Published: November 01, 2012
Every treasury and finance department in Europe will be going through a period of transformation as the SEPA (Single Euro Payments Area) February 2014 migration deadline approaches. Banks such as Societe Generale have a major role to play in facilitating this transformation; however, as Alain Grugé, Global Head of Cash Management, Societe Generale, discusses with Helen Sanders, Editor, the bank is also undertaking an internal transformation which will enhance its ability to meet the pan-European needs of its customers.
In France, we see a difference between small & medium-sized enterprises (SMEs) and larger corporations. SMEs typically still have the migration process ahead of them, while nearly half of our larger customers have at least started to migrate to SEPA Credit Transfers (SCT). Although total market volumes of SCT are increasing in France, a substantial portion of this is driven by the public sector, which has now migrated high volume payments such as payroll and social security payments to SCT.
In most cases, companies have yet to actively embark on a SEPA Direct Debits (SDD) project. SDD still amounts to less than 5% of the total direct debit volume in France, so there is still a substantial journey ahead. Some companies that have large volumes of direct debits, such as telecoms and utilities, have started to plan their migration projects but these are not yet well-advanced.
Although the advantages of standardised payment instruments are clear, such as the ability to rationalise banking partners, centralise processes and simplify cash management structures, migration from existing domestic instruments also brings challenges and complexities, particularly for direct debit migration. For domestic companies that do not use direct debits, the migration process should be straightforward, but larger companies that have subsidiaries in multiple countries have more complexities with which to contend.
Generally, corporates have started very late in the SEPA migration plans, particularly as it has taken time to resolve remaining uncertainties. Unless a company has straightforward payment and collection activities and a limited number of affected systems, many larger companies will not now have time to fulfill the potential that SEPA offers by February 2014. Consequently, these companies should now be considering a phased approach to migration, focusing initially on compliance, with a second phase to optimise payment and collection processes and rationalise cash management across participating countries. While this approach may be more costly or resource-intensive than pursuing a single project, it is important to balance this against possible risk of non-compliance.
As we discussed earlier, the degree of complexity of a SEPA migration will obviously vary according to the size, reach and internal cohesion within each company. The degree of centralisation and standardisation that already exists will also influence the project significantly; for example, where subsidiaries have their own systems, processes and banking relationships, it becomes more difficult to align the migration project. Furthermore, although SEPA is intended to standardise payment and collection formats across the Eurozone, there is inevitably a degree of customisation occurring in each country, which adds complexity to a migration project across borders.[[[PAGE]]]
At Societe Generale, we have developed a comprehensive, proven approach to SEPA migration with our ’SEPA Solutions’ offer. Our objective is to manage projects in a consistent way across our network, leveraging the experiences gained by supporting customers through their migration from ETEBAC to EBICS or SWIFT, which proved very successful. Corporate treasurers and finance managers have differing levels of awareness and experience in SEPA migration, particularly amongst SMEs, so we have conducted an extensive training programme for our customer-facing teams so that they are in a position to help prepare and implement a migration project. Our more sophisticated customers often have considerable knowledge of and expertise in SEPA, so they are seeking our support in implementing best practices and maximising the opportunities that SEPA presents.
As I mentioned, SEPA projects may be more complex and expensive for many companies, particularly those with direct debits. To reduce project risk, cost and complexity, we have recently launched an integrated solution for SDD migration, which has been endorsed by leading technology and consultancy company Atos. In addition, we recognise that SDD migration is not simply a technology project, but it involves a variety of other internal and external stakeholders. We therefore help to align the interests of treasury, accounts payable, accounts receivable, IT, sales, marketing etc. and collaborate on customer communications.
Since the financial crisis, senior managers have become more aware that Global Transaction Banking (GTB) forms an essential pillar of customer relationships. While Societe Generale is a bank with a strong reputation in investment banking, we are seen predominantly as a commercial bank by our large corporate customers, who rely on us to provide them with day-to-day banking services both in France and across our network.
A distinct Global Transaction Banking (GTB) business is already integral to many international banks, so in this respect, Societe Generale is not unusual. Indeed, we already excel in many of the capabilities traditionally associated with GTB, so it made sense for us to combine our correspondent banking, trade, factoring and cash management business into a single division. This allows us to provide more cohesive solutions to our customers across these product lines, such as cash and trade, reflecting the reality of the ways that customers are increasingly managing their business.
Based on our existing capabilities and geographic reach, strength of customer base and GTB investment strategy, we anticipate becoming one of the top five GTB banks in Europe. Our aspiration is to support our customers with the breadth and depth of solutions that they require across Europe, as opposed to spreading our activities more thinly at a global level. Our pan-European network is already a key asset for the bank, with particular strength in Central & Eastern Europe, (including Russia, Romania, Czech Republic and the Balkans) with a substantial presence in North Africa. Customers of all sizes are already actively leveraging this network to create cohesion and efficiency across the region.
One of the consequences of the creation of GTB is that we are able to use this network even more efficiently. For example, it is often complex and time-consuming to integrate acquired businesses, which has an impact on financial and operational efficiency. The new GTB business facilitates more rapid integration by providing a highly cohesive offering across our footprint, enabling companies to accelerate the benefits of the acquisition.
Our GTB business brings a variety of advantages to our customers. Firstly, our customers will benefit from the investments we are putting into GTB, such as electronic banking enhancements and liquidity management tools such as notional pooling, which will start to become apparent in early 2013. Secondly, customers will gain access to the full range and depth of expertise across the Societe Generale network through a single point of contact. Thirdly, as I mentioned earlier, a more integrated network will enable us to deliver more cohesive solutions to our international customers. This applies not only to the countries in which we have a direct presence, but also through our partner bank network in other regions. Although our primary focus is on pan-European capabilities, we recognise the need to provide strong solutions in target regions such as United States, China and other parts of Asia, and we have an active programme to provide expert support in these regions, either directly or through leading local partner banks.
2013 is set to be an important year for Societe Generale GTB and our customers as the investments we are making in enhancing our solutions and strengthening our network will have a visible impact. SEPA is a major component of this as we proactively provide information, solutions and expertise to our customers. Our investment in SEPA is just one of the ways in which we are demonstrating to the corporate and financial community that we are on the right path to realising our objectives and transforming our business model. The bank is in very good financial health, we have deleveraged the bank and sold some assets, which illustrates clearly to regulators, rating agencies and customers that we have sound financial ratios and a commitment to transformation and an enhanced customer experience, in the framework of our SG Ambition 2015 programme, launched in June 2010, focused, internally, on customer satisfaction.
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