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03 December 2009

ECB Gertrude Tumpel-Gugerell: how does thinking small first apply to financing conditions and payments of small to medium-sized enterprises?

SEPA benefits for SMEs, regardless of whether local or cross-border business: legal certainty; enhanced liquidity owing to faster payments and no lost value dates; competitive services;standardised payment terminals and banking software.

Gertrude Tumpel- Gugerell highlighted how SMEs have weathered the crisis and SMEs’ financing conditions. The crisis had led to bad times for SMEs, but exactly how bad is their situation?

She presented evidence from the ECB SME survey conducted in cooperation with the European Commission. It shows that, amid exceptionally adverse economic and financial conditions, 77 per cent of SMEs applying for a bank loan in the first half of 2009 received some or all the amount they applied for. Nevertheless, also indicates that 43 per cent of Euro area SMEs applying for a bank loan reported deterioration in the availability of loans in the first half of 2009. This seems, in particular, to point to increases in charges, fees and commissions or tighter procedures, collateral requirements and other types of required guarantees. Interestingly, large firms were somewhat more negative in their assessment of bank loan availability, with nearly fifty per cent reporting deterioration. Still, it has become clear that firms’ access to finance certainly came under pressure during the current financial and economic crisis.
What are the benefits of SEPA for small and medium sized companies?
The combination of common standards, common payment instruments and a harmonised legal framework will benefit small and medium-sized companies in at least four ways:
·         First, it provides legal certainty throughout Europe. This means that, irrespective of where the company and its customers are located in Europe, there is no additional risk stemming from the existence of different payment rules and customs. Hence, cross-border trading becomes more certain. Tumpel- Gugerell’s view is that this will remove one more important barrier from doing business Europe-wide.
·         Second, the faster execution of payments will enhance the cash flow and liquidity of companies. In the past, it has taken up to five days or even longer for a payment to reach the beneficiary’s account. This has been the case for some national payments, let alone cross-border payments. The SEPA credit transfer will ensure that all payments in Europe are credited to the beneficiary within a maximum of two days and, from 2012, in accordance with the Payment Services Directive, within just one day. In addition, no value dates are lost as the payment will be credited to the beneficiary’s account as soon as it is received by the service provider.
·         Third, fees for cross-border payments cannot be higher than those for similar national payments. This is ensured by the regulation on cross-border payments. The harmonized and integrated European payment market will be a key driver for more competition, leading to lower costs, enhanced services and more innovation. This may also encourage the development of SME-specific services as there is now a Europe-wide market for them.
·         Fourth, standardisation makes the processing of payments simpler. Cross-border payments no longer require any additional effort. All companies have the option to make use of more inexpensive banking software and integrated accounting and reporting applications. Evidence from the Nordic market indicates that common standards have enabled even very small companies to use e-banking and related applications. The standardisation of payment card transactions means that payment card terminals will also conform to a European standard. Merchants will benefit from competition between terminal manufacturers and between acquirers.
In conclusion, she stressed that SMEs as key users of payment instruments can make an important contribution to the successful implementation of a harmonized and integrated retail payments market.

© ECB - European Central Bank

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