Knee-jerk reactions by investors to news about the European debt crisis and the shrinking value of the euro have sent stock markets on a roller coaster ride globally. And a new treaty signed by euro zone countries giving the European Union authority to reject a country’s national budget and order a redraft if it does not meet targets designed to ease the debt crisis has heightened their apprehension.
But investors, as well as government and bank officials, should not weigh the need for a new payments industry infrastructure and regulations in the 17 countries that use the euro as their currency as being part of the solution. In fact, efforts to create a Single Euro Payments Area are so far along they actually are aiding the situation in Europe, Gareth Lodge, a London-based industry analyst with Celent, tells PaymentsSource.
“At one level, SEPA is already here [in Europe], independent of what is going on, because of the Payment Services Directive established two years ago,” Lodge contends.
The Payment Services Directive is a regulatory initiative established through the European Commission to regulate payment services and payment-service providers throughout Europe. It established payment safeguards that did not exist in some countries to pave the way for how business would be conducted in a single Euro zone, Lodge says.
Most importantly, the directive provides consumer protections and payment-provider rights and obligations that otherwise might be nonexistent if each country had to establish its own regulations, he says.
In addition, the services directive has a goal of speeding payment-clearing times by the end of 2012, which in some cases will reduce the risk of nonpayment, Lodge adds.
Though the European banking industry remains a central theme in debt-crisis discussions and debates, the banks’ inability to establish to a new payment system has not been an issue.
However, the European Commission regulates banks and their corporate customers to make investments in technology to handle SEPA payments–and some are doing it quicker than others, Lodge says.
The potential for some angry bankers exists if certain banks further along with the payment-format upgrades mandated for all bank-corporate communications start to “cherry pick” corporate customers away from banks lagging behind, Lodge suggests.
In addition, corporations that have not bought into SEPA may find technology investments a ludicrous notion, he adds.
“At a time when the economy is collapsing around them, some corporations could feel very aggravated by the enforced spending for what many still feel in the short-term could be a worse solution,” Lodge adds.
Though he believes the payments infrastructure is not a deterrent to resolving Europe’s financial troubles, Lodge has acknowledged in past published reports that European banks faced a significant task in embracing and preparing for an overhauled payments system related to SEPA (
As for the payments infrastructure, terminal manufacturers VeriFone Systems Inc. and Ingenico SA have professed goals of establishing payment terminals to accept all EMV credit cards and other forms of payment in the euro zone and ensure the systems meet security standards (
