If You Have Not Migrated to SEPA Yet - Get Ready and Get Inspired: SEP...

If You Have Not Migrated to SEPA Yet - Get Ready and Get Inspired: SEPA Pioneers on the Demand Side Share Best Practice

The SEPA deadline will not move from 1 February 2014 so act today to ensure your compliance

26 April 13

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Why should I care about migration now?

Any business and public administration that has not already started its migration to the Single Euro Payments Area ( ) is definitely now cutting it fine and putting itself in danger of missing the February 2014 deadline. The European Union ( ) 'Regulation ( ) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro' (the Regulation; see 'related links' below) effectively mandates migration to Credit Transfer ( ) and Direct Debit ( ) in the euro area by that date. The first migration report recently published by the European Central Bank (ECB) suggests that many payment service users ( ) are planning to move to by the end of 2013, but this leaves a worryingly small margin for error. Early movers on the demand side echo the sentiments of ECB board member Benoît Cœuré, who has called on stakeholders to migrate "at the earliest stage possible", preferably by the end of the third quarter of 2013. It has to be taken into consideration that availability of external resources offered by banks and other service providers - including testing facilities - will be stretched to the limit towards the end of the year. This, of course, means the planning and scoping out of the migration project needs to start as soon as possible. It is strongly recommended that coordinate the process with their banking partners and other concerned service providers.

Market participants in the euro area should note that failure to comply with the core provisions of the Regulation by the 1 February 2014 deadline risks infringing law. In addition, there are many practical and business risks associated with non-compliance should fail to meet the deadline. Potentially the most damaging is that payments could be disrupted if compliance is not achieved, with operational risks caused by late migration affecting the handling of payment orders. As the Regulation impacts not only payment service providers ( ), but all , failure to comply by 1 February 2014 could cause widespread issues with potentially large numbers of transactions.

Electrabel GDF Suez is an example of a company which has already completed its migration to and . The Belgian energy company processes some 1.8 million credit transfers annually, with an approximate value of 360 million euros. It migrated to in 2011, and concluded its implementation of in 2012. Luc Waterlot, Financial Systems and Interfaces Manager at Electrabel GDF Suez Market & Sales, comments: "Migration to the and is feasible, manageable and beneficial. Preparation, however, is everything and time is of the essence." Waterlot adds: "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 , is no longer an option." Organisations that use credit transfers and direct debits, and that are only now launching the migration project, will have to manage migration to both and in parallel within the next nine months. pioneers on the demand side recommend that late movers now working to meet the 1 February 2014 deadline should focus, in a first step, on achieving basic compliance, then seek to realise further efficiencies to be generated with the implementation of the harmonised payment schemes and technical standards.

What do I need to do then?

The first step to achieving compliance is to appoint a dedicated implementation team. Luc Waterlot of Electrabel GDF Suez explains: "We set up a dedicated implementation team including members of our business management and IT functions, 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 of 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 contributions from an additional twenty team members subject to area of expertise."

The next stage is to prepare for the transition to the International Bank Account Number (IBAN) and the Business Identifier Code (BIC). The Regulation includes detailed provisions on the use of both IBAN and BIC by payers and payees, and project managers unanimously stress the need for careful planning when preparing. They also highlight the importance of thorough testing prior to making the move in the live environment. The required level of investment may seem daunting for small and medium-sized businesses, but provided that they begin now, migration ahead of the deadline remains feasible. Stefan Scheidgen, Head of Cash Management and Accounting at Deutsche Post Pension Service Business Division, recommends: "If you are a small or medium-sized business: plan one or two weekends for your accounting staff to convert master data and ensure budget is available to manage amendments to the IT system." The division, which disburses 25 million pension payments per month, essentially completed its migration project in June 2011.

