SEPA or 'Mini' SEPA?
The introduction of the single euro payments area (SEPA) in 2008 is a crucial factor in achieving the vision of the European Community. In the Lisbon Agenda, the objective set is to make the EU the most competitive and knowledge-driven economy in the world by 2010.
To accommodate the challenges of a knowledge-based economy and growing globalisation, it is necessary to adapt to standardised transaction banking for all European countries. For most countries, this will lead to changes in the transaction service as a whole. As a result, all parties will benefit in the future from the SEPA Cards Frameworks and the Rulebooks for credit transfers and direct debits. However, the current level of preparation and the standard of knowledge regarding SEPA in the economy and the public sector are low. The information process is incomplete and must be continued.
While having a closer look at the new SEPA instruments, the new pan-European direct debit scheme will offer new business opportunities and will potentially lead to a different view on business processes since it could lead to account concentration and better liquidity pooling for companies. However, to get the full benefit, and to be able to use the new transaction instruments, it is absolutely necessary for customers to be well prepared themselves. At this stage, banks can still offer helpful services to their customers. For example, as all future SEPA transactions will only use IBAN and BIC identifiers, Commerzbank offers a conversion service for the old codes (converting account number and bank code to IBAN and BIC). This service is currently available for German banking accounts only.
Due to the various types of markets, we have different requirements for payments, especially in terms of security, user-friendliness and speed. For example, the business-to-customer service (B2C) or customer-to-business (C2B) needs to support simple and secure payments (cards and SEPA Direct Debits) for their customers and smaller companies. Direct debit is a popular and easy method to collect money for our business-to-business (B2B) customers in Germany. We do, however, recognise that other countries have many different requirements compared to our local transaction market. As a consequence, the German banking community is currently working on a strategy to make migration as smooth as possible.
Another potential challenge is that German law prohibits the use of the old German Direct Debit mandate form for the SEPA Direct Debit. This means that in order for our customers to use SEPA Direct Debit, they have to agree to a new mandate. This could result in, for example, an insurance company opening one million new mandates! We want governmental bodies as well as lawyers from different banks and the Federal Government to maintain this as an open discussion. There should be dialogue between all involved parties, including corporates, governmental bodies and banks, to find an acceptable and legally feasible solution for migrating existing mandates.
In terms of the new data formats, we assume that the new XML format will harmonise and standardise payment transactions across Europe. In the near future, it will only be possible to make payments in SEPA with one format only, and consequently it will no longer be necessary to maintain the old national formats. Furthermore, there is the opportunity to concentrate national local accounts into one account, which will enable better cash management solutions.
To ensure a fast, efficient and harmonised introduction of the SEPA instruments in the participating countries, it is necessary to identify both local requirements and integrated systems to adapt them to SEPA. Based on the different branches across Europe, banks have the opportunity to provide SEPA products as an alternative to the existing national clearing types, and can also offer specialist support for customers to migrate to SEPA.
To achieve successful implementation of SEPA during the migration period, national migration plans need to be compiled and publicised. At the beginning of 2008, Commerzbank will be implementing the core services for SEPA and will evolve to ‘fully operational’ in due course. By the end of 2008, we should have an initial overview of how the national markets have reacted to SEPA. Based on national statements, it is very important that each country keeps the migration period as short as possible to prevent several ‘mini-SEPAs’ appearing in the EU by 2009. Displacing and changing the national payment transaction infrastructure is a huge challenge. The Rulebooks and the Payments Services Directive (PSD), however, are now fixed and must be transposed into the national payment infrastructures with the full support of public authorities.
SEPA is not only an issue for the banking sector, but could also have a profound impact on how the corporate sector administer their business. As well as creating opportunities to share the development and implementation of standardised projects within the economy, corporates will also benefit directly from the cost savings associated with standardised payments. By actively promoting the adoption of SEPA, banks could also offer new solutions to their customers.
Furthermore, SEPA will deliver benefits to the economy as a whole. SEPA offers opportunities to the corporate and banking sector to overcome some of the key challenges it is now facing.