With the October deadline looming for non-EU transactions to become compliant with SEPA, treasuries the world over are scrambling to migrate. Take a look at our checklist of essentials to make sure you’re doing it right.
What do we need to do to become SEPA compliant?
SEPA compliance is divided into three areas: systems, processes and data.
System compliance is typically the most time-consuming element. Your business and electronic banking systems all need to be upgraded in line with SEPA regulations, as do web applications and forms. Electronic banking systems will need be compatible with SEPA XML. Note that bigger ERP applications can take years to migrate fully.
Process compliance means bringing all processes in line with SEPA schemes. This could include re-issuing Direct Debit mandates or using the pan-European B2B Direct Debit service.
Data compliance requires that all current account information, which tends to be held in master data files and billing systems, is both valid and capable of converting to the IBAN format. If not, incorrect data will form and you will almost certainly experience payment failures. Data must also comply with the International Bank Account Number (ISO13616) and the ISO20022 XML payment file format – but bear in mind that XML files are 3-4 times larger than “flat” files, so you’ll need to make sure that your system has adequate space before you start converting them. In the handful of countries that have opted to keep them until 2016, you will also need to use Bank Identifier Codes.
We haven’t started migrating at all yet. Can we make the deadline?
How quickly this can be done depends on how centralised your financial and treasury functions are, the kind of payments you make, where in the world you are and whether your migration is solely geared towards technical compliance or you’re looking to adopt other valuable elements of SEPA. Different countries have slightly different requirements and you’ll need to stay on top of the rules for every region in which you operate. Take a look at country-by-country guides, such as these from BNP Paribas, if you’re unsure.
A fast-tracked, focussed, relatively light migration can be achieved in 3-9 months, but a really in-depth migration project would take 12-18 months, which would of course means you’ll miss the deadline if you haven’t made significant headway already. If you’re only just starting on the migration project, you’ll need to really strip things down to basics. Review the three compliance areas and make a judgment call on how quickly your organisation will be able to handle these changes.
The most important thing do it is make sure that you complete validation of your existing payment data. Without this, you will not be able to pay and collect after the deadline. So, if you don’t have time to achieve full migration, focus on this. Then, after the deadline, you can still continue to function whilst working hard to make your systems and processes compliant.
Should you use a conversion service to manage your whole migration?
Only if you absolutely don’t have time to migrate your key operations, and only as a stopgap. By cutting corners, you will lose out on the strategic benefits of SEPA migration In the long run. Work out a long term plan for integrating SEPA into your company strategy and make sure you put in to action once the initial conversions are complete.
However, there are some tasks for which it makes sense to use tools provided by banks or system vendors. For example, once you’ve verified your counterparties’ account data and updated your database to match the new requirements, conversion solutions can be used to change BBAN data into IBAN.
At this stage, you should really be channelling your energies into allocating internal resources where they are most needed to make critical changes, rather than bringing in a third party to draw up a new roadmap. Focus on identifying the areas you can best tackle yourselves and only bring in external specialists to deal with tasks that you lack the expertise for. This could include validating data, converting payment files or mandating management services.
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