Additionally, the Regulation states that must ensure that where a "that is not a consumer or a micro-enterprise, initiates or receives individual credit transfers or individual direct debits which are not transmitted individually, but are bundled together for transmission, the message formats specified in point (1)(b) of the Annex are used". Point (1)(b) of the Annex to the Regulation clarifies that the message formats referred to are the ISO 20022 XML message standards. Article 16 (5) of the Regulation, however, allows Member States to waive the requirement to use the ISO 20022 message formats for until 1 February 2016, except in cases where a requests such a service. (For more information, refer to the article 'The Long Road to Harmonisation: Transitional Arrangements in European Union Member States Permissible Under Regulation 260/2012'; see 'related articles in this issue' below). in most euro area countries will therefore have to make arrangements by 1 February 2014 to adapt to the usage of ISO 20022 XML message standards in the customer-to-bank space in relation to files of payment transactions.

Who has already done it well?

There is no doubt that the scope of change required to ensure compliance is extensive, but it is important to realise that it does pay off. Many businesses have already successfully migrated their systems to and and are now reaping the benefits. Full compliance will lead to more streamlined internal processes, lower IT costs, reduced costs based on bank charges, a consolidated number of bank accounts and cash management systems, more efficiency and better integration of an organisation's payment business. We have already considered Electrabel GDF Suez, which migrated to in 2011. The company has already seen the benefits of this including better customer service, and Luc Waterlot explains: "We have (...) 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 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 services."

The business of UK based TUI Travel PLC, one of the world's leading leisure travel companies, is grouped into four sectors: Mainstream, Accommodation & Destinations (A&D), Specialist & Activity and Emerging Markets. The TUI Travel A&D Finance Service Centre (FSC), which provides back office services and trades with over 24,000 customers and 25,000 suppliers in over 80 countries, successfully completed migration in 2010 and migration to Business to Business (B2B) in February 2012. Jordan Castellarnau, Treasury Manager in the FSC within TUI Travel A&D, confirms: "With in place, there are now plenty of opportunities for TUI Travel A&D to further enhance its treasury management."

These sentiments are echoed by Dr Markus Warncke, Group Financial Controller at ceramics manufacturing company Villeroy & Boch, who comments: "The and Schemes work very well for us. Our figures demonstrate that the benefits resulting from migration to the Schemes and standards exceeded the investment in the first year alone (...) The reality is that the benefits of an integrated euro payments market outweigh the short-term efforts to get there."

Where do I find help?

These examples of best practice demonstrate that compliance is not only manageable and feasible, but also beneficial. The positive news is that compliance by the deadline mandated by law is still possible. With less than ten months to go until the 1 February 2014 deadline, it is however critical that any late moving businesses and public administrations put processes in place to begin their migration immediately. Organisations now working towards achieving compliance with the Regulation are invited to take advantage of the numerous resources available to support market participants during the transition. Relevant information is also made available with 'The Migration Tool Kit' (see 'related links' below). Last but not least, banks and other service providers stand ready to support during the transition to .

Javier Santamaría is the Chair of the .


Related links:

EPC Podcast (April 2013): Learn to Love SEPA in 6 Minutes and Get Ready by 1.2.2014 in the Euro Area. Act Now!

EPC Video (March 2012): 'SEPA for Billers. The Time to Act is Now': to learn more about SEPA and the steps needed for compliance, watch this short video

Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009

Get Inspired: Seven EPC Blogs Highlighting Best Practice Identified by Early Movers on Demand Side Who Successfully Concluded Migration to SEPA Credit Transfer and SEPA Direct Debit

The EPC Migration Tool Kit: Get Ready for SEPA by 1.2.2014. Act Now! 


Related articles in this issue:

UNION TANK Eckstein: "SEPA Credit Transfer and SEPA Direct Debit Allow Everyone to Do More and Better Business across Europe". This company looks forward to 1 February 2014 when migration to SEPA will be completed in the euro area

SEPA Migration - Don't Count on a Plan B. European Central Bank publishes first SEPA Migration Report and warns against risks of late migration

The Long Road to Harmonisation: Transitional Arrangements in European Union Member States Permissible Under Regulation 260/2012 (the SEPA Regulation). European Commission and European Central Bank provide information on national derogations


Related articles in previous issues:

Time is of the Essence: Get Ready for SEPA. Act Now! This Article Offers Detailed Information On How To Prepare SEPA Migration at the Level of Individual Organisations ( Newsletter, Issue 16, October 2012)

EPC Newsletter: Case Studies Highlighting Successful SEPA Migration Projects of Bank Customers

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