Regulation & Standards

On your marks… go SEPA

Published: Mar 2013

The year of implementation

Start now. If there is one thing that you should take away from this guide, it is that you need to start planning your Single Euro Payments Area (SEPA) migration now, if you haven’t already. The 1st February 2014 deadline is swiftly approaching and the months leading up to it will fly by. This is a major project that can take six to nine months or even a year to complete, depending on your organisation’s complexity. You can’t just flick a switch to make it happen – it requires careful planning.

Willem Dokkum

Global Head of Sales Payments and Cash Management, ING Commercial Banking

Tel: +31 20 563 9921

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In the beginning, the frontrunners were those that could identify a clear business case and quantify the benefits to be gained from migrating to SEPA – Electrabel, a subsidiary of GDF Suez and ING client, is one such leading light. To date these have tended to be global corporates that make numerous cross-border transactions, which can see immediate payback from lower costs for cross-border payments. But for those more domestic or smaller corporates that still look upon SEPA as a burden, it is important to understand what benefits SEPA can bring to treasury.

SEPA is a catalyst for rationalising a corporate’s banking landscape, by reducing the number of bank accounts and bank relationships, and standardising its payments IT environment, by moving to the ISO 20022 XML format. The IT department, for one, will be relieved to only deal with one format across the whole Eurozone, but needs also to be mindful that there can be different appendices attached to the standard. ISO 20022 XML also provides extra fields that generate more information to improve reconciliation and reporting, as well as supporting centralising concepts such as shared service centres (SSCs) and payment factories. With XML you can do both SEPA and non-SEPA transactions, which means the format can be used in a global context.

SEPA can also be used as a trigger to review and optimise a company’s business processes. For example, SEPA introduces common cut-off times for payments that all countries and banks must adhere to. Since the end date was legally adopted in February 2012, SEPA has gained the urgency needed to be on the Board’s agenda in order to obtain the funding and IT resources needed for such a major change programme. Today corporates are treating SEPA as a ‘real’ project, with a dedicated project manager, allocated budget and people. This is an encouraging sign.

However, despite this impetus, SEPA uptake remains low and uneven across the countries involved, as illustrated in a number of industry surveys. For example, according to a recent survey by Steria, 30% of French and German businesses had not initiated activity to migrate to SEPA, whereas more than 75% of UK businesses did not even know the deadline.

The European Central Bank (ECB) SEPA Indicators demonstrate the low level of implementation. As of December 2012, the share of SEPA Credit Transfers (SCTs), as a percentage of the total volume of credit transfers generated by bank customers, amounted to 34.86% in the euro area. SEPA Direct Debits (SDDs) are lagging even further behind at 1.91%. Nonetheless, there are some countries, such as Belgium, which are far advanced in their national migration plans and many lessons can be learnt from their experience.

Not becoming SEPA-compliant carries with it many risks. Corporates could face cash flow and liquidity issues if payments don’t go through. In order to help our clients become SEPA-compliant within the timeframe, ING has launched a number of initiatives to help drive adoption. We reached out to all our corporate clients to find out which stage they are at and what help they will need in order to migrate by the deadline. SEPA roundtables, hosted by ING for corporate clients, provide real-life case studies to share best practice and overcome challenges to implementation. We also allocate a SEPA migration manager for large clients that still need to perform in-depth impact analyses. In addition, we have started an information campaign to bring the smaller corporates and small and medium-sized enterprises (SMEs) on board.

By building up our SEPA knowledge and sharing this experience over the years, ING can help clients manage their migration projects as optimally as possible, including a step-by-step plan of approach. We advise them to do a complete analysis of how SEPA migration will affect different business units, so that they have all the data they need before they begin constructing a plan. In addition, at the beginning of this year we launched online training, ‘SEPA Get Ready’, for every corporate – clients and non-clients alike – which can help you with all stages of your preparations (see page three for a closer look).

Migration to SCT and SDD ahead of the deadline is achievable, manageable and advantageous to all companies. Preparation, however, is crucial and the time to start is now.

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