Act Now on SEPA

The current focus for SEPA projects is, understandably, on
the migration of credit transfers (SCTs) and direct debits (SDDs). In common
with many of its banking sector peers, SEB is becoming concerned that many
corporates and public administrations do not yet have a clear view of the
migration path. This should include the set-up of a SEPA project with a clear
timeline agreed with key parties, such as banks and enterprise resource planning
(ERP) providers. It is understandable that the euro crisis, and the potential
risk of countries in southern Europe leaving the European Monetary Union (EMU),
might have diverted corporates’ attention, but the focus must now be shifted
back to SEPA migration.

The European Central Bank’s (ECB) latest
SEPA migration report clearly indications that end-date readiness among
corporates and public administration lags in many countries, and is even low in
those that are more advanced. On a more positive note, in the Nordics/Baltics
region SEPA frontrunners such as Finland have already migrated in full. Also
encouraging is the fact that all three Baltic countries have either joined the
eurozone (Estonia), or are gearing up to do so in the near future.  Latvia will
join on 1 January 2014 and thus has a SEPA migration end-date of 1 January 2015,
whilst Lithuania may also follow a little further down the road.

Opportunities

Despite the challenges in getting there, the
post-SEPA migration period promises many benefits. Corporate treasury
departments reviewing their payment processes will find opportunities connected
to SEPA that they can plan to implement step-by-step, as part of a long-term
SEPA project. By pushing centralisation and standardisation, SEPA is a driver of
common payment processing in Europe. This one common payment standard gives the
opportunity to homogenise accounts payable (A/P) and accounts receivable (A/R)
processes. This is a clear benefit in improving corporate processes. It sets the
foundations for group-wide ERP implementations and creates the chance for shared
service centres (SSCs) for corporates with centralisation ambitions. Long term,
SEPA will likely enhance the ability to improve account structures and reduce
the number of accounts, thus aiding the potential for concentrating
liquidity.

Reporting in ISO 20022 standard also provides long-term
opportunities. It allows for full straight-through processing (STP) when using
the rulebook components and IDs available for automated reconciliation
processes.

Indeed, it is already evident that corporates with wide
use, including implementation on the reporting side, are already enjoying the
benefits of this approach. They are able to extend the use of the ISO 20022
standard outside SEPA by, for example, also using the ISO 20022 payment
initiation for payment initiation in continents beyond Europe.

Tactical Solutions

But what about those corporates and public
administrations which, at least in the short term, feel that the number one
priority is compliance, rather than grasping all opportunities from the SEPA
end-date? Many corporates, especially small and medium-sized enterprises (SMEs)
as well as their ERP system providers, are late in their migration planning. One
tactical solution is the use of third-party conversion services, either through
integration in the middleware/bank channel product or as a process handled
completely by a third party separate from the bank. For example, SEPA migration
in Finland has demonstrated that conversion by middleware suppliers could be a
way forward and SEB also foresees a similar need and solution for the German
market.

Another way to resolve the same problem is through a third party
solution – either in the bank customer´s own IT environment or supplied as a
cloud service, which converts files from legacy format into a
correctly-formatted ISO 20022 file. However, a word of caution to conversion
solutions: while achieving short-term compliance, the solution will still
require effort and costs but without offering long-term rewards, especially if
SEPA reporting in ISO 20022 standard is not also taken into consideration.

Act Now

As with many of its bank sector peers, SEB has for
years been urging immediate action on tackling the SEPA challenge while also
recommending that its requirements are viewed as an opportunity to upgrade,
enhance and streamline payment reporting and reconciliation processes.

However, with the deadline looming, the SEPA project is not all about
opportunities; there are strict compliance requirements for each corporate and
public administration. For a treasurer seeking budgets for SEPA implementation,
this should be a clear signal that should not and cannot be ignored by
management.

For those corporates really starting to feel the
pressure from the approaching deadline, now is the time to consider the
different ways to scope their SEPA projects; that is by initially focusing on
payment initiation processes before the 1 February 2014 end-date and then
improving reporting processes and moving to the ISO 20022 format immediately
afterwards. They could also tackle their transition plan with conversion support
from a third party. In any case the key message is this: now is the time to
act!

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