ECB, banks say deadline needed for payments reform

By Sakari Suoninen and Huw Jones

FRANKFURT/LONDON, Oct 12 (Reuters) - Cross-border direct debit payments in Europe will become available in November but a deadline for completing the changes would speed up benefits for consumers, central bank and industry official said on Monday.

Nov. 2 will mark the launch of a direct debit scheme within the Single Euro Payments Area (Sepa), that will enable companies like utilities to withdraw payments directly from a customer's account in another European Union state.

Sepa will eventually enable consumers to send and receive payments in euros and use their payment cards anywhere in the 27-nation bloc, all from one bank account to cut complexity.

But the debate about an end date for scrapping national payment systems to reap big savings and efficiencies will take a few months, European Central Bank Executive Board member Gertrude Tumpel-Gugerell said in a news conference on Monday.

'End date would be very useful in our view and is also the feedback we have got,' she said. 'Common end date would help the migration come to an end and to bring clarity for all the participants.'

It will be 'a low number of years' more before national systems are retired, she added.

Tumpel-Gugerell said she has to have bank accounts both in her native Austria as well as Germany where the ECB is based, instead of needing just one to manage her expenses in the two countries which use the same currency.

Sepa will also boost competition and choice in services to bring down prices for the EU's 495 million consumers but represents a costly investment for about 4,500 banks.

Direct debits form the second leg of Sepa -- cross-border electronic money transfers became available in January 2008 and now represent 5 percent of total euro credit transfers, said Gerard Hartsink, chair of the European Payments Council, a bank industry grouping.

It may take time for account holders to set up cross-border direct debits as not all utilities, public authorities or companies have upgraded their systems to Sepa.

'It's definitely not a big bang,' Hartsink told Reuters.

Setting a deadline for closing down national payment systems would speed up Sepa switchover, Hartsink said.

The EU's executive European Commission has been consulting on a possible deadline for full migration to Sepa. 'We want to have an end date. We are waiting for a proposal from the Commission,' Hartsink said.

Many but not all banks and customers would be ready by the end of 2012, Hartsink said.

Under the final leg of Sepa rollout, all payment cards issued from the end of 2010 must be compliant so that customers can use their credit and debit cards anywhere in the EU.

Tumpel-Gugerell said running parallel payments systems is costly, but once Sepa has replaced national systems, there would be considerable savings and competition in banking services.

'What is important is that there will be more competition for payment services and this should also mean some pressure on this,' she said.

She quoted a Capgemini study which estimated the cumulative benefits of Sepa at 123 billion euros over six years.

Tumpel-Gugerell said public authorities could have been more active in pushing for the new system, but added they are moving towards adaptation.

'It's (public sector role) maybe less spearheading than we would have wished, but it is co-movement at the moment,' Tumpel-Gugerell said.

Some 2,500 banks will be ready to off cross border direct debit in a few months, forming what she called a critical mass.

Sepa implementation process also faces big challenges, she said. 'First, Sepa for cards, second, the overall Sepa migration process and third, the governance of the Sepa project in the future,' she said in the text of the speech to be given in Brussels on Tuesday.

'We shouldn't underestimate the complexity of the task.'

(Reporting by Huw Jones and Sakari Suoninen; Editing by Ron Askew) Keywords: ECB/TUMPEL GUGERELL ([e-mail]; [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.