As set out in the Official
Journal of the European Union the most relevant member state options for
corporates to consider as regards the single euro payments area (SEPA) are:
- Basic Bank Account Number-International Bank Account Number (BBAN-IBAN)
conversion facilities for consumers (Article 16).
- Niche products
- One-off direct debits (DDs) (Article 16).
- Delayed usage of standard message format ISO20022 XML (Article 16).
- Delayed bank identifier code (BIC) elimination for national payment
transactions (Article 16).
status for each option, indicated by each member state, is dated May
Option 1 allows banks to provide a service to consumers,
although not for corporates, to enter a BBAN and have this BBAN converted to an
IBAN. This option is available to 1 February 2016 and is planned to be used in
Germany, Estonia, Spain, Cyprus and Slovakia. Some banks currently provide this
type of service temporarily through their internet portal, to support the
smooth adoption of an IBAN by consumers when a BBAN is provided in a SEPA
Niche products, as mentioned in option 2, relate to current
domestic credit transfer (CT) or direct debit (DD) products which have a
cumulative total volume of transactions of less than 10% of the total volume of
credit transfers and direct debits in a country. For these products a country
can choose to delay the implementation of the requirements of the Regulation
until 1 February 2016. Greece, Spain, France, Italy, Cyprus and Austria have
indicated specific products for which this applies.
Option 3 covers
the specific one-off DDs generated by the use of a payment card at the point of
sale (PoS). Only Germany and Austria have indicated usage of this option.
Option 4 allows banks to accept the current domestic payment format in
parallel with the SEPA ISO 20022 XML standards for transactions that are
bundled for transmission after 1 February 2014, although this is only allowed
until 1 February 2016. This most frequent users of this option are Estonia,
Greece, Spain, Italy, Cyprus, Latvia and Slovakia. This is considered to
minimise the immediate IT systems impact by providing more time but it does not
remove the requirement to deliver IBAN instead of BBAN support. As such,
corporate changes to cope with this change still need to be made. Furthermore,
for DD users mandate-related information needs to be included, which may not
always be readily available. Corporates operating in countries that opted for
this option should contact their bank(s) to discuss the exact way of meeting
The Regulation indicates that the provision of a
BIC together with an IBAN is not needed for national payment transactions after
1 February 2014. Option 5 defers this deadline until the 1 February 2016. This
option is used by Ireland, Greece, Cyprus and Malta.
Note that some
countries have yet to indicate which options are being (or will be) used.
Member State Options Used, SEPA Necessity Remains
Although a member state can adopt several options, it will only delay
the inevitable full SEPA impact on its corporates. SEPA adoption is mandatory
as there is no alternative with regard to making payments. For a multinational
corporate (MNC) operating around the world the complexity is multiplied.
Different options might be used per country (member state), but as of 1
February 2016, all member states in euro countries will need to comply with the
SEPA regulations. Many countries do not use any options at all, so opting for a
tactical approach to SEPA compliance will increase the overall complexity and
In terms of bank readiness, many banks now have
compliant IT systems that will support projected domestic volumes and the
demands of scalability and availability but the issue has shifted to corporate
compliance and migration which represents a significant change management
programme for all concerned.
It has been noticed that not only SEPA
zone corporates but also non-European corporates have yet to commence their
SEPA implementation; these being corporates conducting payments in the SEPA
zone, but which have their headquarters elsewhere such as North America or
In any case, a corporate must take in account the
- Implementing SEPA will most likely take months to
implement in an organisation of any reasonable size. Every corporate should
have already started or (ideally) have completed their migration.
- Recognise that this is more than an IT systems issue. Non-IT related
operational matters, such as customer communication, contracts, business
processes and procedures need to be acted upon.
- Current statistics for
SEPA adoption, represented by completed migration and soon-to-be-completed
migrations, do not inspire confidence that the migration will be completed in
- There are considerable risks attached to non-compliance:
Not meeting the SEPA end date basically means not being able to make or receive
payments after the deadline. This will clearly have a negative impact on cash
flow and will potentially trigger working capital issues.
issues, such as not being able to reconcile properly due to not allocating
sufficient time to implement and rigorously test SEPA implementations.
