The great SEPA countdown
The race is on to beat the clock and migrate euro payments to Single Euro Payments Area (SEPA) instruments by the deadline of 1st February 2014. At long last, the Eurozone will give birth to a (relatively) harmonised payments landscape that should be easier and cheaper to navigate, both domestically and cross-border.
The gestation period was a laborious 14 years, beginning with the Lisbon Agenda in 2000. The treaty intended to make the EU ‘the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion’ by 2010. Despite the deadline slipping a few times and the intervention of the global economic crisis, the SEPA train continued to lurch forward.
However, with less than a year to complete migration, all reports point to the fact that there is still a long way to go. With a persistently low adoption rate thus far (as of December 2012, SEPA Credit Transfers (SCTs) made up just 34.86% of the total volume of credit transfers, while SEPA Direct Debits (SDDs) made up just 1.91%), every transaction bank and SEPA solution vendor in Europe is ratcheting up their marketing and communications machines into overdrive.
For many of us suffering from SEPA fatigue, this is a welcome burst of excitement and one that will hopefully result in tangible gains for corporates – after the pain, that is.
For those corporate treasuries that are sitting outside the Eurozone, thinking that this has nothing to do with them, then it is time to think again. The EU is a major trading partner for most countries around the world and for those that do trade in euros implementing SEPA will mean faster settlement, simplified processing and lower costs for cross-border payments. In addition, for those companies whose treasury is headquartered outside but still have treasury operations within the Eurozone, this is an opportunity to standardise payments and simplify ERP systems to streamline and centralise to gain further efficiencies. There is a lot to play for.
But in order to take advantage of what SEPA offers, you need to get in the game. Clients are typically requiring between six months and a year to prepare themselves for the switch. The biggest concern being voiced by banks and vendors alike is that many corporates will wait to the final quarter of 2013 to start thinking about a migration programme. If this happens, there will be a crushing (and costly) bottleneck because the banks and vendors will not be able to service all their customers.
An important question still hangs over the scheme: what will happen on 2nd February 2014 if a corporate is not compliant? Will its payments be rejected? No one is quite sure – but then again no one really wants to wait and find out.
Our advice? Start now.