• SEPA: First Stop Europe – Next Stop the World?  

SEPA: First Stop Europe – Next Stop the World?

Apple is successful because they blend the seamless integration of their software with their high-quality hardware. Together, they have created a culture of products that combine a superficial ease of usability with a complex system underneath. More importantly though, they have brought together an ecosystem of products that create a blissful experience for the user who understands that holding an iPhone is nearly the same full-featured and rich user experience as working on a Mac. The products just work well together.

Take a look at Apple’s main competitor, Google. Now Google’s operating system, Android, leads the smartphone market segment, with the majority of people in the world running phones with Android on them. However, Google does not have a cult following for their products in the same way Apple does, because their products, between computers, tablets, and smartphones, do not work well together. The way to inspire product love and adoration simply comes from creating multiple high-quality products that appeal to a mass of users because of their seamless integration.

For a long time, European banking system shared similar characteristics as Google’s Android operating system. Fragmented and disjointed, with each bank having their own proprietary interface or language for account nomenclature. Naturally, these interfaces and languages didn’t integrate between the banks, and it became so inefficient, in fact, an entirely new industry was born up just to handle all the disconnect points between ill-equipped banks.

Of course, these new integrated services were not free, so banks indirectly poured fees onto their clients in order to support the use of these companies. Still, transmitting money between banks remained difficult and fragmented at best, and when it was at its worst, it was close to impossible. Customer satisfaction plummeted as these fees continued to add up, with no change in sight.

Into the void steps the Single European Payments Area (SEPA), an agreement and standardized format throughout the European Union meant to handle the ever-growing disconnect between banks. Simply put, it establishes a standard syntax for banks to label account information in order to quickly share data and information. While SEPA is limited to only 140 characters in size, the same as a Tweet on Twitter, it is a small part of a much more comprehensive and rich ISO 20022 financial transaction standard that promises to be the Holy Grail for interbank transactions and more.

SEPA promises to increase the ability for people and businesses to effectively make both domestic and cross-border payments across Europe. This appears to be helping, but it required an imposing government mandate to make it happen. However, it is not a global standard, and likely will never be. This overhaul was definitely needed, and when it is fully implemented by the end of 2016, a recent study by PYMNTS.com determined that it will directly impact 500 million citizens who collectively do 1.7 billion electronic payments per year. Once fully in place, companies expect to drive upwards of EUR123 billion in savings, just within the next six years.


Much like how Apple brags about having an extraordinarily high 91% adoption rate from users on their latest operating system within a year of introduction, those mandating SEPA throughout Europe are beginning to point to adoption statistics as well. The fact is, since SEPA is being mandated by the government—and traditional domestic payment formats are being discontinued—adoption is not truly a choice. It is actually a smart way to do it. Today, 25% of banks* in Europe claim they’ve made the necessary changes to their systems for SEPA. It’s taken years to get here, and there is still a long way to go, but it is a start.

With the better integration of banks and banking in Europe, it facilitates faster interbank and cross-border transactions in that region. It is a good example that other countries should take note of. The mandate is working. However, the next big challenge will be how to create a standard for truly global cross-border transactions—like between Europe, the United States, and Asia. That will be a much different adoption curve.

*Source: AFP Online

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