ING: Change is the Only Constant - Sander Cok

In theory, we now live in the Single Euro Payments Area, but in practice it is a hybrid world, where SEPA operates alongside familiar payments systems. As Sander Cok of ING tells us, there is a steady shift towards the new infrastructure, but no one knows how long this will take to reach critical mass, nor how long SEPA will continue to evolve.

At the end of January 2008, the Single Euro Payments Area (SEPA) finally came into being, marking what its political backers see as a milestone in European financial regulation. SEPA aims to make cashless, cross-border payments within the Eurozone as quick, cheap and simple as domestic payments.

'ING is among those that have embraced SEPA, and is one of the few banks both receiving and sending payments through the new infrastructure on behalf of clients.'

'The question now is how quickly we will achieve the end goals of the European Central bank and the European Commission,' says Sander Cok of ING Wholesale Banking’s Payments and Cash Management division.

Four thousand banks have so far become adherents to SEPA schemes, though this is by no means every bank in Europe. ING is among those that have embraced SEPA, and is one of the few banks both receiving and sending payments through the new infrastructure on behalf of clients.

The bank has taken the view that SEPA is the platform on which to build future payments services, and has built a central SEPA engine connecting the back offices of many branches as part of an internal process of rationalisation and standardisation.

Cok is keen to see the bank’s clients benefit from migration to the new payments infrastructure, and sees volumes growing, but he recognises that there is much work to be done before the new regulation can claim to be a total success.

Migration is certainly happening. The Euro Banking Association’s (EBA) Pan-European Automated Clearing House (PE-ACH) for SEPA credit transfers and direct debits has seen volumes rise to around 300,000 transactions per day. Its Credeuro service for processing credit transfers for small retail payments of up to €50,000 has simultaneously seen volumes fall, but to a lesser extent.

'It is too early to reach any conclusions about the impact of SEPA, but crossborder payments are migrating to the new infrastructure. Domestic volumes, however, are low. We all want to know when domestic migration will happen,' says Cok.


Some feel that a clear end date for full migration to SEPA would focus minds on completing the process, but there are both pros and cons to setting a deadline.

Meetings of the European Commission on this matter concluded that it is too early to fix an end date, even if it were desirable to have one.

The competition authorities at the European Commission have expressed concerns that a strict deadline would introduce too much complexity into the transition process. 'It all comes down to the choice between internal markets and competition,' says Cok. 'The competition authorities in Brussels have a big say in things. Furthermore, the issue is far from clear for the banks, whether or not they have positioned themselves to take a lead on SEPA.

For ING, which has taken a lead on SEPA systems and services, there is much to be gained from accelerating the migration of customers to the new infrastructure, but at the same time the bank appreciates it would better if corporate users made this choice freely.


'For public authorities especially, if there is no end date then there is effectively no start date,' believes Cok. 'But, one of the main incentives for banks is selfregulation, so they are unlikely to call for such a rule to be imposed externally. The problem you have then is that if the period of co-existence is too long, then maintaining two systems becomes very expensive for banks to support.'

Banks like ING are keen to develop payment services that can add value for their clients, but they must be clear about where to direct their efforts.

'We want to innovate, but do we do it on the old systems where there is high volume, or do we do it on the new systems, where volumes are relatively low?' says Cok.


Progress on clearing will help the market to consolidate and encourage migration. 'The infrastructure side is not fully functioning yet. The EBA, which has substantial reach, does not yet have the required levels of service in terms of cut-off times.'

'SEPA is about harmonisation and standardisation, which you cannot achieve without cooperation.'

'Domestic clearing houses, on the other hand, have the right service levels but not the reach. We expect this to be harmonised in 2009, so there will choices for clearing and that will open up the domestic markets,' says Cok.

SEPA embodies many broad trends - from cash to cards, from paper to electronic documents, and simplifying cross-border payments.

Many issues remain to be resolved as implementation of the new regulations drives this transition forward, many of which are already on the radar.

Some areas of the market are progressing well, and ING is soon to announce a further development to its offering in the card space, but Cok sees some difficulties with SEPA Direct Debits, for instance, which must overcome a number of challenges.


There are questions over how the implementation of the Directive on Payment Services (PSD) will affect SEPA-DD, and concerns also persist among users over the automatic migration of their existing mandates to the new payments infrastructure.

'Risk mitigation is also still a problem. Dutch banks have prepared a paper on the problem of risk mitigation being only recommended and not mandatory. They are also calling for a central database of blacklists, known fraudsters and the like,' remarks Cok.

Here, too, there are signs of progress, but they show only the first few steps on a potentially long road. Many of the problems with SEPA-DD could be circumnavigated if the market moved rapidly towards e-invoicing. This, however, is currently under construction.

The European Commission has recently convened an expert group to examine the development of e-invoicing, and Cok has been encouraged by the tone of the group’s early discussions taking place through the European Commission’s new expert group on e-invoicing, which will set the tone for future development.


On migration, as with all the challenges SEPA presents as it rolls forward, Cok feels communication and co-operation are the way forward.

'Ideally, corporates (the customers) should have been persuaded first, enabling the banks to create the infrastructure to meet their wishes, but SEPA has happened the other way around,' he observes. 'SEPA is about harmonisation and standardisation, which you cannot achieve without cooperation, even with the competition authorities.'

'Politicians wanted SEPA, banks bought into it, but customers are sitting on the fence. We need to leave "push" mode and enter a period of co-operation.'

He also notes that the banking communities early efforts to involve industry bodies that could represent the wishes of end users and, therefore, help banks to get a clear idea of how to construct their SEPA offerings, brought only muted response from stakeholders.

This is largely due, he feels, to the fact that SEPA was the child of politicians and not the market.

Nevertheless, he sees clearer signs that there is now willingness among stakeholders to cooperate in shaping the future of SEPA.

It is still impossible to tell how long it will take the new payments environment in Europe to take its final form and become the norm in the market, but now that it is a reality more banks and end users are starting to take an interest.

Sander Cok of ING Wholesale Banking’s Payments and Cash Management division.
ING is among those that have embraced SEPA, and is one of the few banks both receiving and sending payments through the new infrastructure on behalf of clients.