerful growth driver.
Completely different the situation in Europe, which is experiencing an increase in the use of cash (7.8% in 2007), thereby proving that the measures adopted - the so-called "war on cash" - are still inadequate. And cash processing, in Italy alone, costs around 10 billion euro per year.

These are some of the figures that emerged today during the official presentation in Italy of the "World Payments Report 2009" by Capgemini, at the fourth edition of "Do You Sepa? - Landing on the PSD planet", the International Payments Summit organized by SIA-SSB Group.

The focus of this edition of the International Payments Summit was on the imminent adoption of the European directive on payment services (PSD - Payment Services Directive), the regulatory framework for the creation of a single retail payments market, set for 1st November, by all 27 member states of the European Union plus the 3 countries in the European Economic Area (Norway, Iceland and Liechtenstein).

The Capgemini report shows that, although there have been significant improvements towards the creation of SEPA, above all at institutional and regulatory levels, the operative implementation process of the new payment service standards by banks, companies, public administration bodies and consumers is slow.
"The European financial community has no reservations concerning PSD and SEPA - commented Renzo Vanetti, CEO of SIA-SSB - The single payments area will be realized, it is a final goal that we will certainly achieve, the point is how and when. In order for the entire migration process to be completed, it is absolutely crucial to set a precise deadline, valid for every country involved: a single end-date, or even different end-dates for each type of payment instrument".

Currently, only 10 of the above mentioned countries (Austria, Bulgaria, Czech Republic, Denmark, France, Germany, Hungary, Norway, Slovenia, and United Kingdom) have already included the European directive on payment services in their respective regulatory frameworks.
The players involved, firstly the banking system, are called upon to update the payment systems to comply with the new rules on transparency and execution times.


The new features introduced by the PSD are significant, for example the creation of new players in the payments sector who will have to be authorized to operate in partnership or in competition with banks.
"A true revolution will be the entry in the market of the Payment Institutions, - continues Vanetti - new players authorized to process payment transactions. Equally important will be the development of new value added instruments and services which will define a scenario more open to competition and innovation".

Proof of the need to set an end-date comes, for example, from the limited use of SEPA credit transfers. In August 2009, 18 months on from the launch of the SCT (SEPA Credit Transfer), only 4.5% used the new standard.
Some countries were more receptive than others in adopting the new credit transfer standards. According to the European Central Bank, Slovenia and Luxembourg are among the countries in the Euro zone where the migration was most extensive. In particular, Luxemburg recorded in the second half of 2008 a percentage of SCTs equal to 85% of the total of credit transfers.

A migration carried out also by some non-Euro countries like Denmark and Lithuania, where SCTs in the second half of 2008 reached respectively 56.3% and 41.9% of the total of credit transfers. The percentage of SCTs made in the other countries in the Euro zone is, however, very low, for example in the case of Belgium (2.7%), Spain (1.5%), France and Germany (both less than 1%).

As far as direct debit payments (SDD - Sepa Direct Debit) are concerned, the start up of the new standards is set for 2nd November.

Several months ago, SIA-SSB made available a new service called "SmartSDD" aimed at European banks and designed for the management of direct debits according to SEPA standards. BNP Paribas is among the major European banks to have adopted the SmartSDD solution.
Furthermore, SIA-SSB is EBA Clearing's technology partner in the management of the STEP2 platform, the first and only pan-European clearing house (PE-ACH) for retail payments in euros that, as of 2nd November, will allow over 2,000 direct and indirect banks - including the most important Italian bank groups - to exchange also Core and B2B direct debits.

The new SDD scheme is the base for the instruction of direct debits in euros within SEPA. Last June, in addition to the base direct debit (SDD Core) designed for relations between the corporate sector and consumers, direct debits for the corporate market (SDD B2B) were also approved. This specifically regulates relations where both of the counterparts are corporate bodies.
 
Payments using debit and credit cards have been defined by the Sepa Cards Framework, with the objective of standardizing the acceptance of cards in all European countries, while at the same time promoting competition.
There are however a few unresolved issues regarding the feasibility of the new pan-European scheme, compliance and interchange fees.
In any case, Cards play a crucial role in the creation of the single payments market.


Focus on Corporates and Public Administration bodies

The corporate sector, so far, has done nothing concrete towards the implementation of SEPA because of the limited available information aimed at explaining its real benefits and motivating the necessary investments, such as those in IT.
Further confirmation comes from the results of the report according to which corporates give to the implementation of SEPA only 3 points on a 1-10 priority scale.

Generally speaking, corporates believe that the implementation could be completed in around two years, but that IT is an important issue.

