SEPA and the PSD are progressing but liquidity risk needs addressing

Posted: 8 September 2011 | Logica | No comments yet

Research conducted by the FSC and Logica finds liquidity risk is a major potential exposure for the future and calls for more automation…

Survey ticks

The Financial Services Club and Logica today revealed the results of its research into the state of play in European Payments and the progress of the implementation of the Payment Services Directive (PSD) and Single Euro Payments Area (SEPA). The report surveyed over 360 global bankers, consultants and technologists and covered five key areas. These included the development of the European Union, the impact of the PSD and SEPA, bank-to-corporate relationships, and liquidity risk.

The survey revealed that two-thirds of banking professionals agree that an integrated payments market is either critical or very important to Europe’s future. When it comes to the PSD, 50% of respondents think it has been successful – a 15% increase from 2010. For SEPA, when asked the same question the results are not as positive – only 30% think it has been a success. Banks are also slightly more optimistic on the progress of SEPA – with 70% believing that the SEPA vision will be realised by 2017 compared to 68% last year.

A key issue highlighted by the Logica and FS Club survey is concern over liquidity risk. While 73% of banks surveyed know their financial exposure in the case of a liquidity event, only 39% were able to do this through the right technology of which only 17% can do this in real time.

Chris Skinner, founder of the Financial Services Club, said: “This is the third year we have run our survey and what is interesting is to see the shift in viewpoint of European payments. In 2009 respondents’ concerns were primarily about the implementation of the PSD. In 2010, there was disillusionment with the whole development of the PSD and SEPA. Now it’s clear that European payments professionals are gradually accepting and adapting to the new ways of processing payments. However new challenges are emerging around corporate payments and liquidity risk.”

Nick Ford, global consulting practice leader for payments, Logica added: “New regulations require analysis and allocation of liquidity and its risk management to the lines of business that generate liquidity demand. It is therefore essential that liquidity pricing is built into every part of a banks’ business plan including governance, strategy, capital and liquidity management. The combination of increasing regulation and a lack of right automation tools in many banks , makes it easy to see why this is an area of concern for those surveyed.”

Seven out of ten respondents felt that SEPA was having a positive impact on corporate-to-bank payments processing and 81% found that technology solutions met their requirements, although the majority noted that these developments could be improved.

Ford continued: “SEPA as a whole can boost the efficiency of a corporate firm’s payments processes and it is good to see that the survey has found that will be a positive initiative. The clever corporates though will think longer term to find the right opportunity of how they can find business benefits in SEPA.”

Research background

The survey ran during between July and August 2011, and was completed by 360 participants across 44 countries. The largest single group of participants was from the banks with over a third of the respondents from this constituency. Consultants and technology providers are the next largest groups, also representing over a third of the votes. Almost three out of ten participants (27%) describe themselves as “middle management”, whilst 40% were senior management or C-level and one in four (26%) were “consultants” or “advisors”. The full report is available upon request.

Logica and the FS Club will be hosting a free webinar on GT News on 12 September at 3pm BST / 4pm CEST / 10am EDT.

To register, please click here .

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