Good SEPA Uptake in Belgium: More than Mere Coincidence?
As a Belgium native it was good to see in the latest progress report, issued in September, that the country is a single euro payments area (SEPA) frontrunner. Belgium is performing well in its migration efforts to SEPA payment instruments with the market share of SEPA credit transfers (SCTs) reaching 58% in July 2012, which is higher than in most other SEPA countries. According to the European Central Bank (ECB) the adoption of SEPA Direct Debits (SDDs) stood at 13% in the same month; again much higher than in other eurozone countries where the average SDD market share is typically no more than 0.50%. The SDD mandate challenge facing many corporate treasurers is considerable, but it seems less daunting in Belgium. Why is this?
The relative success of SEPA migration in Belgium is attributed to two main factors: government adoption of SEPA payment instruments (both as a payer and payee) and widespread, targeted communication campaigns to drive awareness.
As a front-row witness, I would like to add two observations. First, the Belgian banks have a long history of cooperation when it comes to payment standardisation, both in retail and corporate banking. For the latter, Belgian banks worked together on standardisation of payment files for domestic and international credit transfers (CIRI), direct debit transactions (DOM 80), and account statements (CODA). These standards have been around for decades and are used by thousands of Belgian companies. Belgian banks have also invested in a standardised electronic banking (e-banking) channel via Isabel. This channel allows companies to access payment services and transaction reporting services of Belgian banks via one standardised channel, rather than bank-specific channels.
As a result, Belgian payment users and service providers have been accustomed to high levels of standardisation and automation, resulting in an efficient payment system with low transaction fees for corporates and consumers. As payment users are unwilling to pay more for SEPA instruments compared to domestic instruments, it has forced banks and service providers to be just as efficient and automated. This, in turn, requires banks to be well prepared when it comes to migration to SEPA.
Second, Belgium is one of the most open economies in the world. Because of the small domestic market, Belgian companies are forced to invest in products and services that can be exported to other markets; in particular the European market. This creates an open mind when it comes to adopting European ‘requirements’ such as the SEPA payment instruments.
Related to this, Belgium has also been at the forefront of treasury and cash management centralisation. In the 1990s it became possible for multinational companies to set up so-called ‘co-ordination centres’, which are tax-friendly vehicles to centralise cash management on a European, or even global, scale in a shared service centre (SCC) environment. Hundreds of multinationals came to Belgium to establish such centres, thereby creating demand for international cash management and payment services, including cash pooling, payments on behalf of (POBO), and in-house banking (IHB). This created additional demand for providers of treasury and payments technology.
As many of the co-ordination centres were created to provide shared services to European entities of the group, it created a European mind-set for banks and other service providers to meet pan-European requirements. The SEPA initiative nicely fits into this mind-set and could explain the high adoption of SEPA payments within Belgium in the enterprise segment.
Belgium is on track to meet the 1 February 2014 SEPA deadline for eurozone countries (non-eurozone countries in the SEPA region follow in October 2016), which is good news. Despite this, there is undoubtedly still a lot of work to be done in Belgium as well as other European countries.