"Companies, and more in general end-users of payment services, are under no obligation to make use of SEPA products: banks must make an effort to understand and channel their requirements, needs and concerns, and to ensure the achievement of a critical mass. The complete convergence on the new products can only be achieved after all the stakeholders, in particular Public Administration and the Corporate Sector, are fully involved and motivated by satisfactory market options," declares Veronica Pichi, Payments Leader, Capgemini Italia.

Also the public sector, which due to its natural ability to generate volumes, could have a driving role in the migration towards SEPA payment instruments, is slow in adopting the new standards: in Belgium, Germany, France, Spain and Slovenia, less than 1% of credit transfers made by PA bodies were SCTs.
"Still, the Public Sector could indeed be the main SEPA driver - adds Vanetti - given that it alone, at European level, accounts for 20% of all payments in euros and for 40% of GDP, as well as representing 15% of the market share in the credit transfers and direct debits area."

Italy, on the other hand, stands out thanks to a more pronounced spirit of enterprise, and started updating state payment services to be SEPA-compliant in April 2009. According to a survey carried out by the European Commission, only 11 of the 16 countries in the euro zone have a national migration plan for the public sector.
Six of these coordinated operations, creating a common migration plan, and eight possess central organizations driving the migration towards SEPA of Public Administration bodies.
The first to complete the migration should be the Netherlands by the first half of 2010.

"In spite of the fact that Public Administration bodies, the Corporate sector and Consumers have largely recognized the benefits of SEPA (which was introduced at political level to make the European economy more competitive), the European Union and the national governments appear to be unfocused and are not investing sufficient resources to support the creation of the Single Euro Payments Area," says Sergio Magnante, Financial Services Leader, Capgemini Italia.
"It is not possible to continue to believe that in a self-regulating system, investments should be the exclusive responsibility of the banking system when the harmonization of the payments system will mainly benefit the Corporate and Public sectors. National governments, consistent with the principles that inspired Lisbon, must be determined and work to support the migration to SEPA and contribute with concrete measures towards the overall investments in order to achieve the desired and shared benefits to the economy", concludes Magnante.

First results of the Research Observatory 2009-2012 on SEPA and PSD

The International Payments Summit presented the initial findings of the Research Observatory 2009-2012, an initiative by SIA-SSB in collaboration with Capgemini and CeTIF - Cattolica University of Milan.

Created with the objective of supporting Italian financial institutions in the transformation process of the payments market brought about at European level by the introduction of SEPA and PSD, the research project is an integral part of a three-year study entitled "The Roadmap for the new Europe".

Four months on from the creation of the Observatory, these are the first results:

-  Some banks are changing their business approach towards payment systems, that are increasingly seen as a profit and cost area to be evaluated separately. This in turn is giving rise to the creation of dedicated divisions/departments for the payments business with decisional and budgetary autonomy.

-  Credit institutes are collaborating in order to fully understand the evaluation rationales and models concerning payments and to define a shared framework for the analysis of costs and innovation. This trend is mainly due to a strong push towards the standardization of the payments system which will not only reduce margins but will also allow for the survival of a small number of players in the European scenario: the research shows evidence of a surprising homogeneity of  tools, means and methods for the assessment of the payments business.

-  The banking sector shows a limited perception of the risk deriving from the entry of new players (the so-called "Payment Institutions") authorized to supply payment services. Competition is felt strongly but is restricted to the banking system.

-  Greater attention is still paid to traditional products and services. The most innovative payment methods (micro-payments, e-payments and m-payments) are in fact seen as a step that comes after the strengthening of the traditional business. More specialized banks in this framework see innovation as the main critical factor of success.

Also Carlo Tresoldi, Chairman of SIA-SSB has spoken about the creation of SEPA, the impact full implementation of the PSD will have on markets, Public Administration and financial institutions and on how SEPA and PSD can help businesses overcome the present economic-financial crisis: "The current picture of SEPA shows that, compared to last year, several major advances have been made. Nevertheless, there are still some areas of concern, also relating to the implementation of the PSD. More specifically, the ongoing  impasse in Public Administration (which is not performing well in its key role as  accelerator for the creation of the Single Euro Payments Area), the delay of national legislators in translating the directive on payment services into the regulatory framework, and the discretion in adoption allowed by the directive itself to the member states, may all become obstacles to the European process of harmonization of payment system and make the ultimate end of the directive fruitless.
If, as agreed upon by many, payments have become a commodity, it is thus crucial when adopting the European directive that the legislator guarantees end-users transparency and reliability in the utilization of the new electronic payment instruments, while at the same time offering adequate explanations regarding the role of the newly-born Payments Institutions".