More than half of European banks believe that the January 2008 deadline for compliance with the Single European Payment Area (Sepa) is unachievable.

Under the Sepa initiative, electronic payments in Europe will be considered domestic rather than international transactions, improving the efficiency of European trading.

But being unable to transact with some banks could hamper the system, said Martin Wilson, chief marketing officer at payment system supplier VocaLink.

"With Sepa compliance just around the corner, the thought that many European banks do not have a solution in reach is a cause for concern," he said.

The survey also found that 81 per cent of banks believe their customers would not migrate payments to Sepa schemes until 2010 or beyond.

Over half (54 per cent) said convincing customers of the importance of moving to Sepa instruments was the most significant issue facing their business.