The Art of communicating SEPA

The Art of communicating SEPA

Who should communicate what to whom in the SEPA process?

22 October 12

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Who communicates what to whom?

In December 2009, the Economic and Financial Affairs Council comprising the Economics and Finance Ministers of the Member States (ECOFIN) stated in its conclusions on that: "extensive communication efforts by service providers, when marketing products, are urgently needed in order to raise awareness" 1. Indeed: given the moderate 6.7 percent market uptake of the Credit Transfer Scheme2 two years after its launch, it is generally recognised that raising awareness is the order of the day. The question at hand is: how?

If one were to follow the logic of the ECOFIN, a compelling script jointly staged by payment services providers drumming home the objectives would culminate in banks and their customers happily walking off into the sunset, violins gently whispering the European anthem, the promised land on the horizon. Unfortunately, this concept fails to consider the following:

Is communication the key to generating a critical mass of payment transactions? Assuming for a second that this would be the case - are we talking about communication or pedagogy? If the latter - are payment services providers best suited to engage in educational campaigns transporting the socio-economic benefits associated with integration in general and the harmonisation exercise in particular? Who would be the target audience of such communication campaigns orchestrated by the banking industry? Are payment services providers the most appropriate spokespersons to convey the objectives of the programme? (There is a reason why marketing professionals like to recruit popular performance artists, sport icons or scantily clad females, and males, to sell a message). In other words, who should communicate what to whom? Has anybody posed these questions prior to sentencing that there is a need for payment services providers to communicate - extensively and urgently as requested by the ECOFIN - on ?

Identifying the appropriate message

When I was a schoolboy I was taught that for communication to occur there must be a sender, a receiver, a channel through which transmission takes place and a message for the target audience or receiver (this simple model may be completed with two more elements, as we will see later). Let us start with the most obvious requisite: to communicate we need something to be communicated; preferably, the message should be positive, unambiguous and easy to absorb.

The European authorities promote the message that the harmonisation exercise will strengthen the common currency, drive forward integration of the internal market and foster competition in payment services resulting in tangible benefits for European citizens and enterprises. At the same time, the European regulators - after having exercised political pressure for more than a decade on the banking industry to build a infrastructure - like to pretend that the programme would be a "market-driven" process. In these instances, the regulator tends to forget that bank customers never asked for existing payment instruments, which generally are viewed to be efficient and convenient, to be replaced by harmonised payment instruments.

The European regulators leave it to payment services providers to convey the following vital piece of information to bank customers such as corporates, SMEs and public administrations: to realise the benefits commonly associated with in the long run requires not just banks but also the demand side to invest into the upgrade of their payment architecture.

As of late, the European Commission equates the single set of payment instruments developed by the at the request of regulators with a "private monopoly" of the . The Commission now seems to advocate the development of additional, competing Schemes. (For further details on this matter refer to the article "On and US Health Care Reform" in this Newsletter; a link is included below). Summing it up, European authorities seem to expect the payments industry to launch comprehensive marketing activities based on the following storyline: " is a process promoted by banks and bank customers eager to invest into new payment applications compliant with different sets of payment schemes, a diversity which prevents market integration and minimises possible scale and scope advantages for all stakeholders. We have no idea how the investment into new payment applications compliant with different sets of Schemes could possibly strengthen the common currency. But, believe me, is great". Not even legions of the most imaginative communication experts could turn this lame duck into a blockbuster.

Messages to the general public promoted by the European Commission are incoherent with those directed towards the financial industry. The Commission should reconsider their positioning and deploy a serious and realistic communication strategy. Hiding behind cloud number seven when painting the picture is detrimental to effective communication; people generally are aware of the fact that there is no free lunch.

Identifying the appropriate sender

Even if the authorities would manage to define the clear-cut messages needed to communicate the rationale for , individual payment services providers are not the appropriate senders to disseminate this message for two simple reasons: firstly, the sales staff in the payments industry are trained and paid to promote cash management solutions; they do not usually sit down with their customers to discuss financial policy issues. Secondly, given their current approval ratings, banks are unlikely to be the most efficient promoters of the objectives. Justified or not, chances are that aggressive marketing campaigns launched by the banking industry would create a backlash rather than broad support among the general public.

Last but not least: is about breaking down the national borders preventing the evolution of one domestic euro payments market. And this is not a message that payment services providers may transmit with credibility.

