SEPA Starts to Fulfil its Promises
Kalliokoski, OpusCapita: SEPA has been the main topic of conversation in European finance and treasury departments for at least three years now. Still, concrete actions are missing. What are corporates waiting for?
Ouwendijk, Deloitte: Surprisingly, our survey revealed that, although most of the corporates are familiar with SEPA, true awareness of the implications of SEPA is low. Various studies inform of the benefits at the pan-European level, but communication should perhaps stress more the potential benefits from individual corporates’ point of view. For the time being, other projects just have higher priority.
de Vries, Atos Consulting: Yes, and another issue may be that the SEPA product portfolio is not complete. The still on-going debate on SEPA Direct Debit (SDD), for example, means there are a lot of uncertainties.
Kalliokoski: Absolutely. There are open questions to which the corporates are not getting real answers. I feel the markets are also waiting for the first real business case: someone who has truly migrated to SEPA payments and is able to comment on the benefits and challenges of the implementation.
Ouwendijk: All in all, there seems to be a lack of a sense of urgency, and the corporates are showing a somewhat passive attitude toward SEPA. The majority of the respondents in the survey acknowledged that SEPA has major effects on their daily payment processes but also saw it as the responsibility of the banks. They expect their banks to offer, for example, conversion services for IBAN and BIC information and SEPA file formats.
Kalliokoski: In Finland, the message is clear: we will change over to SEPA according to the original schedule. Already, there is some urgency in the preparations. The largest backlog in companies’ SEPA conversions will occur during late 2009 and early 2010.
de Vries: Companies in other euro-area countries are thinking alike – most of the survey’s respondents are planning to migrate to SEPA operations in the next two years. On the other hand, the original SEPA timeline is shifting because of the late implementation of the Payment Services Directive (PSD) and SDD.
Ouwendijk: This highlights one crucial thing that is now missing: an actual end date. Without a solid end date, there will be no start date for the projects. If we look at some of the more SEPA-ready countries, we see that regulations and strict migration plans, too, have a role in getting the SEPA process moving.
de Vries: Still, first and foremost, SEPA is and should be a market-driven project. So, banks should be the ones to create an appetite for SEPA by offering services that are compelling when compared to current payment products. The survey showed some worrying results. Banks are quite active in informing the corporates about SEPA – more than half of the respondents said their bank had already contacted them – but when we asked whether the banks were offering an acceptable SEPA solution, only 26% of the respondents answered in the affirmative.
Ouwendijk: The fact is that SEPA is only going to be a success if all stake- holders play their role. In addition to banks and corporates, the importance of the public sector as a leader should not be downplayed. In my opinion, public organisations could provide the push toward the critical mass needed to make SEPA work.
Kalliokoski: I agree, and in Finland the first projects have already begun. The SEPA deadline for government offices is 10 July 2010. Banks are on the move
de Vries: On a positive note, the emergence of market dynamics in the European payment markets is already evident. The respondents said they had been contacted not only by their primary bank but also by secondary or even unrelated banks. I have also noticed that advertisement of banks from other European countries has increased in the Netherlands.
Kalliokoski: I think this fulfils one of the biggest promises of SEPA: corporates will be able to choose whichever bank in Europe offers the best services at the best price for them.
de Vries: I fully agree. There seems to be a shift of power from the banks to the clients.
Kalliokoski: I would like to add one comment. It seems the Finnish banks are in a good position for this competition. Thanks to their high level of automation, they can offer, on average, 30% lower transaction costs than banks in central Europe can.
Ouwendijk: And it is not only the banks that are on the move. Also global companies with subsidiaries in Europe are avidly monitoring the development and are keen to make their European payments more efficient.
Kalliokoski: In many companies, SEPA has already triggered plans to centralise euro payments, and corporates are looking into payment factories and in-house bank solutions. For sure, the harmonisation is the biggest benefit of SEPA.
de Vries: Definitely. And the companies who have formed a SEPA team have a better chance to grasp the benefits of SEPA. If you have not centralised your payments in any way, you may not have a clear insight of your current payment environment: what the total volume of payments is, what the costs are, how many people are working on payments, how many banks and bank accounts there are… This is also one of the reasons for which corporates are unable to estimate the amount of investment needed or the financial benefits available.
Ouwendijk: I actually think that the one thing that was missing from the first stages of planning of SEPA was, in fact, the voice of the corporates – that is, the users of the payments. If they had been included in the discussion earlier, issues that are now high on the corporates’ wish lists – for instance, bank-to-corporate reporting standards and standardised remittance information structure – would have seen progress already.
Kalliokoski: Yes, and on a related note I am quite sure that at least in the Nordic countries most of the corporate customers using direct debit now will start using more advanced e-invoicing instead of SDD. The system’s long time frame, in which cancellation of the payment is allowed, is considered a weakness and makes the liquidity management process a bit challenging, too.
Ouwendijk: It is true that for corporates and banks it is not always a particular improvement; the whole idea of the SDD scheme is to improve the situation for the consumers. I do not believe e-invoicing can stop SDD from going live. But the e-invoice is something the European Commission and European Payment Council are looking into seriously at the moment. This could very well be the next wave of SEPA.