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The economic impact of the Single Euro Payments Area

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  • Heiko Schmiedel
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    Abstract

    With the realisation of the Single Euro Payments Area (SEPA), there will be no difference in the euro area between national and cross-border retail payments. SEPA is aimed at fostering competition and innovation, and improving conditions for customers. This requires concerted efforts from various stakeholders, in particular the banking industry, to align national practices. The Eurosystem strongly supports the SEPA project. In its catalyst role, the European Central Bank (ECB) closely monitors and assesses the overall development of SEPA. Against this background, the ECB has carried out in cooperation with the banking industry a SEPA impact study with the aim of enriching its understanding of the potential economic consequences of SEPA. Based on the quantitative and qualitative expectations of major pan-European banks, the study finds that the overall financial impact for the banking industry varies according to different scenarios of the SEPA project. The coexistence of national and SEPA retail payment schemes is expected to lead to initial investments borne by the banks. In the longer term, banks expect to benefit from improved cost efficiency and economies of scale and scope. Furthermore, banks are expected to face downward pressure on their revenues as competition will increase across borders and as a result of new market entrants. The findings of the study confirm the view that a dual SEPA implementation phase should be as short as possible. In fact, a longer migration period would give rise to higher costs than a shorter period. It can furthermore be concluded that those institutions that embrace new technological developments, create new businesses and provide innovative services are likely to gain most from SEPA. JEL Classification: G21, L11, L22.

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    Bibliographic Info

    Paper provided by European Central Bank in its series Occasional Paper Series with number 71.

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    Length: 27 pages
    Date of creation: Aug 2007
    Date of revision:
    Handle: RePEc:ecb:ecbops:20070071

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    Keywords: SEPA; European integration; payment systems.;

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    Cited by:
    1. Hasan, Iftekhar & Schmiedel, Heiko & Song, Liang, 2009. "Return to retail banking and payments," Working Paper Series 1135, European Central Bank.
    2. Wilko Bolt & Heiko Schmiedel, 2010. "SEPA, Efficiency, and Payment Card Competition," DNB Working Papers 239, Netherlands Central Bank, Research Department.
    3. Kemppainen, Kari, 2008. "Integrating European retail payment systems: some economics of SEPA," Research Discussion Papers 22/2008, Bank of Finland.

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