Euro Single Payment Area Dream Elusive as Deadline Imminent

Of the 12 companies that Fritz Woldt regularly pays for electricity, insurance and water at his second home in Spain, 10 refuse to accept money from his German bank account.

Only a local water utility and an Internet provider have agreed to collect cash from a non-Spanish account. That’s supposed to change from tomorrow as credit transfers, direct debits and card payments fall under the Single Euro Payments Area -- allowing Woldt, a 53-year-old German information consultant working from Frankfurt and Cadiz, to cut his ties to Spanish banks.

“Euros in people’s bank accounts should move according to the same set of rules across Europe and that hasn’t necessarily been the case,” European Central Bank Executive Board member Benoit Coeure said in e-mailed comments. “Harmonizing payments can create opportunities to reduce costs and foster innovation.”

Woldt says he’ll save as much as 100 euros ($136) a year in transaction charges because of lower costs at German banks. Yet he may have to wait after the European Commission requested a six-month grace period for the changeover, citing “potentially severe consequences” in case payments are rejected, and prompting a backlash from Germany’s Bundesbank.

Credibility Threat

“The move won’t reinforce credibility in the reliability of European decision-making,” Carl-Ludwig Thiele, a board member of Germany’s central bank, said in an interview on Jan. 28. The delay “could mean significant costs for some companies, especially banks, which developed conversion services and signed contracts with customers to offer them,” he said.

The European Parliament and governments have yet to approve the commission’s proposal, which applies to euro-area nations. Other European Union members and the five non-EU countries participating in SEPA have until 2016 to make the switch.

“Had European lawmakers not made SEPA standards a legal obligation, they would continue to be ignored,” said Ileana Izverniceanu, spokeswoman for the Spanish consumers’ defense organization OCU, in Madrid. “Consumers would be left without protection.”

Last Minute

Woldt’s difficulties should have been solved as early as March 2012. Under EU regulations, payments or credit transfers must be possible within the euro area regardless of the location of the bank account. A smoother system could propel economic growth. An ECB working paper published in August estimated that SEPA can boost gross domestic product by 0.02 percent as it spurs trade and consumption.

Even so, companies and governments ignored those rules as they delayed the necessary investments to process cross-border transactions until the Feb. 1 deadline for SEPA.

“The law is there but national authorities must continue and increase their efforts to ensure that it’s actually applied,” said Chantal Hughes, a spokeswoman for EU financial services chief Michel Barnier. The Commission hasn’t yet published the list of sanctions for non-compliance, Hughes said.

The ECB says Spain is among the most advanced countries in implementing SEPA, with banks and big billers ready as of this month and public administrations and small and medium enterprises expected to meet the deadline. Germany and Italy are expected to be ready in time, while small and medium-sized enterprises in France and Luxembourg are lagging behind.

Complicated Switch

Customers such as Woldt may still get what they want. Energy supplier Gas Natural SDG SA and the local unit of Vodafone Group Plc say they’re already moved to SEPA internally. Both companies will accept debit payments from non-Spanish international bank account numbers, or IBAN, from Feb. 1, according to their respective spokesmen who asked not to be named in line with company policies.

Spanish wireless and broadband carrier Jazztel Plc has been paying suppliers and employees using SEPA standards since December, communications director Beatriz Valverde Garcia said in an e-mailed response to questions. However, the company will use the delay proposed by the commission before applying them to its clients’ direct debits as banks haven’t yet conducted the necessary tests, she said.

“No one is going to change something that already works unless there is a mandatory deadline,” said Victoria Golobart, who is in charge of software compliance for the Spanish unit of Walldorf, Germany-based SAP AG, the largest maker of business-management software. “SEPA changes processes for companies and it can be complicated.”

‘No Surprise’

The Bank of Spain expects little disruption after Feb. 1 as implementation is on track, said a spokesman. The country’s association of treasurers said the proposed delay will enable a more “orderly” completion of preparations, while Thiele said the technical challenges aren’t “a surprise that has appeared in the past few weeks.”

Woldt says he’ll approach his service providers again once the deadline passes.

“I’m quite confident that I’ll succeed, even though there’s currently resistance,” he said. “SEPA will surely lead to better customer service in Europe.”

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