First Data's John Chaplin, speaking at the Digital Money Forum in London, makes eight predictions on the impact of SEPA. Before I go through the predictions, I want to first say that the arguments were quite intelligent and persuasive. I found myself analyzing each prediction as John made his argument, then switched and began analyzing why John, as a First Data executive, would be making the prediction. You really can look at each of these predictions on both levels, as a general idea, and then why the prediction is important to First Data.
1 - Every part of the cards business will change. Some banks feel that they won't be impacted by SEPA, or that they are already "SEPA compliant". John's advice: "Think again."
2 - Interchange will survive but at a much reduced level in many markets. Most markets will likely evolve towards the French market, where merchants pay low interchange fees on debit, and consumers pay an annual fee of around 30 Euros.
3 - Many national payment schemes will disappear and MasterCard and Visa will become even more powerful brands.
4 - At least one European debit card brand will emerge and will take at least 15% of the market within 5 years.
5 - Many national processing companies will become uneconomic and cease to exist in their current form. "30 companies doing inter-bank processing in Europe cannot last. Lots of these national processing infrastructures are going to disappear."
6 - Card schemes providing processing will be forced to change and will have to chose what they want to be.
7 - Increased regulatory intervention will happen, as self regulation will not deliver results fast enough. Does anyone really believe that if you are a monopoly in Greece or wherever, that you will happily open up to other networks, processors and brands if you are not forced to?
8 - Large banks and some non-banks will aggressively exploit SEPA freedoms and opportunities.
John throws in two jokers that could disrupt all of these predictions:
1st joker - The European Commission abolishes interchange. The EC is already very angry with MasterCard and could just go ballistic with all interchange models and simply abolish the practice.
2nd joker - Rapid convergence of debit card and ACH processing. These are managed separately today, but they could conceivable converge, and bring about disruptive change.