Payment services providers operating in a competitive market promote products and services if and when this fits their business strategy

Any payment services provider with an interest in the business is free to choose a payment strategy and to define services and products which add value to the underlying basic operating principles. Hence, the product portfolios of banks will differ necessarily and each one will send a distinct message to its customers stressing the differences and value added compared to products and services offered by competitors. As a result of product promotion by competitors in the commercial payments environment we should expect diversity, differentiation, creativity and specialisation benefiting individual customers rather than common messages supporting shared objectives that unite the European public under the banner.

Identifying the appropriate target audience

Even the most convincing message transported through the most appropriate communication channels is lost if targeting the wrong audience. Bank customers do not approach their payment services providers seeking lectures on integration but to acquire fast, efficient and secure payment services. The lead in selling the benefits of integration to the general electorate falls to the relevant European institutions and Member States.

It is also an oversimplification to think that there is a homogeneous audience acting as the recipient of communication. Supply side diversity is a trifling story compared to demand side expectations. It is impossible to create a limited number of messages to address all relevant specificities. In fact, attending demand side needs would require from apostles not a communication strategy but an army of pedlars knocking door by door. It could be far more effective for corporates, SMEs, public administrations and consumers to device themselves a set of positive messages adapted to the information needs of each particular stakeholder group3.

The rationale for the demand side to migrate to the new payment instruments is the same as for the payments industry, e.g. the benefits generated through integration. Consequently, the banking sector trusts that the ECOFIN will address the relevant bodies and ask them to roll out communication efforts targeting their own constituencies.

The limits of communication

The above demonstrates that the call of the ECOFIN on the payment services industry to take a leading role in communication is based on a fundamentally flawed perception of who needs to communicate what to whom. The only other explanation for this misplaced call to action might be the fact that the relevant European authorities so far seem to have no appetite whatsoever to dedicate necessary resources to communication. In case this is a secret to some: defining messages, communication channels and target audiences is only the first step. Once these preliminaries are dealt with, somebody will have to cough up the budget it takes to translate these elements into marketing and information campaigns that will make a household name among 490 million European citizens in 32 countries.

At the very beginning I mentioned that the simplistic model applied to communication specifying the sender, the message, the channel and the receiver should include two more elements: (1) the objective of the communication and (2) the desired feedback to be generated among receivers. Communication, as any other human venture, must have a meaning; it should be pursued if benefits exceed costs. Along this article I think that I have brought evidence to back the idea that we have not yet responded adequately to the question "why communicate on ".

Incidentally, regulators perceived the need to communicate on based on the naïve belief that the lack of market uptake would result from a lack of information. At this point, however, even the regulators have woken up to the fact that the lack of market uptake is based on a lack of market demand for payment instruments as perceived by individual users of payment services. What is needed to generate migration to is an Regulation setting a mandatory end date for migration. Going forward, communication in the context at hand will have the objective of explaining the rationale for mandatory migration - it is important to internalise this fact.

Feedback as a requirement for complete communication proves that it is not a one-way process. The receiver reacts to communication, and even to lack of communication. We should analyse in advance what is the feedback we intend to inspire among receivers. From my viewpoint we should start studying what the receivers of messages, e.g. users, really need to embrace . Is it communication for informational purposes or other kind of help from those who are pushing ? Of course they should understand the concept, but communication is not the only means to produce understanding. Maybe they require time to adapt, or the right incentives to move (sticks and carrots), or the conviction that there is no other alternative. Communication does not answer adequately to all of these needs.

Let's discuss before we communicate

The Council now being established under the joint chairmanship of the European Commission and the European Central Bank bringing together the demand and the supply sides could serve as a forum to discuss related matters.

Last but not least: whichever parties eventually decide to launch targeted communication campaigns should leave the job to those who have the tools and the language that actually allow reaching people. For all their skills and competence - evidence shows that this is not necessarily a forte of European regulators, lobbyists and, oh well, bankers.

Javier Santamaría represents Banco Santander. Banco Santander is a member of the European Payments Council.

Related articles in this issue:

On SEPA and US Health Care Reform. The EC paper "SEPA Migration End Date": a commentary


1 ECOFIN Conclusions on (December 2009) available at .

2 ECB Indicators:

3 The has made available extensive communication material to assist explaining the impact of on different stakeholder groups available for download at / Customers.

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