Part I: Get Ready for SEPA by February 2014 - Early Movers on the Cust...

Part I: Get Ready for SEPA by February 2014 - Early Movers on the Customer Side Share Lessons Learnt. The Time to Act is Now

25 October 13

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Preparation is everything and time is of the essence: this holds true for most things in life and is key for any business and public entity transitioning to the Single Euro Payments Area ( ) within less than two years. It may also be worthwhile considering lessons learnt by early movers on the customer side, which are highlighted in the Newsletter and in the new video ‘ for Billers: The Time to Act is Now' (see links below).

In February 2012, the European Parliament adopted the ‘Regulation establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (the Regulation), which defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. Effectively, this means that as of this date, existing national euro credit transfer and direct debit schemes will be replaced by Credit Transfer ( ) and Direct Debit ( ). The experience of early movers handling major payment volumes indicates that it takes (at least) two years to complete migration to the payment schemes and standards.

Deutsche Post Pension Service Business Division started its migration project in early 2009 and essentially completed the process in June 2011. The division disburses 25 million pension payments per month on behalf of the public German retirement scheme, to retirees residing in Germany and abroad. In January 2012, 22.5 million of these payments were SCTs, the remainder of the volume will be migrated shortly. Stefan Scheidgen, Head of Cash Management and Accounting at Deutsche Post Pension Service Business Division, points out that launching the migration project now "probably means that availability of external resources will be restricted. It also needs to be kept in mind that the migration project does not only impact the accounting and treasury departments, but the entire organisation and administration." To ensure readiness by the deadline set with the Regulation, he advises: "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. If you are a bigger company (more than 5,000 master data records and more than three IT systems): Run! This means you must act now."

UNIQA Group Austria, which services approximately 7.5 million customers in 21 regional markets, started the migration project at the beginning of 2008 and essentially concluded the transition in 2011. The project covered migration to both and . Thomas Weissmann, Project Manager with the group, clarifies: " is an excellent and necessary idea. It should be kept in mind however that the dimensions of the migration project are comparable to those associated with the transition to the euro currency a decade ago."

The Finnish public sector spearheads migration by public administrations in the European Union ( ). According to the European Commission Services' fifth survey on ‘Public Administrations' Preparedness and Migration to ' (see link below), public administrations in Finland boasted an migration rate of 90.9 percent in June 2011. By end 2011, Finland completed migration to and the ISO20022 message standards. Anneli Seppälä, the Payment Processing Manager of Kela, the Social Insurance Institution of Finland, recalls: "In October 2007, we set up a dedicated work team of our payment experts to analyse which changes would be required within the organisation in order to migrate to . This research also identified the staff to be appointed to the Kela implementation team. Based on this analysis, we developed a very specific project plan which led to the start of the actual Kela project in May 2008." Kela disburses payments to the majority of the Finnish population. The institution manages more than one hundred different types of benefits and compensation schemes. The annual value of benefits and compensations amounted to approximately 12.2 billion euros in 2010. Kela makes some 33.3 million payments annually, which include 250,000 cross-border payments. The organisation sent its first payments in May 2009. In 2010, Kela disbursed some 21.6 million SCTs and concluded its migration project at the end of this year.

project managers who shared their migration experience in the Newsletter identified the following challenges:

  • Conversion of customer account data to the International Bank Account Number (IBAN) and the Business Identifier Code (BIC). (The Regulation stipulates that payment service users will not have to provide the BIC for national transactions after February 2014 however, Member States have the option to extend this deadline to February 2016. This ‘IBAN only' rule will apply for cross-border transactions after February 2016).
  • Implementation of the ISO 20022 message standards.
  • Adaptation to mandate requirements.
  • Alignment of interfaces with customers and business partners to ensure seamless end-to-end payment processing.

These early movers however also confirm that migration to pays off. Stefan Scheidgen points out: "We have accomplished execution times of just one business day for SCTs, which allows our contracting partners to save liquidity. In the process of migrating to , we consolidated the previous four payment systems into one. We plan to further automate our banking processes, based on the implementation of schemes and standards, which will result in even more efficiency." Thomas Weissmann identifies these advantages: "Firstly, migrating to the harmonised payment schemes allows for more efficient account reconciliation. Secondly, being able to collect direct debits throughout Europe using the harmonised Schemes is also a principal advantage for us." Anneli Seppälä comments: "Our experience confirms that our payment processes are more efficient following implementation." To get an overview of main aspects to consider when setting up a migration project, watch the new video ‘ for Billers: the Time to Act is Now'.


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