The European Parliament voted yesterday in favour of proposals to extend the migration deadline for processing Sepa-compliant payment transfers by six months, so endorsing the plan announced by the Commission last month.  This is contrary to the view of the Eurosystem of central banks, which have been urging the region's banks to be ready for the original Sepa migration end date of 1 February 2014. Central banks were encouraged by the recent statistics released by the European Central Bank (ECB) show that Sepa migration rates picked up strongly in December, with 74% of credit transfers and 41% of direct debits in the euro area already Sepa-compliant. Furthermore, the European Payments Council was wary of the plan because it had not been formally approved.

Six months to solve remaining problems

Although the European Council still has to formally adopt the plan (formal adoption is expected to take place in the coming days), businesses can now plan on using the extra grace period of six months to prepare their systems for accepting Sepa credit and debit transfers before legacy payment instruments are blocked.  

The launch of SEPA has been less problematic than some analysts have predicted, but there have already been problems in the SEPA Direct Debit scheme with debtor banks rejecting SDDs for bizarre reasons. There could also be other problems with the SEPA Credit Transfer scheme which will only become apparent over the next 2-3 months. Already large MNCs in Europe are expecting problem with their receivables as many SMEs have not amended their systems.

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CTMfile take: Next 2-3 months in Europe will be interesting, very interesting for observers, but not for banks and corporates who could find that making and collecting payments could be difficult as they solve the final incompatibilities. Hope it only takes six months, but in several countries, there is much less time.