The potential for increased bank fees, as banks may charge for
non-straight-through processing (STP) payments.
– Regulatory supervisory
bodies may fine corporates (and banks) for not being ready.
– Support to
meet compliance deadlines or migration services can be expensive and costs may
increase over time.
Accelerate and Focus your SEPA
Corporates need to take action, even when already
in full execution. ‘Escalate, escalate, escalate’ should be the action plan and
should be given full priority with management focusing on the deadline being
met. Make sure there is adequate management attention and well-structured risk
and issue management for faster decision making.
- Scenario approach: Challenge your SEPA team and SEPA
steering committee on ‘what if’ scenarios and the impact, consequence and
resolution of that scenario.
- Seek smarter solutions:
an effective baseline of compliance to get up and running as soon as possible.
Understand and accept the risks of not implementing certain parts, choose
solutions that are fast to implement, and schedule any non-compliance related
elements by reprioritization.
o Partners outside the corporate domain,
such as banks or IT solution providers.
o Consider specific third party
payment solutions to complete the SEPA challenge. This can be temporary or
permanent. A software-as-a-Service (SaaS) solution, such as Capgemini’s
Pay2SaaS, will limit the implementation time and can provide an accelerated
route to meet SEPA regulations.
o Seek proven alternatives, enabling a
cutback in development, migration, or the change timeline and even de-scope
portions of the testing effort.
- It should be considered that any
potential SEPA benefits entailing additional effort should be pushed back in
order to free up available staff and possibly take away any additional
What is acceptable for a specific corporate will depend on
the countries it operates in, the payment products used, its current setup, its
strategic choices and other. It is clear that two broad topics need to be
Business Continuity Plan
a line in the sand for a viable start date for a business continuity (BC) plan,
to ensure that countermeasures are in place to avoid any chance of passing the
end date and suffering the consequences. Monitor all issues, their measures and
the timelines against this. Do not accept any exceptions that will cause delay
and execute your business continuity plan immediately.
At the same
time recognise that your organisation will not be the only one facing these
issues. So do not set the date so late that you end up in a long queue for
testing, in which case you may find yourself very late with a risk of missing
your deadlines. An implementation of a BC plan also takes time. Figure 1 below
gives an idea of implementing a SaaS based solution:
Figure 1: Example of Putting an SaaS Solution in Place via a
Build Phase Towards the Run Phase.
As a corporate works closely with many other corporates as its trading
partners, it should bear in mind that the largest risks are with the small and
medium-sized enterprises (SMEs), which may not always treat SEPA compliance in
a structured manner. An often-heard answer is that the IT provider will manage
it for them, but their IT provider may lack SEPA awareness or at least
knowledge of any country-specific member state options, and the scope and
impact of SEPA on their business. Furthermore new IT enhancements need to be
implemented, which costs effort and money. It has to be recognized that SEPA is
more than technology and affects the operations of a corporate in business
processes and procedures as well.
The migration to SEPA-ready
systems can be challenging enough, including the migration of DD mandates from
many legacy systems. More than ever, payments in the era of SEPA will require
different and specific knowledge and expertise on payments and should not be
taken for granted. Adequate payments expertise is required within your IT
staff, your software vendors, and IT providers to cope with all relevant
aspects of SEPA from pre-notification up to managing DD mandate related events
in bank reporting (for example, ‘R’ messages) to properly manage the sequence
of your DD collection transaction.
By now corporates should be in the final stages of achieving SEPA
compliance, rather than still at the starting line. Where the latter is the
case, the corporate will probably be late or pay the highest price in the
market for SEPA compliance. The corporate should look for smarter solutions,
even when they are on track but especially if they are lagging behind. Have the
experts help you, get proven technology, demand swift delivery of the solution
and work with parties that can help out your corporate in meeting the end
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