By Maria Bruno-Britz, Bank Systems & Technology
There's always talk in the payments world about the need for greater harmonization and standardization in the ways that payments are processed. That's no less true at this year's Sibos. However, in spite of the calls to action that we hear from the industry, the world still operates along very nationalistic lines. I had a chance to sit with TowerGroup's Ted Iacobuzio, managing director and practice leader for payments, while at the show to discuss such issues.According to Iacobuzio, this attitude toward regionalism has made doing business globally more difficult for banks than it probably should be. "The regions of the world are really regions, each with its individual set of problems," he says. "This makes it difficult for a bank to do business in the three major world regions-U.S., Europe and Asia/Pacific."
In Europe, not surprisingly, the single euro payments area (SEPA) initiative is at the top of the list for financial institutions-or so we think. "With SEPA, we're seeing a lot more talk than action," he says.
Not only does Iacobuzio share the view of many others that the deadlines will never be met in time, but he also thinks that SEPA is creating just the opposite of the payments harmonization for which it was designed. "SEPA is having a paradox effect," he says. "It's spurring national bank mergers rather than cross-border mergers. In fact, it's making cross-border mergers more difficult." He cites, for example, recent protectionist moves by Italian banking institutions against takeovers from across their borders.
That comes as no surprise to me. In spite of the lofty goals of unity expressed by the EU, how can anyone think it will be easy for nations that have existed for centuries to accept many of the tenets of a unified Europe? Deep down, there is still a desire to maintain one's national identity. And apparently this holds true for financial institutions as well.
As a result, Iacobuzio understandably gives SEPA a longer timeline to work itself out-approximately 20 years for things to settle down and become truly unified. "SEPA is about payments. But it's also about creating a unitary banking environment across the continent."
Although some say SEPA should be looked at as a model of unity for the rest of the world to follow, Iacobuzio points out, and perhaps rightly so, that the U.S. financial/payments system is more of the model for the EU than the other way around.
The greatest challenge for U.S. banks is going global. Right now, they are in the midst of trying to create payments utilities using services-oriented architecture (SOA). "Banks want to use SOA as a lever with which to construct a payments hub. So they're looking inward to find the common denominators for building an enterprise payments platform." And when one considers that two of the big three U.S. banks are the products of large, multiple mergers, this process of putting one's systems capabilities in order becomes even more crucial to banks' international aspirations, even as they engage in global business.
Asia, meanwhile, is on the cusp of some very significant banking developments, he says, and should be watched. Right now, there is a focus on trade flows within Asian markets, especially in China and India. These economies may soon rival Japan in financial prowess, he says.
In China, however, there are huge issues around infrastructure that must first be addressed, he says. "But the Chinese are being more realistic with their deadlines than the EU [is with SEPA]. They have a big house to put in order."
However, once things are straightened out, it could become interesting. Will a Chinese bank buy into a U.S. bank? Probably, says, Iacobuzio. "I think a Chinese bank will buy a U.S. bank within 10 years and will start to issue cards out of the U.S."Global banking still faces hurdles in spite of global face of commerce, sayss TowerGroupp's Ted Iacobuzio.