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European Market Dynamics Against a SEPA Background. eFunds Technical User Forum Daresbury, 26 th September 2006. SEPA Vision. SEPA is the most significant change in EU’s payments in the past 20 years. SEPA Components. Plus… The New Legal Framework (NLF)/ Payment Services Directive (PSD).

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european market dynamics against a sepa background

European Market DynamicsAgainst a SEPA Background

eFunds Technical User Forum

Daresbury, 26th September 2006

sepa vision
SEPA Vision

SEPA is the most significant change in EU’s payments in the past 20 years

sepa components
SEPA Components

Plus…

The New Legal Framework (NLF)/ Payment Services Directive (PSD)

Component

SEPA Common Payments Framework

Component

SEPA Common Payments Framework

Payment

Payment

Two new

Two new

replacement

Electronic Transfer

Electronic Transfer

Transfers

Transfers

Schemes (ETS):

Schemes (ETS) and common operational services:

SEPA Credit Transfer Scheme (SCT)

SEPA Credit Transfer Scheme (SCT)

§

§

SEPA Direct Debit Scheme (SDD)

SEPA Direct Debit Scheme (SDD)

§

§

The SEPA Cards Framework (SCF) as an

The SEPA Cards Framework (SCF) as an

Cards

adaptation

adaptation

enabler to Europe

enabler to Europe

‘s card schemes

to become SEPA compliant:

to become SEPA compliant:

§

§

Implementation of EMV

Separation of Scheme from Infrastructure

§

§

Network Interoperability

§

§

Cash

Cash

The single euro Cash Area (SECA) Framework

The single euro Cash Area (SECA) Framework

european change context
European Change Context
  • New Players
  • New Business Models
  • New Products

……but with

  • Margin Pressure
  • Increased Competition

SEPA

SEPA is accelerating us towards a new market equilibrium within Europe,

and it’s happening now….

sepa the major change driver
SEPA the Major Change Driver

What do you regard as the major external change drivers?

Source: PSE research for Accenture

Market recognises the increasing impact of intervention, but also the influence of M&A and merchant needs

future very different for cards ach
Future Very Different for Cards & ACH

15

11

11

7

7

4

Number approximate, do not include ATM schemes

Source: PSE research for Accenture

Substantial aggregation in scheme environment likely to be echoed in banking sector through ongoing M&A

banks well placed to exploit change
Banks well placed to exploit change …

Which players do you believe are best positioned to exploit the expected changes in your market?

Source: PSE research for Accenture

This is an opportunity for banks to enter new markets, and offer new propositions to their customers

but pessimistic about the outcomes
… but pessimistic about the outcomes
  • Three out of four banks believe that the costs will outweigh the benefits - Many see revenue losses as a result
  • Domestic banks believe that they will be pushed out of local markets by pan-EU or global players
  • Only 30% see SEPA impacts to be of importance to consumers
  • Over 75% see significant benefits to merchants and corporates

Source: PSE research for FDI

high cost of compliance
High Cost of Compliance
  • Top 88 banks in Europe expected to spend more than €3bn on SEPA compliance
  • Over 80% of payments change budgets will be spent on technology related investment
  • Half intend to use “converter boxes” or third party solutions to meet deadline

Source: PSE research for FDI and Accenture

greatest complexity in ach world
Greatest Complexity in ACH World

Which business product changes do you believe are the most complex, requiring the most development effort?

Source: PSE research for Accenture

Implementing the new Direct Debit Schemes seen as the greatest challenge for banks, therefore unlikely to meet timelines

most still on the starting blocks
Most Still on the Starting blocks
  • Half of the large banks have a dedicated Tsar or team, while 27% are still leaving business units to assess how to comply without central co-ordination
  • The majority of banks are still evaluating requirements
  • Half of non Eurozone respondents did not expect to be ready by 2010

Source: PSE research for FDI

summary
Summary
  • Tremendous catalyst for change
  • Internal and external opportunities
  • Extensive impact across bank
  • Spend likely to be substantial
  • Initial focus on ACH until cards (SCF) clarity
  • Timeline may slip, but change already underway
next steps
Next Steps
  • Get hold of the SCF - understand impact on your bank
  • Monitor EPC Working Groups’ outputs - it is more than just paper
  • Review new formats for ACH transactions - action is already being taken by your competitors
  • Monitor European Commission reports and statements
slide18
Thank you

Chris Jones

Chris.Jones@pseconsulting.com

+44 (0) 208 891 6244