Methodology

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SEPA Achievements and Challenges

Our quantitative analysis is based on the eurozone countries that published SEPA migration plans. For credit transfers, we considered currency, straight through processing, processing delays, message length, International Bank Account Number/Bank Identifier Code (IBAN/BIC) features, reject and refund procedures, and refusal dispositions. For direct debits, we considered those same criteria, along with mandate, mandate lodging, advance notice, and advance notice delays. For both, we also took a closer look at rejections, refusals, refunds, and returns.

Our qualitative analysis is also based on the eurozone countries that published SEPA migration plans. We assessed each plan according to the following criteria for each means of payment (SEPA direct debits, SEPA credit transfers):

  • Dates: whether the plan gives dates for beginning the SEPA implementation (first availability of the instruments), achieving the critical mass for volumes, decommissioning legacy instruments, and reaching full SEPA implementation (end of the SEPA migration).
  • Evaluation of the complexity of the SEPA migration: whether the plan mentions the gap between the country’s current payments system and what the European Payments Council is calling for in the Frameworks and Rulebooks.
  • Means to achieve migration: whether the plan provides any explanation of the operational means to achieve the SEPA migration, from both banking and client points of view.
  • Problems encountered: whether the plan mentions any specific barriers to the migration.
  • Testing period: whether a testing period is planned for checking the bank-to-bank interoperability of SEPA instruments from both national and pan-European perspectives.
  • Additional notes: whether the plan gives further information about issues specific to each country (e.g., decommissioning legacy payments).

Country Migration Plans

The highest SEPA adoption scenario relies on the following hypotheses:

  • The introduction of the SEPA Direct Debit (SDD) by November 2009 gives a boost to the migration to SEPA instruments.
  • Strong commitment from both corporations and public institutions helps to close the manageable gap on SEPA Credit Transfer (SCT) and SDD by the end of 2010, and reach 89% of the critical mass of volumes by then.
  • Full decommissioning of legacy instruments ends 18 months (best case) after the critical mass of volumes is reached.

The average SEPA adoption scenario supposes that:

  • The full potential is not reached. Only 70% of corporations and public institutions make a quick migration to SEPA instruments by the end of 2010. This might mean that a critical mass of volumes would concern 61% of transactions (supported by the fact that at least 4 countries already say that they will reach a critical mass of volumes).
  • The critical mass of volumes is reached later. Depending on the goals, this leads to a later decommissioning date.

From that average scenario, the lowest SEPA adoption scenario suggests that public institutions might start their migration to SEPA instruments 1 year later than originally planned.

Convergence of Eurozone, Non-Cash Payments Levels

This year’s analysis has been conducted with greater focus on relevant countries. For macro descriptive graphs (volumes, cards, ATM, and number of transactions), 17 countries have been surveyed, which is the same as last year. This includes all eurozone countries (Germany, France, Spain, the Netherlands, Italy, Belgium, Austria, Finland, Portugal, Ireland, Greece, Luxembourg, and Slovenia), as well as 4 non-eurozone countries (the United Kingdom because it is the biggest non-eurozone country, Sweden and Denmark to represent Nordic countries, and Poland to represent Eastern Europe).

Values and projections for 2012 focus on 13 countries: this year’s projections include 4 new countries and go 2 years further than the previous World Payments Report. More specifically, 9 of those countries are the same as last year (France, the Netherlands, Austria, Sweden, the UK, Germany, Italy, Poland, and Spain). Additionally, Belgium falls between Italy and Austria in volume, while Greece and Portugal complete the southern countries overview. Finally, the United States has as big a payments market as the whole of Europe, though it has different usage patterns.

For the focus on cash, ATM figures include all 17 countries listed above, for the broadest panorama possible. Cash withdrawals were studied at ATMs located in each country, by cards issued in the country. The analysis of cash in circulation versus GDP and non-cash transactions was conducted for 6 countries, the same ones as last year: the 5 main eurozone countries, which account for 85% of the area’s payments volumes, and the U.K., as the biggest non-eurozone country. These countries are also the biggest cash issuers in Europe.

Common sources were used to build our analysis. Volumes were consolidated from the latest European Central Bank payments statistics (published in the Bluebook in December 2006). Macroeconomic indicators were collected from the Organisation for Economic Co-operation and Development (OECD) for greater accuracy. Cash figures were provided by national central banks and the European Central Bank.

Of special note: while some sharp peaks appear in historical data (2001–2004) for 2012 projections, they have to be interpreted as a methodology bias rather than actual erratic fluctuations in payments volumes. Therefore, they do not alter projections from 2005 to 2012. Indeed, Bluebook methodology is constantly being updated, with no possible retroactive calculation most of the time. This holds especially true for paper-based non-cash transactions prior to 2004, which were hard to track. We believe that recent data offer greater accuracy and consistency.

The Regulator’s Impact on Bank Revenues

Banks’ payments volumes have been estimated from their national market shares, including sub-member banks. From those volumes and the surveyed prices in each country, banks’ payments revenues have been calculated. Volumes and revenues focus only on operations in their national markets (defined as the country where those banks are principally listed), while their cross-border international activity is not taken into account. A survey of Capgemini’s own clients showed that those estimates are close enough to actual figures to be considered a good representation of the European payments market.

The calculation of the regulator’s action was made on a country-by-country basis, to avoid a bias depending on the consumer or corporate aspect of a given bank.

Definition of a Critical Size

From the projected bank revenues calculated using the same methodology as above, we looked for a limit that would make 10 players, at most, reign over the payments market. Considering the future increase in competition and possible mergers and acquisitions, this led us to consider that such a player would hold 5% of the eurozone payments market. Thus the limit was identified at 5 billion transactions processed per year, per player, with a 2012 horizon.