Electrabel GDF Suez: producing and supplying energy with a commitment to sustainability
Established in 1905 under the name 'Electriciteitsmaatschappij der Schelde', the company was named Electrabel in 1990. It is the biggest utility company in Belgium supplying energy services to retail and business customers. Electrabel is part of and owned by GDF Suez, a company that engages in the areas of electricity, natural gas, as well as energy and environmental services. Its subsidiaries design innovative and effective solutions for individuals, communities and businesses to respond to their energy, water and waste management needs, while at the same time fighting climate change and optimising the use of resources. In Belgium, Electrabel GDF Suez provides energy solutions to 3.3 million residential, professional and industrial customers. The company, which is also one of the most important employers in Belgium, develops its activities as both a producer and a supplier of energy and as an employer in a spirit of social responsibility and sustainability. It is committed to supporting customers in reducing their energy consumption and CO2 footprint.
The company processes some 1.8 million credit transfers with an approximate volume of 360 million euros annually. Electrabel GDF Suez is also the biggest creditor in Belgium collecting some 18 million direct debits with a volume of approximately 2,600 million euros annually. These figures represent payment transactions exchanged with customers however, do not include transactions exchanged with vendors and other business partners. Electrabel GDF Suez' payment business is fully compliant with the Single Euro Payments Area () payments schemes and technical standards.
The energy company Electrabel GDF Suez implemented Credit Transfer () in a step-by-step process, which was concluded in 2012. It migrated to Direct Debit (SDD) Core in 2011.
Electrabel GDF Suez leads migration to SDD in Belgium
The October 2012 edition of the Newsletter reported on the approach adopted in Belgium to successfully drive forward migration to (see 'related articles in previous issues' below). Belgium remains a front-runner among euro area countries regarding migration to harmonised payment schemes. In September 2012, the Belgian Steering Committee on the Future Means of Payment (the Steering Committee) published the fourth progress report towards in Belgium. Once again, it showcases impressive results. In mid 2012, the share of SCTs in Belgium reached more than 58 percent of total credit transfers; the share of SDDs exceeded 15 percent. By comparison, according to the Indicators compiled by the European Central Bank, in July 2012 the share of SCTs in the euro area was 29.6 percent; the share of SDDs remained marginal at 1 percent.
Following successful migration to by public administrations and the majority of payment service users in the private sector handling major payment volumes, the Belgian market tackled migration to SDD. In Belgium, 13,728 creditors managing 31 million mandates1 use the direct debit payment instrument. The number of mandates managed and direct debits collected however, varies considerably from one creditor to another. Available data shows that the ten biggest Belgian creditors generate 34 percent of direct debits; the twenty biggest creditors already account for 44 percent of direct debits. This data also indicates that 200 companies collect 90 percent of direct debits in Belgium. Consequently, the Steering Committee focused its communication efforts first on motivating these major creditors to embark on the SDD migration process. Engagement of Electrabel GDF Suez, the biggest creditor in Belgium, was crucial to implementing this strategy.
Electrabel GDF Suez embraced its role as a trailblazer leading migration to SDD in Belgium. When Electrabel GDF Suez and other early movers started collecting SDDs in December 2011, the Belgian SDD migration rate spiked from 2.6 to 19 percent. This peak reflects the fact that a high number of payments due quarterly, bi-annually or annually are collected in that month. As of June 2012, the Belgian SDD migration rate amounted to 15 percent. Electrabel GDF Suez represented 12 percent of these total 15 percent (i.e. about 80 percent of all SDDs).
Figure 1: Share of Direct Debits in Belgium compared to legacy direct debits (July 2011 through July 2012)
Source (figure 1): Fourth Progress Report on Migration Towards in Belgium (September 2012)
The Belgian migration model is based on the following principles: (1) engagement of and leadership by public authorities; (2) coordination among all impacted stakeholders cooperating in the Steering Committee; (3) timely action based on a step-by-step national implementation plan initially rolled out in 2008; (4) multi-targeted communication creating awareness and educating the general public on the new payment schemes and technical standards to ensure a positive reception.
The Steering Committee is confident that Belgium will complete migration to and SDD by 1 February 2014, which is the mandatory migration deadline in the euro area established through European Union (EU) Regulation2.
The Electrabel SDD project - questions and answers
Newsletter: What motivated Electrabel GDF Suez to set up a implementation project early in the process, despite the fact that at the time there was no legal obligation to implement payment schemes and standards?
Luc Waterlot: The Belgian Steering Committee, which coordinates migration at a national level, rolled out a very effective communication campaign starting 2008 to educate market participants on the project early in the process. The Belgian market was also fully aware that the European legislator would establish mandatory deadlines for compliance with the requirements of EU Regulation, which effectively mandates migration to and SDD. Considering the substantial scope of the changes required to become compliant as a company handling major payment volumes, Electrabel GDF Suez decided to adhere to the implementation timelines recommended by the Belgian Steering Committee. Engaging in the migration project early allowed us to minimise the risks inherent to any major change programme.
