Grasping the SEPA Opportunity
by Cédric Derras, Head of Cash Management Corporates, Deutsche Bank France
SEPA (Single Euro Payments Area) has dominated the treasury media and banks’ collateral for many months, often discussing the characteristics of the SEPA payment instruments and changes to the legal framework. However, the clock is now ticking as we rapidly approach the migration deadline of February 2014. By this time, organisations in the Eurozone will need to have migrated from existing payment instruments to SEPA Credit Transfers (SCT) and SEPA Direct Debits (SDD). Consequently, theoretical discussions must now be transformed into practical projects: the issue is no longer when to migrate to SEPA, but how.
Current migration status
In France, many large corporations are further ahead in their SEPA plans than in other markets. French treasurers have actually always looked at multi-bank and multi-country solutions and in many cases, the need to migrate from ETEBAC to alternative connectivity solutions such as EBICS or SWIFT has helped in developing a SEPA strategy. However, in France, and even more so in other markets, projects have often remained at the planning stage and now need to move into a practical phase.
In many companies, treasury professionals have developed a high level of expertise in SEPA compliance requirements, and are now looking for advice and solutions to manage the migration process, drive process efficiency and maximise the benefits. For example, by standardising payment and collection methods across the Eurozone, treasurers and finance managers are keen to understand the opportunities for centralisation of payments and collections, standardisation of processes and technology, efficiency optimisation and bank account rationalisation, as well as increasing cash visibility. These themes have been priorities for treasurers and finance managers for some time, and will continue to be so, long after the SEPA migration end date. However, a SEPA project can be a catalyst for change, an opportunity to deliver on these objectives and offer additional value to the business.
Defining project scope
With the February 2014 end date for migration to SEPA approaching quickly, companies have no time to lose in starting their migration project. In some cases, particularly for global companies with significant scale or complexity in their payments and collections requirements, there may need to be a phased approach in order to unlock the full potential that SEPA standards offer. A first phase could therefore focus on compliance and some initial ‘quick wins’ in order to meet the 2014 deadline. With a second phase to extend the value further, these companies could leverage on global standards like Common Global Initiative (CGI) and Swift solutions to go beyond the sole SEPA geographic area and perform a global optimisation project. In other cases, particularly for companies that operate in a limited number of countries and have less complexity in their payment and collection activities, it may still be possible to deliver a fully integrated SEPA project, by leveraging anyway on technological standards for a common platform, fully shared, focusing then on simplification and standardisation of processes, reduced costs and enhanced operational and counterparty risk management.
Whether adopting a phased approach or a single project, it is essential to work with a bank that can help turn SEPA migration from a regulatory requirement to a catalyst for a cash management transformation. In the past, many companies have been obliged to work with local banks that have an extensive in-country branch network in order to support local payment and collection methods and enable competitive pricing. This has often been the case in France where high interchange fees have existed. Looking ahead, treasurers in France and across the Eurozone have far greater choice when selecting a partner bank. With standardised payment instruments across Europe, and the decision to abolish interchange fees, corporates can choose to work with a bank that has the financial strength, depth and breadth of solutions, as well as ability to invest in innovation and focus on customer service that they require, irrespective of where the bank is headquartered.
Consequently, a number of major French corporations have already made the decision to appoint Deutsche Bank as their SEPA partner, based on our reputation, global footprint, expertise and commitment to technology innovation. Both in France and across the wider reach of countries that comprise SEPA, companies are keen to engage our experience in centralisation, standardisation and optimisation across Europe and beyond. In most cases, projects that we have already undertaken have been focused on SCT migration, but there are also some examples of companies that have already migrated to SDD with Deutsche Bank, and in this precise period, many are in a migration phase, although SDD still represent less than 1% of direct debit volumes in France.
While every SEPA project needs to be managed in a disciplined way, an SCT migration is typically more straightforward, not least because there are fewer stakeholders. When migrating SDD, it is not only treasury, IT, accounts payable and accounts receivable that are involved, but also sales, marketing and customer support divisions whose input is required, particularly for B2C businesses. Having said that, it would probably not be a big surprise to see in France the SDD migration rate becoming superior to the SCT migration rate during 2013. The reason is that SDD volumes are concentrated on a few big B2C French corporates, whereas a lot of SMEs in France are using wire transfers and are still not fully aware about SEPA. SDD migration rate would therefore rapidly increase with the big B2C French corporates implementing their SEPA project.