Looking at the implementation figures, the corporate reaction was quite understandable. The implementation levels of November 2013 were the decisive ones for the EC to decide to extend the formal 1 February deadline. At that time, according to statistics from the European Central Bank (ECB), only 64% of all European credit transfers were actually made in the SEPA format, the situation being far worse for direct debits, of which only 26% had reached conformity. The most recent figures from January 2014 indicate that the EC’s decision was quite justified as implementation levels were still far from reaching the 100% mark.
Legal and Technical Issues
The EC’s decision to grant an extension does open up a number of potential pitfalls that have to be taken into account by those companies that are running late for the original SEPA deadline: on 1 February 2014, the original ‘SEPA D-Day’, formal ratification of the EC’s proposal by the European Parliament (EP) and the Council of Ministers was still outstanding. Moreover, the new deadline has to be translated into national law. As a consequence, using anything but the SEPA formats in European payments means that companies are moving into a legal grey area.
Furthermore, as the EC stated in its press release
“The introduction of a transitional period of six months, until 1 August 2014, means that the SEPA end-date remains the same but banks and payment institutions will be able to agree with their clients to process payments that differ from the SEPA standard until then.”
Thus, companies cannot necessarily relax and take extra time for their SEPA migration, as it all depends on their banks. In Germany, for example, the banking industry has stated that with the debit order (a direct debit type that was not widely used) one payment method definitely ceased as of 1 February 2014 and is no longer available despite the SEPA extension.
What to Do
Talk to Your Banks:
A top priority for action by companies that are affected by the extension of the SEPA deadline is to check with their banks whether they still accept certain legacy formats. Some banks in Germany, for example, have already clearly stated that they would not accept any legacy formats after 1 February 2014. As an alternative, the banks may offer a conversion service for which a fee may be charged.
Use the Time for Testing:
Companies that have already migrated all their formats and systems to SEPA may use the extension for further tests. What might look good on paper does not necessarily always work well in practice. Thus, comprehensively testing the new formats with the banks is a very efficient approach for companies to ensure SEPA-compliant processes. Over the weeks immediately prior to the original deadline it might not have been possible for all companies to conduct tests due to their own time constraints or those of their banks. They will now have the opportunity to carry out or expand the testing of the systems.
Be Ready for 1 August 2014:
As the European Commission made it very clear in their official statement, the extension is a one-off event. So, companies need to be able to meet the 1 August deadline as there will be no further extension. Consequently, organisations should not relax – as some stakeholders already fear they might – but instead keep moving at a fast pace to achieve full SEPA compliance as soon as possible.
Use the Time to Professionalise Your Mandate Management:
In cases where companies may have scrambled together a system for managing their mandates in accordance with SEPA, they may use the additional time given for replacing any makeshift solutions with a professional mandate management system. A fully integrated solution that enables a group-wide management of mandates would provide a much better overview, a clear history of all mandates as required and help optimise the mandate processes to a maximum.
Advantages of the Extension
The postponed deadline will be particularly beneficial to those companies that would have had difficulties in achieving full SEPA compliance in time for 1 February. All others can consider the extension as an additional testing phase or use the time for replacing any stopgap solutions with professional ones. Pushing back the deadline will benefit the European economy overall, as potential liquidity risks have been averted. These could have had serious effects on those organisations whose partners or suppliers would not have been ready for SEPA by the original deadline
Whereas some stakeholders may fear that the longer transitional period might curb the level of SEPA migration within some organisations, most companies welcome the extension. Nevertheless, it is not a time for relaxing but instead organisations need to keep strongly focused on their SEPA project and complete the migration as soon as possible – for everyone’s benefit.
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