We therefore started the migration project in the first quarter of 2009, opting for a phased approach. First, we updated the systems used to manage customer payments. In 2011, we started paying reimbursements to customers using . Then last year we aligned the systems used to manage payments to vendors and payroll.
In light of the fact that we are the biggest creditor in Belgium, we realised the importance of Electrabel GDF Suez acting as a catalyst leading migration to SDD. We initiated the SDD implementation project with a pilot in January 2011, which focused on migrating some 40,000 direct debits generated by our business customers. This pilot involved all parties concerned with managing our payment business including our banking partner and software providers. By December 2011, we completed migration of the mass direct debit payments collected from our retail customers.
Newsletter: Did Electrabel GDF Suez implement both the and the SDD Business to Business (B2B) Schemes?
Luc Waterlot: To date, we implemented only . The decision to not implement at this initial stage is mainly due to the fact that it would have required obtaining a massive number of new mandates from our business customers. To be able to process B2B direct debits, the payer also needs to inform its bank about the mandate number and ask its bank to activate the account for B2B transactions. Subject to customer demand, we will revisit the question whether to implement at a later stage.
Newsletter: Did you set up a implementation team? If so, which departments of your company were involved in the project?
Luc Waterlot: Yes, we set up a dedicated implementation team including members of our business and IT as well as the marketing, sales, legal, and finance and treasury departments. It is really important to understand that implementation impacts an organisation at all these levels. Successful project management therefore requires appointing a team to coordinate the process. The Electrabel GDF Suez team included some thirty members. The project required one year of full time work by ten team members and part time contribution from an additional twenty team members subject to area of expertise.
Newsletter: Was implementation viewed as a stand-alone project or was it part of a review of processes and applications beyond payments?
Luc Waterlot: At Electrabel GDF Suez, was not a stand-alone project. We integrated the implementation process into a global project involving updates of our software.
Newsletter: Did you decide to upgrade the existing IT architecture or to implement new IT applications and enterprise resource planning (ERP) systems?
Luc Waterlot: Both actions were necessary, because we are managing two systems. We implemented a new IT application with the SDD pilot, which started in January 2011, to migrate direct debit payments of business customers. Mass migration of all payments processed with our retail customers to the payments schemes and technical standards required, in addition, updating the existing ERP system. Migration to and SDD included aligning the tool used to communicate with our banking partner with the ISO 20022 XML file formats. This was done using software programs developed by our ERP software provider. These programs are based on the implementation guidelines related to the and SDD Schemes made available by the European Payments Council (). In the testing phase, one must consider the inter-dependency of systems on both sides in the customer-to-bank communication. At the same time, we decided to move to the SWIFT (Society for Worldwide Interbank Financial Telecommunication) channel.
Newsletter: What were the main challenges in the implementation project?
Luc Waterlot: One of the main challenges was the conversion of customer account data to the International Bank Account Number (IBAN) and the Business Identifier Code (BIC). In particular, identifying the correct IBAN for bank accounts in each European country; i.e. finding reliable data required for testing, was a real issue due to national differences in the structure of the IBAN.
Newsletter: In Belgium - and some other European countries - migration to SDD involves transitioning from a legacy national direct debit model based on the 'debtor-driven mandate flow' (DMF) to the 'creditor-driven mandate flow' (CMF)3. Consequently, legacy mandates issued by Electrabel GDF Suez customers had to be transferred from customers' banks to Electrabel GDF Suez so that you could create a mandate database in-house. How did you coordinate this process? (Note to readers: for detailed information; please refer to the Website page 'The Creditor-Driven-Mandate Flow (CMF)'. See 'related links' below).
Luc Waterlot: Transitioning from the legacy Belgian DMF direct debit model to the CMF model underlying SDD indeed constitutes a major challenge in the Belgian SDD migration project. It certainly was one of the most difficult steps in the Electrabel GDF Suez project. The electronic data of existing mandates previously issued by Electrabel GDF Suez customers had to be transferred from customers' banks to us so that we could establish a mandate database in-house. We collect 18 million direct debits with a volume of approximately 2,600 million euros annually.
To ensure zero defect rates, we were completely dependent on receiving accurate mandate data previously known only to customers' banks in Belgium. The transfer of data took place via a central mandate migration database held at the National Bank of Belgium. Obtaining accurate information with regard to 'historical' mandates held by banks throughout 20 or more years of mergers and acquisitions in the Belgian banking landscape proved particularly complex. The fact that Electrabel GDF Suez was the first major Belgian creditor to manage this exercise also meant that we could not take advantage of any experience by others.
Migration of the existing mandates also required implementing a specific rule in the customer-to-bank interface to communicate the previous mandate reference when initiating a first SDD collection based on a legacy mandate. This allows banks to update their systems accordingly. This rule in fact facilitates the transition from DMF to CMF. To implement this rule in the customer-to-bank communication we had to modify the software program furnished by our ERP provider however, adapting the program was actually very easy.
