The most challenging and frustrating aspect of the Single Euro Payments Area project, according to a major German acquirer, is its goal of establishing common payment standards throughout Europe.

Many players in the European payments market aren't in a position to standardize protocols themselves, mainly because they have no reason to make investments in technology that other countries may not fully adopt, says Andreas Stendera, director of sales for Frankfurt-based B+S Card Services.

The European Union established the SEPA initiative over the past decade as a way to simplify bank transfers and create a common currency and payments system throughout most of Europe. SEPA regulators have established Feb. 1, 2014 as the deadline for compliance with the initiative's core provisions.

Issuers and acquirers in Europe are waiting on the European Union to define more SEPA standards, especially for debit cards, Stendera says, "but we can't all wait on the European Union, so acquirers work on overcoming barriers with their own solutions."

B+S, which has provided processing and point of sale terminal service for 25 years, has had major retail and petroleum customers in Germany request more cross-border and international business, Stendera says. B+S provides cross-border services, but it's not a simple process, he adds.

"SEPA is really only the first step needed to standardize the payment industry," Stendera says. "Credit cards are a big barrier, because some countries like Belgium and Denmark operate only with local debit cards."

As such, acquirers may be reluctant to spend the time and money to integrate small debit card schemes into a network, Stendera says.

Each country also has different protocols for POS terminals, Stendera says. "There is a need for terminals that work internationally, but you have to provide the service level required, which is difficult with the different standards and different merchant behaviors in each country."

Any discussion about SEPA has to include the realization that payment types in Europe are not the same, says Gareth Lodge, a London-based industry analyst and SEPA expert with Celent.

"At the beginning of the SEPA project, research identified over 200 features unique to debit cards in one country, but those features are not found in every country," Lodge says.

The complexities in Europe are more magnified because each country has a single debit card, but routes transactions on different networks operated by the banks.

"The models and level of fees vary by each country, but it's probably safe to say that fees are under pressure," Lodge says. "As a result, where is the money coming from for these changes?"

Cross-border acquiring remains a challenge in Europe despite SEPA, says Zil Bareisis, also a London-based senior analyst for Celent.

"The notion of 'omnichannel commerce' where the boundaries between physical and e-commerce is disappearing also is placing additional challenges on the POS infrastructure, which does not make it easier to achieve the desired standards," Bareisis says.

While SEPA represents a major challenge in Europe, the continent's desire for a third card scheme may soon be resolved with the rapid growth of China Union Pay acceptance at merchant terminals, Stendera says.

B+S announced an upgrade to its processing services in the UK, allowing merchants to accept China Union Pay transactions at a time when travel restrictions in China are being lifted.

China Union Pay is "the fastest-growing credit card system and becoming big business in parts of Europe," Stendera says. "It will be the third major card scheme behind Visa and MasterCard in Europe."

Bareisis says his Celent report on payment trends in January of 2012 indicated that China Union Pay had become the largest payment card scheme in the world in terms of number of cards issued.

"I suspect it will take time, but I think CUP will be an important player in Europe going forward," Bareisis says.

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