Counting the hidden costs of SEPA migration

Abstract

The countdown is already under way and the clock is ticking towards the Single Euro Payments Area (SEPA) deadline, after the European Council formally adopted a regulation to switch euro payments from domestic clearing to pan-European systems by February 2014. But poor quality data is going to cost — and in a nutshell, a minimum of e22bn is being looked at. There are enormous critical challenges to conversion and validation of payments data, which are already riddled with significant errors. As a result, adoption of SEPA-compliant systems across the continent looks like a mammoth task if it is going to be completed in little more than 18 months’ time. But the longer it is delayed the more it is likely to cost. There should also be factored in a loss of reputation for institutions, client dissatisfaction and the impact on cash flow — and suddenly the full scale of the challenge resulting from late adoption takes shape. So why should it be done? Regardless of the ongoing preoccupation with the Eurozone crisis, sovereign debt in some member states and the impact of the bailouts, the need, desire, appetite and political will to switch to, and adopt SEPA as soon as possible continues to be very strong. Early and rapid adoption of SEPA also has enormous benefits and cost savings for any key players in the integrated payments market, as it enables banks to eliminate costs associated with running legacy systems alongside SEPA — on a Continental scale.