This series of Blogs highlights best practice identified by bank customers who have successfully completed migration to the Single Euro Payments Area (). Part III focuses on how to determine the appropriate strategy to ensure the compatibility of IT systems with payment schemes and technical standards. The complete series reflects the experience of early movers on the demand side who have shared their lessons learnt in the Newsletter and in the Video ‘ for Billers' (see links below).
The European Union (EU) ‘Regulation establishing technical and business requirements for credit transfers and direct debits in euro' (the Regulation, see link below), 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 (). Project managers, who have already concluded the migration exercise, unanimously recommend that organisations which still have to adapt systems and operations to the schemes and technical standards become active immediately.
With regard to the adaptation of IT systems, project managers should consider whether to:
- Adapt the existing IT architecture using conversion services.
- Build new systems.
- Coordinate IT adaptation in house or outsource.
- Look beyond requirements and consider, in addition, initiatives such as e-invoicing, e-signatures, authentication of bank infrastructures and third party services, e-procurement and mobile payment services, for example.
The experience of early movers on the demand side demonstrates that choosing the best approach is subject to the specific situation of individual business and public entities. An important factor in the decision-making process is the current technical state of systems. In addition, interdependencies with systems of business partners must be analysed to ensure continued compatibility.
Stefan Scheidgen, Head of Cash Management and Accounting at Deutsche Post Pension Service Business Division, points out: "IT changes are needed to get master data and payment data streams ready - that is what everybody plans for. Other IT changes are required due to the implementation of migration tools, temporary converter solutions, changes related to mandate management and pre-notifications under the Schemes and changes of interfaces in processes. The scale of IT investment mainly depends on the existing systems landscape. The age of the systems and capabilities need to be considered. In our experience, even mainframe applications can be ready while occasionally applications with more up-to-date technology might need some shared converting support. Change requirements for business processes also vary by industry and degree of automation. If you need to synchronise several external service providers, the picture could be very different than in an environment where you do not outsource. This huge regulatory change could also be an option to rethink and consolidate some of the investment requirements fully driven by regulatory changes." Deutsche Post Pension Service Business Division disbursed the first payments to German retirees in November 2009. The division processes 25 million credit transfers monthly; 90 percent of which were SCTs as of January 2012. The division is now in the process of migrating the remainder of its payment volume.
Mikko Grönman, Project Manager at the Finnish Government Shared Services Centre for Finance and Human Resources (HR), comments: "We handled implementation as a stand-alone project; however we did take into consideration other IT projects in the pipeline. We opted to implement conversion services wherever possible to achieve -compliance of existing systems. There is a specific reason why this approach was chosen: in the years 2011 through 2014, the Treasury's so-called ‘Kieku' IT programme is being introduced across all central government administrative entities. The objective of the Kieku IT system is to improve the efficiency and quality of operations with the help of uniform and streamlined processes, as well as to support the service centre model. This Kieku IT system was built taking into consideration requirements. We also had to take into account a further new IT programme being rolled out on the customer side to manage travel expenses. So, in essence, we focused on implementing solutions that allow us to continue using the systems currently in place." The conversion services used to achieve -compliance ensure that the functionalities introduced into the centre's existing IT architecture are compatible with other IT programmes rolled out in parallel. "Replacing existing systems by new systems would also have proven too costly," Mikko Grönman clarifies.
Created in 2010, the Finnish Government Shared Services Centre for Finance and HR merges the activities of four separate shared service centres that previously existed to support individual ministries of the central government and the judiciary. The centre integrated and concluded SEPA implementation projects, first launched in 2009, by these four separate administrative entities. The centre provides financial administration and HR support for approximately 110 central government agencies, departments and funds as well as approximately 80,000 private employees. The total volume of payments processed annually amounts to some 80 billion euros (2010). The organisation essentially concluded migration to and the ISO 20022 message standards by the end of 2010.
Anneli Seppälä, the Payment Processing Manager of Kela, the Social Insurance Institution of Finland, opted for this strategy: "The Kela project relied on the following premises: firstly, we decided to manage the entire process in house. Due to the fact that we appointed in house staff to upgrade all relevant IT systems, rather than to rely on external providers, we were in control of the process at all times. Secondly, our goal was to create long-term -compliant solutions rather than to rely on conversion services used to ‘translate' legacy formats into ‘ lookalikes'. We also opted to implement the required web services and public key infrastructure (PKI) instead of choosing an interim solution. As a result, all Kela systems are compliant. Lastly, it proved very important to have a full time project coordinator." Given that Kela does not collect direct debits, the project focused on the implementation of and the ISO 20022 message standards. Kela sent its first payments in May 2009. In 2010, the organisation disbursed some 21.6 million SCTs; the Kela project was concluded at the end of that year.
A phased approach regarding the decision whether to update existing systems based on conversion services or building new systems may also work very well. Stefan Scheidgen adds: "I have been lucky that the strategic IT planning of the Pension Service Business Division was wise enough to provide a flexible solution that proved to be an enabler for the project. For some legacy master data systems we - as part of the project deliverable - still operate using some converter functionality. Migration of those legacy master data systems is scheduled already. The last significant replacement is currently underway and will be delivered by the end of 2012."
Future entries in this blog series will share additional lessons learnt by early movers on the end-user side as regards aspects relevant to ensure compliance with the Regulation by 1 February 2014 in the euro area.
- EPC Blog - Part I: Get Ready for SEPA by February 2014 - Early SEPA Movers on the Customer Side Share Lessons Learnt. The Time to Act is Now
- EPC Blog - Part II: Get Ready for SEPA by February 2014. Early Movers on the Customer Side Share Lessons Learnt. Why IBAN and BIC Remain Important for Bank Customers
- EPC Video (extended version / eight minutes): SEPA for Billers: The Time to Act is Now
- EPC Video (short version / four minutes): SEPA for Billers: The Time to Act is Now
- EPC Newsletter (Issue 8, October 2010): Facing up to the IT Challenge. Choosing the right IT strategy for SEPA compliance
- EPC Newsletter Series: SEPA Case Studies - Learn from the SEPA migration experience of early movers in the business and public sectors
- EPC Website: SEPA Direct Debit
- EPC Website: SEPA Credit Transfer
- 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
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