Marking the Start of a New Era with the SEPA End Date
by Luca Poletto, Head of SEPA, BNP Paribas Cash Management, Andrej Ankerst, Head of Cash Management Germany, Robert Mol, Head of Cash Management Netherlands, at BNP Paribas Cash Management
Over the past 12 months, many websites have displayed a ‘countdown’ to the 1st February 2014 end date for SEPA migration. As the countdown reached 3 months, 1 month, 1 week, anxiety grew, not least due to ongoing uncertainty about the adoption of an additional transition period. While some uncertainty remains, European payments systems did not collapse on 1st February. Rather, this date marks not the end, but the start of a new era for cash management. The challenge for banks, regulators and corporations alike is how best to leverage SEPA as a basis for future innovation.
Progress towards migration
In the final months before the SEPA migration end date, we saw a large number of customers migrating to SEPA credit transfers (SCT) and direct debits (SDD), particularly in December 2013 (74% of credit transfers and 41% of direct debits, source: European Central Bank) and January 2014, when many large remitters completed their migration.
An additional transition period of six months after the formal end date to 1st August 2014 was ratified by the European Parliament on 4th February 2014. The aim of this additional grace period is to enable financial participants, particularly small and medium-sized enterprises, to complete their migration projects without risk of payment rejection. However, notwithstanding this, central banks and banking associations in several countries have already formally agreed differing transition periods that vary from 2 to 6 months, particularly in countries where SEPA migration rates are already high. In Belgium and Ireland, for example, the transition deadline is 1st April 2014 and in Spain, 18th March 2014 for credit transfers and 10th June for direct debits.
Some countries, such as Estonia and Finland, have rejected the additional transition period. In Italy, for example, processing of legacy transactions during the 6 month transition period is carefully monitored by the Bank of Italy, while in Luxembourg; the six month additional transition period applies only to direct debits. In some instances, such as in Austria, France and Greece, central banks have not yet confirmed an official position (as at 4th February 2014) but we expect these announcements shortly. These additional transition periods (if any) are of limited value to treasurers and finance managers of multinational businesses that may have payments and collections activities in countries with differing arrangements. In these cases in particular, companies should complete projects as a matter of urgency.
The need for more time?
Bearing in mind that some countries have adopted a different position to the European Commission’s six month additional transition period, and the recent surge towards adoption, some have questioned whether it was necessary to introduce this period at all. Migration has been quicker in some European countries than others, and in some cases, the need for more time to complete migration has been greater, such as in Germany (see Box 1). Furthermore, while large multinational corporations and domestic billers and remitters with large volumes have generally had strong awareness of SEPA and the resources to enable timely migration, small and medium-sized enterprises (SMEs), particularly those that only operate domestically, are more likely to lag behind their larger peers.