Banking in Ireland owes a lot to its colonial history. The core systems, payment instruments, standards, and legislation are almost identical to Britain – but in certain aspects they are a couple of years behind in terms of development and/or market penetration. Politically, the Irish are committed Europeans, and participation in European monetary initiatives, including adoption of the euro has benefited the economy greatly.
The Irish have been very successful in implementing national projects which have a sharp edge and clear objectives – the smoking ban and the euro currency are good examples. There are also very good national and regional initiatives in waste collection and recycling. SEPA is a different story.
The availability of the SEPA credit transfer from 1 Jan 2008 will likely pass unnoticed by all but a few corporates. But these corporates are important. Ireland is the European HQ for many major multinationals, including Microsoft, Google, Ebay, Intel, Dell and many others, partly due to the fact that it is the only English-speaking country in the Eurozone. And there is a very important international banking sector at the IFSC in Dublin.
The SEPA direct debit will be welcomed by the many Irish who have properties in Mediterranean countries, and want to pay utility bills from their Irish accounts. The complexity of SEPA direct debit procedures for originators, bankers, and payers alike will not be welcome for domestic direct debits, when compared with the simplicity of the existing Irish direct debit system.
Most Irish-issued plastic cards, including debit cards already have international branding – and under Regulation 2560, are charged exactly as domestic transactions when used throughout the eurozone. It would seem that there is a prima facie case for the removal of the infamous Irish stamp duty on plastic cards to achieve the “level-playing-field” EU objective for the Eurozone.
For as long as there is parallel running of Irish and SEPA payment instruments, many will choose to stay with what they know. Since bank charges in Ireland are regulated, there is little opportunity for banks to use pricing to incentivise change. Government support of SEPA will almost certainly be necessary, and will likely commence with government organisations being required to migrate to SEPA payment instruments at an early date.
The advent of national legislation in 2009 to implement the EU Payment Services Directive (PSD) may change things. There is an increasing range of entities which will either challenge or complement the services of the mainstream banks, and which will potentially gain new status and greater opportunity for participation in clearing systems when they register as payment service providers under the relevant Act. These include the very substantial Credit Union movement which already challenges the banks for deposits and loans, the Post Office which has commenced a banking initiative with Fortis Bank, and a range of specialist payment service providers including Realex Payments.
For businesses of all sizes, the specialist payment service provider takes the hassle out of payments, leaving the business to concentrate upon what it does best. This will be particularly important in the case of the SEPA direct debit.
SEPA in Ireland is co-ordinated by Irish Payment Services Organisation (IPSO), a banking industry umbrella body which manages the various clearing systems in Ireland. There is no clearing house in Ireland. There is a virtual arrangement under which clearing is effected through bilateral agreements between seven direct participants. Such arrangements were considered unacceptable by earlier drafts of SEPA. Now it’s less clear. Ireland will participate in Pan-European clearing, but will likely look at a range of options for that participation.
Cheques are not mentioned in SEPA or in the PSD – their very omission is a strong signal that they have no long-term future. In Ireland, cheques are mainly used for payment of Business-to-Business invoices. IPSO has indicated aspirations for major reduction in cheques, and although there is a recent downward trend, it is not sufficient. This author believes that electronic invoicing will be necessary to persuade cheque writers to change – there is no initiative by the banks in this space.
The over-arching twin objectives of the EU Commission in relation to SEPA are improvements in efficiency, and new levels of pan-European competition among banks. It is now far from clear how efficiencies will arise; and the anecdotal evidence suggests that there is little enthusiasm among banks to seek out competitive opportunities in SEPA, either at home or abroad. Nor is there any great indication that pan-European competition originating outside Ireland will target the Irish market through competition for payments.
With six months to go to the start of SEPA, what is particularly striking is the silence. There is little awareness among the business community or the population in general. There appears to have been little or no consultation, and few public announcements by the banking industry. Occasional newspaper articles have been sourced from Brussels. And so, Realex Payments has recently stepped into the breach to launch the first Irish SEPA information website http://www.sepa.ie/ with news and blog.
