While scenes of protesters battling police inAthens over international bailout conditions have died down on thenews networks, the ultimate fate of the Greek, Italian, Spanish,Portuguese, and most recently Cypriot, memberships in the Eurozoneis far from certain. With the new banking crisis in Cyprus and therecent election in Italy, more voices are pushing for publicreferendums on leaving the Eurozone.
For the payments industry, Europe is poised for a migration toSEPA (Single Euro Payments Area) on credit transfers and directdebit as the Feb. 1 2014 deadline approaches. The move can becompared with the change to EMV in the United States. SEPA is aninitiative to make all cross-border electronic payments as easy asdomestic payments within a country.
Although no country has publicly stated a desire to leave theEurozone, what would happen to SEPA if should one or severalcountries leave? The short answer is almost nothing; the SingleEuro Payments Area is a misleading name as members of SEPA are notall users of the Euro. For example, the United Kingdom and Norwayare both SEPA members, but both use the pound and kronerespectively. That means if Greece or Italy leave the Eurozone andreturn to using the drachma and lira respectively, they couldrealistically still participate in SEPA.
So while countries leaving Eurozone would have a minimal impact onSEPA, the project itself is facing its own hurdles. The ECB(European Central Bank) recently released its latest progressreport on SEPA, which highlighted many companies are not ready forthe early 2014 migration and that could result in payment orderhandling disruptions for consumers. According to the latest dataprovided by the ECB, less than 35% of total transactions processedin the Euro area as of September 2012 were in the mandated SEPAformat.
The ECB’s report also stated concern about companies waitinglast-minute to make SEPA changes despite knowing for more than adecade. Only large companies have made the change and even theywill not use SEPA until the end of the year, according to the ECB.The bank also is worried SEPA awareness among small companies andlocal public administrations is “fragmented and the level ofpreparedness is rather poor” according to the report.
ECB Executive Board member Benoît Cœuré said of the report,”Adapting to SEPA involves adjusting a lot of technical andbusiness procedures over a limited period of time. Projects of thiskind should not be left to the last moment.” With the ongoingeconomic and financial struggles in many Eurozone countries,however, encouraging small and medium enterprises’ to migrate tothe SEPA mandates will be a tall task.
Though SEPA would likely survive a potential withdrawal of acountry from the Eurozone, this is far less concerning than thelack of migration progress for the 2014 deadline. Given the currenteconomic outlook, SEPA would be better off delaying or extendingthe impending deadline to allow small merchants and localauthorities more time to migrate while they deal with difficultausterity measures.