Fast Track to SEPA Migration in Slovakia
by Marcela Výbohová, General Manager, Payments Division, CSOB
W ith adoption of the euro taking place in 2009, Slovakia is one of the most recent countries to join the single European currency, which includes adopting the Payment Services Directive (PSD) and the planned migration to the Single Euro Payments Area (SEPA) payment instruments. Migration to SEPA payment products is already under way in many European countries, with banks and corporates alike in the latter stages of preparation and in some cases migration, but with later euro adoption, transition plans in Slovakia are at a later stage of development. This article looks at the status of migration to SEPA in Slovakia and some of the opportunities and challenges that it presents for businesses located in the country.
Banks in Slovakia are making active preparations for migration within an aggressive timescale.
Preparing for migration
Banks in Slovakia are making active preparations for migration within an aggressive timescale. The National Bank of Slovakia is spearheading these efforts by publishing migration guides that will enable commercial banks to migrate processes and technology to support the new instruments. Banks such as ˜CSOB, KBC’s subsidiary in the Slovak republic, is proactively analysing, preparing and implementing changes to its own systems and processes to facilitate migration to SEPA. While the official deadline for SCT migration is February 2013, we are on target to support SEPA-based clearing by end 2012, a far shorter time than most countries have enjoyed.
Introducing SCT represents a more straightforward proposition than SDD, and consequently, the project to develop and support SCT is further advanced. The SCT (see box) is not fundamentally different from the existing domestic credit transfer, with the same pricing and value dating, although the technical standards (i.e., ISO 20022 formats) have not yet been introduced. As the requirements of the PSD (figure 1) have already been implemented, pricing of domestic and cross-border payments is now consistent. In reality, this has already had a significant impact on companies operating internationally, even before the SEPA payment products have been introduced, as cross-border transaction costs are reduced.
Consequently, we are not yet experiencing demand from corporate clients to migrate to SEPA, although it will ultimately be a requirement for all companies. Some subsidiaries of companies based in Germany and other European countries are keen to keep themselves informed about the status of SEPA migration plans so that they can integrate their Slovak payment operations with those in other countries, taking advantage of the technical convergence that SEPA offers.
However, harmonising the technical, legal and pricing conditions for payments across the Eurozone brings considerable advantages particularly to companies operating internationally. In the past, it has often been difficult for multinational companies to centralise and standardise payments and collections processing. Consequently, many have maintained multiple banking partners with different interfaces, complex cash management structures to consolidate cash, and separate payments and collections departments with diverse processes and technology. SEPA therefore offers the ability to centralise payment, collection and cash management processes and rationalise the number of banking partners, with advantages such as:
- Rationalise banks and bank accounts, reducing fragmentation of cash and cash-related information, managing counterparty risk more effectively and creating greater economies of scale;
- Simplify cash management structures, reducing cost and complexity;
- Reduce the number of banking interfaces, reducing costs and enhancing controls;
- Standardise the communication formats used with banks across multiple interfaces using ISO 20022 formats;
- Manage days payables outstanding more effectively, improving working capital;
- Use best-in-class technology to replace existing fragmented systems, providing greater automation, efficiency and lower risk of fraud and error
- Improve cashflow forecasting and reduce working capital requirement
- Make strategic use of surplus cashflow: M&A, share buybacks, pay down debt or dividends.