Leveraging the SEPA Opportunity
by Andreas Kriz, Head of Treasury, MIAG C.V. (part of METRO GROUP) with Thomas Eisenhuth, Vice President, Global Transaction Banking, Societe Generale, Frankfurt
“While the need for every company operating in the Eurozone to migrate to SEPA payment instruments is dominating the headlines, less attention has been given to the advantages that European harmonisation offers to optimise cash management. As Andreas Kriz, Head of Treasury, MIAG outlines below, SEPA offers a historic opportunity to review and enhance bank relationships, payments processing and cash management.
Although SEPA migration has been slow in some cases, we are now seeing companies across all industries seeking to leverage the opportunities of harmonisation and standardisation that SEPA offers. For example, centralised payments processing, often on a payments-on-behalf-of model, is becoming increasingly common. This enables treasurers and finance managers to rationalise bank accounts and relationships, simplify cash management and achieve significant operational efficiencies and cost savings. MIAG, which acts as the shared service centre for payments and working capital solutions for the METRO GROUP and its suppliers, was one of the first companies globally to centralise payments processing. In this article, Andreas Kriz, Head of Treasury, MIAG describes how the company has taken the opportunity of SEPA migration to enhance its payments processing and optimise bank relationships.”
Thomas Eisenhuth, Vice President,
At MIAG, we have operated a centralised payments factory on behalf of METRO GROUP entities for nearly 40 years. As a pioneer in this area, we have refined our processes and technology over many years to achieve the highest levels of efficiency, control and security. Migrating to SEPA (Single Euro Payments Area) marks the next step in our journey in optimising payments processing at MIAG. Once the SEPA end date was confirmed in early 2012, it was quickly apparent that we needed to adopt SEPA instruments promptly to avoid interruption to our payments processing. As the third largest clearer in Switzerland after UBS and Credit Suisse, with around 1.5 million payments each year, it was essential that migration could progress smoothly without risk of error or loss of automation.
We recognised that our SEPA migration project was an opportunity to make improvements to our payments processing that extended beyond regulatory compliance. In particular, we identified two key opportunities:
- to review and rationalise our banking relationships
- to standardise our file formats on XML ISO 20022, not only in Europe but globally
Reviewing bank relationships
In the past, we worked with two banks in each country on an equal footing (as opposed to having one primary bank and one back-up). We used these accounts at MIAG to make payments on behalf of group companies. Harmonisation of payment instruments, formats and legal conditions in Europe meant that we no longer needed to maintain accounts or bank relationships in each country. We therefore decided to centralise our banking relationships in Germany with a view to reducing the number of bank accounts we maintained, cutting bank charges, rationalising formats, streamlining fragmented data hubs and reducing the amount of administration time spent on maintaining bank relationships.
We started a tender process in Germany in co-operation with Metro Finance, our Group Treasury function. Initially, we contacted around 25 banks, a list that we later reduced to 10 and then to four. Many of our requirements were familiar: the bank’s financial stability; quality of service provision; reliability and depth of solutions. An essential condition was that a partner bank could provide same-day value on SEPA Credit Transfers (SCT), including both the debit from MIAG’s account and the credit on the beneficiary’s account, and at a low cost (less than 1 eurocent per transaction). We were also interested in the bank’s transactional capabilities, such as supporting SWIFT Corporate Access. We have had SWIFT in place since 2007 and we connect to all our banks (around 40 in total) so it was an essential requirement.
We selected Societe Generale as one of our four SEPA payment banks as it satisfied all of our criteria and the relationship was very positive. We already worked with Societe Generale in three countries, so we were confident in the bank’s capabilities and the team’s commitment to developing the relationship further.