Although corporate treasurers have been able to send and receive payments in euros under SEPA Instant Payments since 2017, it’s fair to say adoption has been mixed. The scheme is designed to make sending money between European countries as easy as making bank transfers within the same country and seen as key to accelerating trade and supporting economic growth. But friction and complexity have stifled uptake, and many corporate treasurers remain unconvinced by the opportunities SEPA real-time payments offer outside processes like insurance claims.
Last year, in a bid to accelerate adoption, EU legislators made it mandatory for all banks and payment service providers operating in the Single Euro Payments Area to both send and receive payments within a maximum of ten seconds. Policy makers also introduced the SEPA Verification of Payee (VoP) which asks users to verify beneficiary data before making a payment in a bid to boost security and confidence and encourage take up in faster payments. Other facets of the new legislation include harmonising the cost between SEPA Credit Transfer, SCT, where payments can take a few days, and super-fast, SEPA Instant.
Will legislation speed up adoption? Members of Standard Chartered’s European transaction banking team, Richard Stansbury, Head, Product Management in London and Felix Orth, Director, Cash Product Manager based in Frankfurt, tell Treasury Today it will. But they also argue that progress in real-time payments is best viewed in the context of a wider trend in real time treasury that extends beyond just payments to real time account balances and transactional information.
Primed, ready, and “excited” to support corporate payments in line with the legislation, Stansbury and Orth believe the policy will encourage more corporates to tap into the benefits of the card-like experience of SEPA Instant, as well as other SEPA advantages like the ability to move money outside standard cutoffs. Meanwhile, VoP will help create a safer environment, and give consumers and corporates confidence in payments that settle instantly, rather than hours or days.
They say take-up will, in turn, open the door to other steps on the road to real-time treasury. For example, the technology will enable treasury teams to move funds across the region in a strategic approach that supports optimal management of cash balances to ensure treasures have the right money in the right place at the right time.
“The dream is that at some point in the future, we will be able to use SEPA Instant real-time payments for point-of-sale transactions whereby a corporate can, at the point of sale, release the goods in exchange for incoming, real-time payments. These journeys are possible today, and will gather pace,” says Stansbury.
Challenges remain
That said, corporates still complain of friction in the current systems. For example, SEPA Credit Transfers, SCT, are more likely than SEPA Instant to be processed successfully, explains Orth. “Under SEPA Instant, scheme participation is not yet universal, and the reachability is still evolving into all SEPA participating countries.”
Adoption is only mandatory in countries that have the euro. It isn’t mandatory in non-euro EA countries yet, although it will be next year. Elsewhere in non-EA, SEPA countries, adoption is voluntary, with no mandate. “Corporate clients can’t assume that every IBAN in SEPA is reachable in SEPA Instant just yet,” says Orth.
Another source of friction is VoP. Although this is welcomed by retail clients that can make payments with certainty with a new level of security, for many corporates it involves an additional step they need to consider in their payment journey. For example, it may require a change in their Enterprise Resource Planning (ERP) systems that introduces a process break like logging onto a separate system to check and confirm verification of payee status in what would, ideally, be a straight through process. Still, Orth notes that corporations can opt out of VoP for bulk transactions on files. Positively, VoP also enables corporates to validate the IBAN before making a payment in their ERP systems, in an added benefit helping to fight payment fraud.
Despite these challenges, Orth and Stansbury conclude that the legislation serves to highlight the exponential acceleration in real-time payments that will allow corporate treasurers to perform tasks faster and tap into much higher quality information to inform their day-to-day jobs.
Looking ahead, they say more regulation like Payment Services Regulation will similarly continue to drive innovation in Open Banking and account to account payments. Moreover, SEPA’s One-Leg-Out scheme will also evolve to support instant settlement in transactions that start, or end, from outside the SEPA area in line with G20 objectives in another benefit for corporate treasurers seeking faster payments.
They conclude with key advice for corporates preparing to ride the real-time wave: maintain vendor data, and ensure it is saved in structured formats because all future developments in payments will ask customers to send information in a structured format, and always look for opportunities to accelerate statement and account reporting information flows to improve treasury decisioning.
