After years of debate, the February 2014 SEPA deadline is forcing banks into action, but convincing corporates there is more to it than compliance has however been a different matter, says Zak Garner-Purkis
Progress towards the adoption of the Single European Payments Area has been slow, but the February 2014 deadline is a spectre at the shoulder of Europe’s banks. Regulation No. 260/2012 – better known as the "SEPA migration end-date regulation" gave banks a definitive date of 1 February 2014, by which all retail credit transfers and direct debits within the Eurozone area must to adhere to SEPA requirements.
Go deeper with GlobalData
At SIBOS 2012 in Osaka Electronic Payments International spoke to some key players in the European banking industry and found out how they’re dealing with the SEPA cut-off date.
The concrete deadline means for banks compliance is no longer an issue for debate but a procedure to implement. Financial institutions have been forced find the value within the system and now have the challenge of persuading corporate customers to take up a range of SEPA based services.
Kevin Brown, Head of Global Products, Transaction Services, International Banking at RBS explains: "You have got a situation where the banks are ready for SEPA in 2014, but we are going to have to work closely with the corporates to offer a range of translation services, because the readiness for the corporates to utilise SEPA is running behind the banks"
This was sentiment echoed by Maurice Cleaves, managing director at Barclays. "The reality is now starting to kick in with most of our clients. Have they made their preparations, and if they haven’t, what do they need to do in order to do that?
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData"The reality is if you haven’t budgeted for it in 2013, then you’re probably not going to be prepared."
Trans-European payments are nothing new; maintaining liquidity across a range of companies based in different countries using cash pooling or cash management schemes is something that most major corporates already do. As Kevin Brown says it isn’t a question of getting clients to change their processes, but to explain how the landscape makes things easier: "From a client perspective we do a lot of these things already. Our bank makes sure we have the right set of payment solutions for out clients and from a European perspective that means having a very strong SEPA capability today and tomorrow," he says.
Adding value
Encouraging companies to seek the new ‘value added services’ rather than just compliance will be of vital importance. As much as a customers demands define the service a company provides, what they offer the client is equally important. "Some corporates have been very quick in implementing SEPA and have driven that forward; but, actually, in the markets I’m responsible for, I think it is still not there where it should be," says Beate Murray Bank of America Merrill Lynch’s head of global treasury solutions for Germany. Maurice Cleaves believes the situation is multi-faceted. "I think there are several factions emerging: there are those who will be prepared and compliant, others who will get efficiency gains as a result of SEPA; some are going to force ways to make efficiency gains. Then there will be another set who will have a two-step process of first compliance with efficiency gains in the future."
If banks can use SEPA to attract more business then perhaps those losses can be offset. Insights on SEPA a Capgemini Nederland report published this year found that SEPA holds a market potential of EUR123bn (USD159bn) in benefits. The report, which calculated the benefits cumulatively over six years also said there would be a significant upside for all demand side stakeholders and would allow banks to retain current margins.
However, with 9,200 institutions across the continent offering payment services, problems are inevitably being anticipated.
Ad Van de Poel, head of payments and receivables for global treasury solutions EMEA at Bank of America Merrill Lynch feels that despite an improved level of expertise timing remains a major stumbling block. "Because of that imminent end date, we are likely to see a bottleneck of resources," he says. "In such a short time, we all need to comply and although there are actually quite a few people out there with SEPA knowledge, the conversion is daunting for many."
Another difficulty is how banks will cope when the volumes get turned up. The systems might work well now, but only when every trans-European electronic transfer has to use International Bank Account Numbers (IBAN) and Business Identifier Codes (BIC) will the systems the banks have put into place truly be tested. As Scott Fitzgerald VP, Marketing at ACI explains: "SEPA is two years away and a lot of banks are looking at what they have done and saying: we’ve put in the solution we needed when it was small volumes, we now need to think about how we’re going to handle the real volumes."
Translation services
But it is not only the timing and quantity that pose problems to banks, clarity was one of the repeated concerns critics of the regulation have expressed. The Capgemini Nederland report found that the main barriers were "the lack of product standards, country specific laws and interests, and unbalanced benefits."
RBS’s Kevin Brown however believes this type of difficulty can be overcome. "There will be challenges at the beginning in terms of the potential differences in local schemes and the special added services that will exist, but over time that is going to change and there is a strong place for banks, and potentially technology companies, to offer translation services that effectively take the existing activity and convert it so you can act seamlessly across borders."
Until it arrives and probably well after the deadline, SEPA will be criticised and analysed in equal measure. But one thing is clear, the 2014 deadline is forcing banks to act.
Undoubtedly there are opportunities within the regulation, but key to exploiting this will be how banks and corporates interact. Sensibly, most financial institutions are anticipating difficulties and learning from the problems they encounter early will be crucial. This will, of course be vital in order to meet the second deadline of 31st October 2016, when SEPA extends to EU member states using currencies other than the Euro.
Furthermore, with the European commission setting its sights on the standardisation of mobile payments and electronic invoices, whatever lessons are learnt will be very useful, very soon.
