Published: June 01, 2012
We have been very fortunate in this edition of TMI to have interviewed Gerard Hartsink, outgoing Chairman of the European Payments Council (EPC) on his hopes and fears for SEPA, as well as featuring a case study from early adopter, Electricité de France. To complement these important features, in this month’s Treasurer’s Voice, which features responses from over 100 corporations, we find out about how much progress companies have made towards SEPA adoption, some of the obstacles that may remain, and companies’ actual or anticipated outcomes.
Eighteen per cent of respondents indicated that SEPA was not applicable to their organisation (figure 1); however, on further analysis of the results, this was actually only the case for 7.2% of respondents, showing that there is still a substantial proportion of companies that remain blissfully unaware of SEPA and its implications. As Willem Dokkum, Global Head of Sales, Payment & Cash Management, ING, emphasises,
“There is evidently still a strong need to educate companies about SEPA, not only European companies, but US and Asian companies with a European presence.”
Furthermore, while we expected that these respondents might represent small and medium-sized enterprises, this was not necessarily the case. The remainder of the results are approximately what we would expect, with 51% of companies having either implemented SCT for some of their euro flows, or made plans but have not yet started migration. Sixteen per cent have implemented SCT fully, while an uncomfortable 15% have yet not started making plans. As the cover story in this edition of TMI emphasises, as does EDF’s case study and the interview with Gerard Hartsink, there is now no time to lose and companies must either seek more information on SEPA if they are unaware of the implications, or start making their migration plans.
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Of those that had already started implementing SCT, most had phased the project by country. As Willem Dokkum, ING notes,
“It is interesting that relatively few companies have only partially implemented SEPA at this stage, whether for international or domestic flows. Only a small number of companies have migrated all their euro-denominated flows.”
Although SCT volumes vary at present by country, respondents listed a wide range of countries, including Germany, Belgium, The Netherlands, France and the Nordics. It was surprising to see that a similar proportion of companies had implemented domestic flows (26.6%) compared with cross-border flows (28.1%), as typically one of the major benefits of SEPA is considered to be the lower cost of cross-border payments. However, this could reflect companies’ country-by-country approach; similarly, some of those that indicated ‘Other’ also indicated that they had migrated to SCT in their business units, but had not implemented at headquarters level.
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There have been a wealth of factors that have delayed companies’ migration to SCT up until now (figure 3) but many of these reflect a general view that other priorities took precedence over SEPA migration, mentioned specifically by 40% of respondents (respondents were asked to indicate the top three issues that had resulted in delays in their migration project). Although some respondents noted external issues, such as a lack of support for SCT by their banks or technology vendors, these were outnumbered by around three to one by internal constraints and lack of priority. These considerations can no longer apply now that an end date for national payment schemes has been set for February 2014 (see the interview with Gerard Hartsink). Although there is some talk of a further delay in some southern European countries, this should be considered as no more than a distraction. Willem Dokkum, ING outlines,
“Corporates have been waiting for a defined end date for national payment instruments before progressing their migration plans. As SEPA is now a mandatory requirement, other impediments will increasingly disappear. It is surprising that some treasurers and finance managers are still under the impression that their banks do not have a SEPA solution: this view may not be based on up-to-date information, or the banks in question will certainly not have a payments business in Europe in the future. ING has a long-term ambition to lead payments processing in Europe, while this area is less important strategically for other banks, which may already be reflected in these statistics.”
It is not only banks that have invested heavily in SEPA: technology vendors have also had to do so. As with any new developments, however, these capabilities do not manifest themselves automatically (except perhaps for the few companies using a SaaS [software as a service] solution, and even then, there is still work required for migration); the system(s) will need to be upgraded or in some cases replaced.
An unfortunate 16.9% have postponed SEPA migration in order to include it as part of a wider centralisation or optimisation project. Unless the project is relatively simple and self-contained, and/or it is already under way, it seems likely that these companies will already be too late, so they will need to implement SCT first, and then expand the wider project as a second phase. The potential that SEPA offers for standardisation and efficiency, as outlined by EDF, should not be lost in the hand-wringing that will inevitably occur as we approach the end date for national payment schemes. In some cases, there may not be time to realise all of these advantages, but they can be achieved once SEPA compliance has been completed. As SCT and SDD use standardised XML formats, this is valuable groundwork for a wider standardisation project, not only at a European level, but potentially at a global level.
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Despite treasurers’ and finance managers’ prevarication and apparent reluctance to migrate to SEPA, only 11% do not anticipate any benefits from doing so. Actual or anticipated advantages cited most commonly included the reduced cost of cross-border payments, and the ability to rationalise euro accounts. In addition, respondents recognised the potential for simplifying liquidity structures, and centralising cash management, payments and collections more easily. Indeed, with many of these advantages appearing highly compelling for larger, complex multinationals in particular, it has to be questioned why other priorities have taken precedence up until now. It may be that some companies have become so familiar with the ‘SEPA advantage’ as articulated by the banks and the media that they are simply reading from the same script, without necessarily believing that the benefits will apply to their own organisation. This is perhaps cynical, however: after all, SEPA offers genuine advantages. As we mentioned above, there may not be time to achieve all of these benefits during the initial project phase, particularly for projects involving a large number of stakeholders, but harmonisation, simplification and standardisation can undoubtedly follow post-compliance.
Although a reasonable proportion of respondents had either started to, or planned to migrate to SCT, SEPA Direct Debit (SDD) is a completely different proposition. Not only was SDD introduced later, and it has taken longer for some banks to be reachable, but there are still outstanding issues, such as mandate management, the lack of eMandates, and interchange fees. In addition, internal processes for SDD will be quite different from those in place today in most countries, as creditors will now be responsible for managing customer mandates, as opposed to the debtor bank as is usually now the case. Therefore, there are likely to be increased costs and processing requirements, particularly for those with large volumes of collections by direct debit.[[[PAGE]]]
Of those using direct debits, 84% of respondents had not yet started migration, and nearly half of these had not yet made plans. This is not surprising due to the issues mentioned above. Although most respondents cited internal reasons for not implementing SDD so far, 68% noted these broader industry challenges. Sixteen per cent indicated that they did not yet know enough about SDD to plan their migration projects. Notwithstanding this, and the challenges alluded to above, the 2014 end date still applies, so companies will need to move forward with migration, even though they may feel that the current solution is not ideal. Willem Dokkum, ING emphasises,
“It is a major concern that such a large proportion of companies that use direct debits have not yet started planning their SDD migration project, as this is where a great deal of the work is required.”
As every author discussing SEPA in this edition of TMI has emphasised, there is no further ability to delay SEPA migration, which is now a regulatory as opposed to market-driven initiative. As this survey illustrates however, although there is a reasonable level of understanding about SCT, if not yet SDD, and indeed a good level of recognition of the considerable benefits that can accrue, there remains a substantial proportion of companies that have not yet progressed their migration project. Banks and vendors can go some distance towards educating and encouraging their customers, but ultimately treasurers and finance managers now need to be proactive in finding out the information they require, and seeking the support they need for migration.
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