This Financial Insights study explores the challenges and opportunities of the single euro payments area (SEPA) as well as the reality of achieving integrated payments architectures. Based on our ongoing research, we also highlight the key strategies European banks should be pursuing in the wake of payment harmonization.

Most European banks agree that SEPA will influence their payment strategies and impact their infrastructures. Already a very commoditized business, this is an industry that will become increasingly difficult to differentiate in. However, Financial Insights believes that a number of opportunities will also be made available to the banks that adapt and are proactive rather than take a regulatory compliance approach.

"SEPA is forcing many banks to rethink payment strategies because charging less for payments will require greater automation and integration to maintain margins. Dramatic cost efficiencies will therefore be required, improving operational costs by 50% in some cases," says Rachel Hunt, manager, Financial Insights' European Banking service.

"An increasingly harmonized banking Europe will mean that domestic banks will be less able to defend their national markets and that the current trend for cross-border mergers and acquisitions will intensify, but it will also boost the adoption of enterprise payment hubs at tier 1 institutions across Europe. Nevertheless, a number of opportunities will also be available to banks, from strategic sourcing to developing new payments products and services."