SEPA’s sDD (small ‘s’, big ‘DD’)

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5 November 2009

The end date for the application of the Payment Service Directive (PSD) just expired on November 2nd. The transposition of PSD into country legislation was presented as the last hurdle before the full deployment of SEPA Direct Debit (SDD).

The European Payments Council (EPC) keeps on confirming a successful kick-off, where to-date 2,607 banks, representing about 70 per cent of SEPA payment volumes, have signed up to the new schemes of the SDD services.

There are no evident signs of significant uptake by banks, least by corporates.

What we perceive from banks, in reality, is an investment strategy focused on applying new direct debit schemes at local level, with a country-by-country piecemeal approach.

This is why I think we should refer to an ‘sDD’ implementation.

A small ‘s’, because in reality the spirit of SEPA is being betrayed, and a big ‘DD’, because each bank is looking at its own backyard and developing ad-hoc DD schemes.

Bottom line for banks

Get involved with corporate representative bodies (e.g., EACT- European Association of Corporate Treasurers) to guide your investment strategy and select key countries.

Bottom line for corporates

Get your banks explain in practical terms how they intend to deploy their SDD (i.e., ‘Big S’) services.

Question to the reader

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Read Celent's existing research reports.


  • With the Payment Services Directive now in force and the launch of SEPA Direct Debits underway, there is still a high degree of confusion in the market. The banks and the countries themselves are at varied levels of preparedness for both the PSD and SDDs to be implemented. What contributes further to the lack of readiness is the fact that the SDDs are being launched into a market where the legacy direct debit instruments across Europe are still in play until some as yet indeterminate future date - a recipe to evoke resistance of both banks and their corporates.

    It is the time for effective and clear end-date for a switch over of old to new payment systems to ensure higher take up rates of the SEPA instruments. What we do not want, however, is a situation where there are multiple end-dates across Euroland. That would truly betray the spirit of SEPA, consigning us to a small ‘s’ for the foreseeable future.

  • Most of the Member States have met 1 November deadline for the implementation of the Payment Services Directive, while the remaining states should do it by the end of the year (with two exceptions: Sweden has defined 1 April 2010 as the target date, and in Finland the law implementing Titles III and IV will come into force on 1 May 2010). However, the latest figures from the European Commission show that around 2,600 of Europe's 8,000 banks were ready for the launch of SEPA's Direct Debit scheme on 2 November.

    The launch can be described as piecemeal at best. The key challenge for the SEPA framework is still the lack of added-value which is preventing corporate customers from migrating. Within this, a lack of a fixed end-date for legacy payments and low awareness around the requirements, including the conversion from domestic account numbering systems to the European BIC and IBAN system has resulted in delays. If SEPA and the PSD were perceived as a value-added alternative there might have been less debate and no need for an enforced end-date as customers would want to migrate. However, there is light at the end of the tunnel and 2010 should see a strong industry drive to set a SEPA end-date for legacy payments. Only setting a fixed end-date can provide the impetus needed to force the financial services industry into motion.

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Asia-Pacific, EMEA, LATAM, North America