Ready or Not, Here Comes SEPA!
by John Gibbons, EMEA Regional Executive, J.P. Morgan
Those of you who have read my previous columns may have noticed my subtle reminders that the clock is counting down towards the Single Euro Payments Area (SEPA) deadline. Over the past few months, it is of no surprise (to me) that SEPA has rapidly increased on many client meeting agendas. In essence, time may no longer be on everyone’s side.
One of the greatest opportunities facing corporate treasury is the switch from a fragmented payments landscape to SEPA’s pan-regional model. Understandably though, when it was announced around five years ago following the Lisbon Treaty, the excitement appeared to only come from one source - the banks. And even then, not all of them were thrilled with the prospect.
Most, if not all of the financial industry has at some point promoted its introduction, advice on preparation and the benefits. Curiously though, and depending on where you live, if you search ’SEPA’ on the internet, there are varying and interesting top results. The Scottish Environment Protection Agency appears top of the pile in the UK and US engines, and in many European countries it is not usually the expected ‘normal’ industry sources that come up first. One could surmise from search engine analytics, that none of the industry, and that includes banks wholesale and retail, industry publications, conference organisers, consultants, etc. provide a robust source of information that is proving to be more popular than any other.
For at least four years, the message from the industry has been the introduction of SEPA. Yes, the financial crisis, the global recession and concerns over the Eurozone have distracted us, but SEPA has been the one constant. But while Scotland’s environment continues to show up first on searches, something is amiss. Now I’m not suggesting the protection of Scotland’s natural beauty is not an important issue, but did the industry as a whole unite to give corporate treasury the right information at the right time?
As for now, it’s curious that only 12 months ago, it was a challenge to engage in a conversation about SEPA. ‘More important issues’ were usually the rationale as to why. A typical male leading up to the festive season will set out with all good intentions of planning ahead to get the perfect gift for his partner. One only has to walk around a department store the day before the holidays, and see long queues of despondent men promising themselves for the umpteenth year, that next year will be different. Can we afford to take that type of approach with SEPA?
SEPA is on its way – just like Santa for that matter, and those companies operating in Europe who continue to adopt a ‘wait and see approach’ might find themselves in a very sticky situation come 2014. Some might suggest that the deadline will be pushed out if too much concern is expressed about the number of institutions that are not yet compliant – unlikely. But seriously, let’s think about that approach for a moment. Do you really want to run the risk of having to be the one explaining to your CFO why payments have frozen, bank fees have just gone through the roof, suppliers are threatening you with court action, and employees have not been paid? Then suggesting you only had a measly five years to prepare. Somehow, one has to think your partner’s present just got a whole lot smaller.
It is at this juncture that I would like to go off on a tangent and tell you how good J.P. Morgan’s euro cash management proposition is. Even if your systems cannot produce payment instructions in XML, our unique SEPA SWITCH feature would make you compliant, but I won’t do that. I’ll refrain from going any further as at the end of the day, that’s your choice.
Instead I will leave a message with those of you that have not yet started or are only in the planning stages - you are not alone. Recent J.P. Morgan sponsored research suggests that 36% of companies in Europe are still at that stage for credit transfers and a whopping 58% for direct debits. Also, based on conversations we have had, there appear to be a number of banks that are also finding it a challenge to be SEPA ready. Now start thinking about those long frustrating queues in December and think about how many last minute shoppers there could be for SEPA.