The economic impact of the Single Euro Payments Area
28 August 2007, 16:08
"The economic impact of the Single Euro Payments Area" is the catchy title of the latest Occasional Paper from the ECB's Directorate General of Payment Systems and Market Infrastructure. The penny has dropped that the worst financial scenario for the banks is the one where the new Schemes are introduced but the old ones are not retired (no doubt that won't really be good for the consumer either, but it isn't so clear why). This conclusion is underpinned by a rehashing of the figures from BCG and Capgemini, and by a piercing set of questionnaires of the ECB's own devising. The results on ECB's chosen specialised subject are the same as John Cleese's: "The Bl**din' Obvious". The solution is assumed to be that everyone switches to the SEPA Schemes but why? Surely the most fair and transparent processes would be for an independent study as at 31/12/2010 to assess which Payment Schemes have (a) the least usage (b) the lowest functionality (c) the highest price. So on 31/12/2010 the ECB should measure each Payment Schemes on that basis and dictate that the losing ones be scrapped. That's market economics at work. Only a couple of problems, of course. The SEPA Schemes will lose hands down, because there is no compelling case for customers to use them. At the same time the economic benefits case for SEPA in the way that ECB describes it is based on accepting a false premise: that it is legitimate for the EU to demand the introduction (in the form of the SEPA Schemes) of new capacity into an industry with existing overcapacity. That was not really what the EU was invented to do, but in Payments they have done so - and that cannot fail to negatively impact the P&L of participants in that industry.— Bob Lyddon
