Published: October 10, 2014
As one of the largest billers in Slovenia, SEPA migration was a particularly significant project for Petrol d.d. due to the risk of damage to cash flow and customer relationships in the event of migration issues. A large proportion of incoming cash flows are through direct debits and it was therefore particularly important to ensure that the migration to SEPA Direct Debits (SDD) took place smoothly. In this article, Nevenka Šubelj, financial director, discusses the successful SEPA migration, but also emphasises how treasury has leveraged the opportunity that SEPA migration presents to improve process efficiency and enhance customer service.
Before the introduction of SEPA, we had an efficient process for managing around 40,000 direct debits each month via Bankart, Slovenia’s clearing system. This direct debit solution was particularly convenient for customers as they could manage all their direct debits (such as those for electricity, gas, water etc.) centrally through their banking provider. From Petrol’s perspective, however, there were some limitations to this solution, specifically around the process of requesting direct debits. As customers could set up direct debit mandates with their banks, we received a large number of requests from banks to set up new direct debits. As the banks did not necessarily have an automated process for setting up the direct debit mandate and submitting it to Petrol, the number of duplicate and incorrect requests was high, creating a significant administrative overhead and potentially damaging customer relationships.
Some time before migrating to SEPA direct debits (SDD) therefore, we changed the direct debit set-up process so that customers no longer set up new mandates with their bank. Instead, they do so at Petrol points of sale. This has simplified and accelerated the process of setting up a new direct debit, reduced errors and duplications, and enabled us to provide customers with a higher quality of service to customers. Furthermore, this was an important pre-requisite to migrating to SDD as we already had a consistent process for setting up customer mandates and a central, reliable repository for customer information.
We started our SEPA migration in August 2012. While this was later than some organisations, we had to balance the need to migrate to SEPA with other business and IT priorities. We take a rigorously disciplined approach to appointing resources and managing projects professionally which allows us to conduct even large, complex projects quickly and efficiently. Consequently, we were able to complete the project in a timely manner and comply with the SDD migration deadlines. One of the first decisions was to appoint a partner bank to support SDD. We had an existing relationship with UniCredit that had given us a high degree of confidence in the bank. Furthermore, having compared UniCredit’s SDD offering with other contenders, we found it to be the most compelling and competitive proposition. In addition, we have appointed a Slovenian bank as our SDD partner for one of our smaller Petrol subsidiaries as it is important for us strategically that we do not rely exclusively on any single provider.
With the central database already complete and up to date, and a best-practice approach to project delivery, the migration from legacy direct debits to SDD was relatively straightforward at Petrol. In this, we were greatly assisted by UniCredit who offered significant technical assistance and business advice.
We experienced two primary challenges as part of the migration. Firstly, with a very large number of direct debit mandates in place, it would have been challenging for many banks to manage the volume of transactions that Petrol requires. Consequently, it was essential that UniCredit had the processing capacity and technical resilience to deal with these volumes.[[[PAGE]]]
The second challenge related to the mismatch in timing between the information and receipt of cash from the bank and the actual payment by customer. Under the SDD scheme, Petrol receives the information and cash flows based on the SDD that are due and approved. Based on this information, we can then update customers’ accounts. However, customers’ accounts may not be debited on the same date, so there is the risk that funds are not available in customer accounts when the account is actually debited. We pride ourselves in having an open and transparent relationship with our customers, so we believed that this process was disingenuous. Furthermore, from a technical and customer service perspective, the duplication of information and the need to communicate more regularly with customers to recoup amounts resulted in considerable additional overheads.
Consequently, we have worked with UniCredit to implement a variation on the standard SDD process, which has required technical changes on both sides. This has proved very successful, however. We now receive information and cash flows from direct debits once customers have already paid. This results in better predictability of funds, a more efficient flow of funds and information and the volume of customer queries is reduced. Our process is now working smoothly and we now receive around 55,000 SDD and 11,000 SEPA Credit Transfers (SCT).
Alongside the SDD migration, we were keen to implement further efficiencies rather than simply replicating the existing direct debit instrument. We have therefore worked with UniCredit to launch an e-invoicing initiative. This replaces the paper invoice that we mail to customers with electronic invoices via email. This is attractive to both Petrol and our customers: we reduce our costs and streamline our operational processing; customers also reduce costs as they are not charged for electronic invoices and avoid the need to deal with physical invoices. Consequently, we are seeing strong monthly growth in the number of customers requesting an electronic invoice instead of a hard copy version.
We have achieved substantial benefits from our migration project, not only by introducing the SDD instrument but by introducing wider improvements to our processes. Customers paying by SDD from an account in another EU country can use the same payment method as those with an account in Slovenia, without paying cross-border charges. We now have the ability to set up direct debits on any day of the month, although we have not yet rolled this out. This will bring three major advantages. Firstly, we will be able to smooth our cash flow profile by collecting cash throughout the month rather than on one date. Secondly, we will be able to offer an enhanced service to customers by giving them the choice of debit date. Thirdly, related to this, by enabling customers to choose the debit date (such as the date on which their salary is paid into their account) then the number of rejected debits as a result of insufficient funds will be reduced.
The partnership with UniCredit has proved very valuable throughout and beyond the SDD migration project. By working closely together, we have devised business processes that meet the needs of both Petrol and our customers more precisely, whilst demonstrating best practices in process efficiency, control and automation.
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