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European Market Dynamics Against a SEPA Background

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

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  1. European Market DynamicsAgainst a SEPA Background eFunds Technical User Forum Daresbury, 26th September 2006

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

  3. 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

  4. SEPA Timeline TODAY

  5. 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….

  6. 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

  7. SEPA Already Affecting the Market

  8. 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

  9. 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

  10. … 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

  11. Potential Impacts on Acquirers

  12. Potential Impact on Debit Issuers

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. Thank you Chris Jones Chris.Jones@pseconsulting.com +44 (0) 208 891 6244

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