PSD and SEPA research results

A research report has been published on September 8th by The Financial Services Club, sponsored by BT, Earthport and Logica.

The report can be purchased on a single user licence basis at The Financial Services Club. A free copy of management summary of qualitative analysis (19 page pdf, 300kb) and a free copy of key answers to quantitative views (27 page pdf, 1.5mb) can be downloaded below.

Download Survey Summary

Download Results Summary

The press release says that there are alarming differences in country interpretations and implementation.

In particular:

When asked: “how ready are your banks for the implementation of SDDs in your country?”

• Belgium: 13 out of 15 respondents said ready (87%)
• Germany: 20 out of 24 respondents said ready (83%)
• Austria: 10 out of 12 respondents said ready (83%)
• Italy: 10 out of 12 respondents said ready (83%)
• Spain: 6 out of 8 respondents said not ready (75%)
• Ireland: 11 out of 18 respondents said not ready (61%)
• Sweden: 4 out of 8 respondents said not ready (50%)
• France: 4 out of 8 respondents said not ready (50%)
• UK: 36 out of 78 respondents said not ready (46%)
• Netherlands: 4 out of 9 respondents said not ready (44%)

When asked: “How well prepared do you believe your national authorities are for the implementation of the Payment Services Directive on 1st November 2009?” the survey found that only 15% of country-based respondents felt their country was ‘very ready’; 23% felt ‘quite ready’; 30% ‘just about ready; 27%, ‘not really ready’; and 6% ‘not ready at all’.

When asked: “How is your country implementing the PSD?”

• 7% of respondents say their country is implementing the full PSD with no changes;
• 60% state they are implementing the full PSD with changes that are permitted;
• 19% are implementing part of the PSD, but the important parts (10% with no changes and 9% with changes that are permitted);
• 10% are transposing with changes that are not permitted; and
• 4% are not implementing the PSD at all.

CONCLUSIONS

The Payment Services Directive is flawed in both its drafting and transposition.

The 23 Additional Optional Services (AOS) mean that Member States have inconsistencies over how currencies are treated and whether they are in or out of PSD’s coverage (the ‘leg-in’ / ‘leg-out’ issue); how small businesses are classified as consumers or corporates; how payment accounts are defined; how direct debit products are defined; and more.

Every country is using AOS to protect historical products, services and infrastructures.

This inconsistency means that there is no harmonisation across Europe’s payments instruments, even though this is a maximum harmonisation directive.

It is highly likely that 2012, when the European Commission review the transposition and implementation of the PSD, that a revised PSD will be drafted eliminating AOS and other anomalies, such as multilateral interchange fees on cross-border direct debits.

The result is that the PSD will not support an integrated and harmonised European payments marketplace until 2013 or beyond.

The Single Euro Payments Area is progressing but too slowly.

SEPA’s clearly gained momentum as banks convert core systems to use the new schemes and formats; by way of example, SEPA Credit Transfers have more than doubled in volume from under 2% of all credit transfers in the Eurozone in May 2009 to almost 5% by August 2009.

SEPA is still progressing far too slowly to be convincing however, and when SEPA Direct Debits come into play in November 2009, if the new schemes are not demonstrating critical mass within an eighteen month timeframe, then the SEPA program will be deemed to have failed.

SEPA has strong support amongst the banking community, but not amongst corporates and other end-users; this support needs to be promoted through political weight of force by ensuring all member state public authorities and utilities migrate to the use of SEPA instruments during 2010 and by the introduction of an end-date for SEPA migration as a regulatory mandate.

The SEPA end-date is expected to be around the end of 2013, but the migration of end users (corporates) and obsolescence of existing national infrastructures is not expected to happen until the end of the next decade (2018 or thereafter).