SIA: increase in the use of SEPA payments in the Eurozone, but the end-date for the adoption of the new standards must be set rapidly

It is necessary to pursue efficiency objectives in order to reduce the cost of payments through an increase in volumes and economies of scale, enhanced automation level and outsourcing.

 

Massimo Arrighetti (CEO of SIA): “We must have the courage to adopt the most appropriate industrial strategy not only to guarantee fair prices to customers, but also to free up resources and promote competitiveness within the country.”

 

E-payments and mobile payments: set to start in 2012 is a new pan-European service for easy and secure online purchases using Internet Banking without the need for the user to enter his/her details, while more solutions are being developed for mobile phones, internet and contactless technology.

Milan, 17^th October 2011 – Overcoming the crisis in Europe may be facilitated by raising confidence in financial markets and throughout the eurozone, with the rapid definition of the end-date for SEPA (Single Euro Payments Area) and the adoption of new standardized payment instruments that must take over from those in use at national level. During the opening of SIA EXPO 2011, the International Payment summit dedicated to the evolution of payment systems and services, Carlo Tresoldi, Chairman of SIA, has called for the EU Commission to commit itself and set a precise end-date.

 

"Europe can tackle the current period of instability in the financial markets and reaffirm the integration process also through the definitive implementation of the Single Euro Payments Area – stated Tresoldi – The current economic and productive situation, in fact, requires us to take urgent action in favor of the eurozone not only through purely financial activities but also by supporting important zero-cost initiatives which may help to send out a strong signal towards recovery, such as the standardization of the various payment instruments. We have thus come to the point where we can no longer afford to postpone the definition of the end-date for SEPA. It is important that the EU Commission issues, without delay, the regulation needed to establish the end-date by which credit transfers and direct debits harmonized at European level will have to replace the domestic instruments. In doing so, an integrated Europe would once again take center stage in a clearer and more transparent regulatory scenario, able to increase the confidence of financial market operators, and finally realize the goal of simplifying the lives of European citizens and achieve efficiency at corporate and PA level.

 

 

Surveys and figures on SEPA

 

Even if no end-date has been set, SEPA is advancing gradually and it is strongly expected to accelerate so that the Single Euro Payments Area can truly produce its beneficial effects for consumers, businesses and public administration bodies.

According to the "SEPA Survey 2011", the online survey carried out by the ECB and the European Commission on over 350 companies, 22% of corporates in the eurozone are already using the SEPA Credit Transfer (SCT) for more than half of their payments and 24% no longer use domestic transfers. In the next two years, the percentage of companies that will make payments with the SCT is estimated to reach 57%.

 

Confirmation of the progress made by SEPA in the adoption of new payment instruments , also comes from the figures of the three-years observatory “ Economic and strategic assessment of the payments business " conducted by CeTIF - Università Cattolica in collaboration with Capgemini Italia and SIA.
The research involved a panel made up of the main Italian banking groups representing more than 70 % of the payments market where, in 2009 , there was a total of around 1 billion transactions with a growth of estimated volumes at around 10% in 2010 .

 

In line with what emerged from the survey by the ECB and the European Commission, SEPA Credit Transfers amount to more than 6% of total transactions (estimate 2010) compared to 0.6% in the previous year. The significant migration to the SEPA credit transfers strongly influenced domestic transfers which amounted to 80% following the 92% in 2009.

 

Thus, the SEPA Credit Transfer was the payment instrument with the highest growth since the volumes have increased by 977 %, ris ing from nearly 1.1 million transactions in 2009 to about 11.8 million in 2010 .

It is also important to highlight that the SCT is mainly used over the counter (95% of all operations in 2010). And the counter is also the channel where the increase is most significant (+1200%), followed by corporate remote banking and web banking (+328% and +77% respectively). These figures essentially confirm the path, chosen by the majority of Italian financial institutions, of migration of platforms and implementation of the new standard.

 

The research also shows a rather rigid industrial cost structure of the payment transaction which makes any significant efficiency-increasing action difficult.

In particular, personnel costs represent the main part of fixed costs, above all in the Payment Initiation phase. As the figures relating to domestic transfers show, 75% of the cost per unit is represented by this phase. A further burden on manual operations, both in the front- and the back-office stages, is the massive use of paper documents that leads to job repetitions and delays in processes.

 

Also on the collection side, process inefficiencies cause costs to be around four times greater than those of   STP transactions (Straight Through Processing, or completely automated transactions), mostly due to the need to manage exceptions and the verification and authorization activities.

 

The figures show the need for combined and integrated actions aimed at reducing the cost of payments and pursuing the objective of increased efficiency:

• Increase volumes and economies of scale in order to spread fixed costs among a greater number of transactions
• Increase as far as possible the automation level of processes and thus of STP operations
• Outsource some of the process and/or back office phases

 

"We must force ourselves to consider the payment as an industrial good. No car manufacturer produces all the components of a vehicle in-house - declared Massimo Arrighetti, CEO of SIA - It is thus right to understand and analyze the elements of the value chain, however at the same time we must have the courage to adopt the most appropriate strategy not only to safeguard the profit margins of the bank and to ensure a fair price to the customer, but also - from a system viewpoint - to free up resources and improve the competitiveness of the country".

 

In this context, we must also consider the various players involved in the new forms of payment (retail distribution, TELCOs, banks and internet operators) which may make agreements to manage some or all of the parts of the payments value chain. Such alliances would ensure an innovative service with significant cost savings (investment), compared to the choice of a business model that includes the internal development of staff and all the necessary systems for daily operations.

 

e-payments and mobile payments

 

One of the most interesting features of the so-called "e-SEPA" (a development of SEPA which provides for complete automation in all stages of the payments value chain), is the MyBank project, scheduled to start in 2012; a new pan-European service which EBA CLEARING is developing in the field of e-payments to make online purchases easy and secure.

This solution offers those who make purchases online a new method of payment in addition to the traditional ones (credit cards, prepaid cards, PayPal), allowing users to make payments directly through their bank’s Internet Banking portal using their bank account without having to enter their details.

 

Similar domestic solutions already exist in Germany, Holland and Austria, but MyBank’s ambition is to establish itself as a European standard that can be adopted by all the EBA Clearing subscriber banks.

 

In addition to widening the market, innovation will play a key role in payment services. Mobile phones and Internet, alongside cards, may be new instruments through which to deliver advanced payment services.

In particular, the spread of mobile phones (especially smart-phones) in Italy is now an established phenomenon, which in any case is still showing strong and steady growth. The mobile phones area is therefore a very attractive business in which new ideas to develop innovative offerings may find fertile ground.

 

There are already several solutions that take advantage of mobile, internet and contactless technologies to deliver innovative payment solutions able to reduce the use of cash to the benefit of more advanced, practical and fast instruments. In this direction, the development of payment systems for nominal amounts based on NFC and mobile technologies will certainly make an important contribution towards an increasingly "cashless" society.