Rebecca Brace, Columnist, FX-MM
Regional differences mean that the benefits of the grace period announced for firms to migrate to the single European payments area (SEPA) may be more complex than expected. FX-MM’s Rebecca Brace explains why the value for companies operating in multiple countries is likely to be limited.
The SEPA journey continues. The formal deadline for SEPA migration was February 1, but on February 4 the European Parliament approved the addition of a six-month SEPA transition period proposed a couple of weeks earlier by the European Commission. The industry therefore has a little longer than expected to complete migration – but as with many areas of SEPA, the transition period is proving to be less straightforward than initially indicated.
In its announcement in January, the EC stated that migration rates for credit transfers and direct debits were not high enough to ensure a smooth transition to SEPA. European Central Bank (ECB) figures show that as of December 2013, SEPA credit transfer (SCT) transactions represented over 73% of credit transfers in the euro area, while SEPA direct debits (SDD) were lagging behind at 41% of direct debits – a significant increase on the 26% reported in November but still a long way short of full migration.
For companies yet to finish the migration process, the transition period will provide welcome relief – but the benefits of the transition period may be more limited than initially indicated. The transition period itself is affected by the geographical variations that characterise other aspects of SEPA. Rather than applying throughout the eurozone, the transition period is being adopted on a country by country basis – and not all countries have decided to implement it at all.