Having mastered the mandate migration, I really would like to share this advice with every organisation that currently collects direct debits based on the DMF model and which has yet to implement SDD: they must plan for the extra effort of transferring mandate data from customers' banks and storing these. Billers in migrating to SDD who have traditionally stored the mandates issued by their customers will be spared this effort.
As regards new mandates and in consideration of the present Belgian law on electronic signatures, our customers can download an SDD-compliant mandate form from the Electrabel GDF Suez Website and send it back to us. We intend to provide, when possible, a fully online solution.
Newsletter: Were there other aspects of the SDD migration project, which required specific attention?
Luc Waterlot: In the Belgian legacy direct debit system, we were able to assign the same mandate reference when collecting direct debit payments resulting from several contracts with the same payer. Following migration to SDD, we use the existing mandate reference for direct debit collections related to one underlying contract with a business partner. We had to create new and additional mandate references for direct debit collections from the same business partner resulting from separate contractual agreements.
We also had to specifically program our systems to ensure that the timelines mandated with the Scheme are respected; i.e. to avoid that a recurrent collection is executed prior to the first collection. Based on the timelines, the payer's bank must receive the request for a first direct debit collection or for a one-off direct debit collection at least five business days prior to the due date. For subsequent direct debit collections, the payer's bank must receive such a request at least two business days prior to the due date.
Newsletter: In your view, what are the main benefits of implementation?
Luc Waterlot: The fact that we are now managing mandates ourselves allows us to implement collection of payments based on new mandates faster. We have also received a very positive response from our customers who reside in Belgium but hold bank accounts in their country of origin. These customers are often affiliated with the many international organisations including the institutions headquartered in Brussels. We specifically approached these customers to alert them of the opportunity now provided with SDD to have their payments debited from their 'home' accounts. Likewise, Belgians residing abroad for a great part of the year such as retirees, for example, are able to make payments in Belgium from the bank account they hold abroad. Many of these customers actually make use of this option. We are therefore delighted to offer them SDD services.
Implementation of and SDD also allows streamlining account reconciliation, centralising cash management as well as reducing the number of bank accounts and banking relationships. Using the ISO 20022 XML formats enables us to integrate and non- payments. Electrabel is part of the global group GDF SUEZ; within the global group it is expected that standardisation of payment processes based on the ISO 20022 XML formats will lead to cost reductions.
Newsletter: law effectively mandates migration to and SDD by 1 February 2014 in the euro area. The representatives of corporates, public administrations and government agencies, who reported on their successfully completed migration projects in this newsletter, unanimously recommended that organisations, which still have to achieve compliance become active as soon as possible. Since October 2012, the has alerted market participants that this is no longer a recommendation but an imperative; i.e. there is no time to procrastinate further. Do you share this view?
Luc Waterlot: Absolutely! Migration to and SDD is feasible, manageable and beneficial. Preparation, however, is everything and time is of the essence. As mentioned above, the scope of the changes is extensive. At this point, it also needs to be taken into consideration that the migration approach adopted by Electrabel GDF Suez; i.e. migration to first followed by migration to SDD, is no longer an option. Organisations, which use credit transfers and direct debits, will have to manage migration to both and SDD in parallel within the next twelve months. In January 2013, the message is: any organisation, which still needs to achieve compliance should act now at the very latest or risks missing the 1 February 2014 deadline.
Newsletter: Mr Waterlot, thank you very much.
Luc Waterlot is the Financial Systems and Interfaces Manager at Electrabel GDF Suez Market & Sales and responsible for SDD implementation.
Related articles in this issue:
SCT and SDD: the Next Generation Rulebooks Will be Published in November 2014 to Take Effect in November 2015. The process leading to the publication of new rulebook versions will roll out at the start of 2014
EPC Addresses Operational Aspects Relevant to Payment Service Providers Participating in the SCT and SDD Schemes. The newly issued clarification paper seeks to ensure consistent implementation of the schemes across SEPA
Related articles in previous issues:
Belgium: A SEPA Success Story. In Belgium, SEPA Credit Transfer migration rate is 58 percent; SEPA Direct Debit migration rate is 15 percent (July 2012) ( Newsletter, Issue 16, October 2012)
1 The SDD Schemes allow a creditor (biller) to collect funds from a debtor's (payer's) account, provided that a signed mandate has been granted by the debtor to the creditor. A mandate is signed by the debtor to authorise the creditor to collect a payment and to instruct the debtor's bank to pay those collections.
2 Regulation () No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro (see 'related links' with this article).
3 The SDD Schemes are based on the CMF model, where the payer (debtor) completes and signs a paper-based mandate and sends it directly to the biller (creditor). In this model, the biller is responsible for storing the original mandate, together with any information regarding amendments relating to the mandate or its cancellation. In the DMF model however, the payer used to send the mandate to its bank.
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