European Central Bank Running out of Patience with Slow Migration to SEPA

by Terry X Xie 0

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The progress towards a SingleEuro Payment Area (SEPA) is painfully slow – such that the EuropeanCentral Bank (ECB) is running out of patience and asking nationallegislators to take action to enforce deadlines.

In ECB’s seventh SEPAprogress update (Link:,ECB said that two and a halfyears after SEPA Credit Transfer was officially launched in January2008, more than 90 percent of all credit transfers within the euroarea were still not compliant with SEPA standards. For SEPA DirectDebit, which was launched in November last year, SEPA-compliantdirect debit transactions were well below one percent of all thetransactions in the region. The industry self-imposed migrationdeadlines of December 2010 for SEPA Credit Transfers and DirectDebits, therefore, will be missed.

This is the latest setback inthe ambitious efforts to create a single payment market in the eurozone, after multiple major delays along the way. Now the ECB hopesthat the migration would be completed by December 2012. In order todo so, ECB is asking European legislators to step in and make themigration deadline a legal requirement rather than an industryplan.

The SEPA for card migration,is even further behind. Though the migration to EMV standards hasbeen relatively smooth, there are major unsolved issues regardingcard schemes. ECB has long pushed for new local European cardnetworks to compete with existing international card networks suchas Visa (which in response separated its European operators to forma new entity – Visa Europe) and MasterCard. But the progress so faris limited.

The migration to SEPA iscontroversial, as some observers criticized ECB and the EuropeanCommission for overlooking the fact that most transactions todayare still domestic and can be served by existing infrastructure.The European banking industry is slow to move in SEPA migration forlack of market demand and business reasons to do so.

One can only hope that SEPAmigration will be completed in two – three years. But judging fromwhere it stands today, it is pretty safe to say that it is amission impossible.

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