Is SEPA Dead?

That’s the slightly “hysterical” question I’m being asked today after the announcement on Monday from VocaLink. Hysterical in the sense I don’t know whether to laugh, or perhaps as in hysteria that something may be interesting happening in SEPA. I will declare an interest in this story. I worked for many years at VocaLink, and indeed was heavily involved in decision to enter the SEPA fray. As such, I’m probably both too close to the issue and bound by confidences in commenting too much. But let me address a number of misconceptions that seem to be coming through the emails I’ve been getting. Is this the death of SEPA? Absolutely not. SEPA is an umbrella of a number of activities, and some of those are already here e.g. the payment services directive Is this the death of VocaLink? Absolutely not. 9.3bn transactions processed last year, industry leading SLA achievement, new services successfully launched, etc. So what IS this? I think it’s a clear signal to the politicians that political vision without intervention usually ends up with very little change. The early days of SEPA saw visions of free competition between payment processors. One statement suggested a reduction from 60 processors to below 7 would happen, and triggered the mergers that created VocaLink and Equens. But with most countries having processors owned by the banks, paid for by the banks and developed to serve just those banks, the argument that banks would quit the processor they owned and had already paid for, and give the payments to a processor owned by the competitors now, in the cold light of day, looks optimistic at best. Lest we believe VocaLink has failed, take a look at the SEPA volumes to date. The volumes are still small. VocaLink, on a busy day, can sometimes process more than the total monthly European SEPA volumes. Even with the end date nigh though, anecdotal evidence so far has seen little if any notable shifts of significant volumes between processors. It will be interesting to see what, if anything, happens if the status quo continues. The regulator keeps mentioning its determination to see a third card scheme, even though many believe that the business case is weak at best. Will the regulator make statements re-iterating its view that there needs to be a reduction in ACH-like processors? That’s a question I intend to ask, and the answer to which has huge implications. Different payment types are being treated differently at the moment (i.e. interchange), yet its not clear as to whether this is by design or by accident. I know which I think it is, and that’s the real threat to SEPA. When we do SEPA next time (joke!), the lessons learnt from this attempt would mean that the clarity of objective and governance from day 1 would be much clearer. That’s ultimately the issue here – SEPA is about chasing someone elses’ dream. And unfortunately, its that of politicians.