The Proof of the Pudding is in the Eating: SEPA Benefits Identified by...

The Proof of the Pudding is in the Eating: SEPA Benefits Identified by Businesses and Public Administrations

10 January 14

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With the previous Blog (see links below), we quoted the Single Euro Payments Area () benefits for payment service users such as businesses and public administrations projected by the political drivers of the initiative, i.e. European Union (EU) governments, the European Parliament, the European Commission and the European Central Bank. (Note: the European Payments Council is not part of the EU institutional framework.) The proof of the pudding however is in the eating. This blog highlights the testimony of representatives of corporates, small and medium-sized enterprises (SMEs), public administrations and government agencies, who reported on their successfully completed migration projects (through the Newsletter case studies section since April 2011 and in other media). Early adopters on the demand side confirm that timely migration to the new payment schemes and technical standards is manageable and feasible. They also demonstrate that migration to Credit Transfer () and Direct Debit (SDD) leads to significant benefits. There is no doubt that the scope of change required to ensure compliance is extensive, but it does pay off. 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, and more efficiency and integration of an organisation’s payment business.

Streamlined internal processes lead to reduced costs

A common theme amongst payment service users reporting on their migration to has been about the benefits that streamlined internal processes have had on the day-to-day running of their organisations. Stefan Scheidgen, head of cash management and accounting at Deutsche Post Pension Service Business Division says: “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.” Also Denis Hilaire, financial director of the Mazet Group finds that the streamlining of processes through results in “optimised financial operations.” Dr Manfred Hochhold, project manager at the Austrian Federal Ministry of Finance confirms: “Migration to allows IT systems to be streamlined, and ultimately consolidated, which results in cost reductions.” He estimates that with the Schemes in place, the Austrian Federal Ministry of Finance can potentially “save about one million euros annually in foreign country bank fees.” Dr Markus Warncke, group financial controller at ceramics manufacturing company Villeroy & Boch comments: “The and SDD 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.”

Centralised cash management improves liquidity management

also leads to considerable benefits through the integration and increased efficiency of the payment business. In addition, corporates, SMEs and public sector entities should see compliance as an opportunity to review all of their cash management processes. A centralised payment processing system will be easier to run, require less time and resources, and as a result will improve the overall efficiency of an organisation. Dr Hochhold of the Austrian Federal Ministry of Finance observes that “implementation of the Schemes facilitates improved management of execution times and thus predictability when payments will be debited or credited. We also noticed increased quality of payment related data.” He concludes: “Following implementation of the payment schemes and standards, we are able to save about 15 million euros annually thanks to improved cash flow.” Andreas Kriz, head of treasury, MIAG C.V. (part of METRO GROUP) reported in Treasury Management International (TMI) that “liquidity management is easier and more transparent in that we no longer need to fund multiple accounts each day. This allows for greater concentration of cash and more efficient deployment of cash.” He also points out that with fewer day-to-day banking contacts, communication with banking partners is “more efficient, there is greater accountability and closer personal interaction, so any issues are resolved more easily and quickly.”

Implementation of the ISO 20022 message standards generates efficiency gains

The realisation of an integrated euro payments market requires the use of a common set of data to exchange information between the parties executing a payment. The and SDD Schemes are based on the global ISO 20022 message standards developed by the International Organization for Standardization (ISO). Early movers on the demand side of the payments market confirm that implementation of the ISO 20022 message standards drives forward standardisation, automation and dematerialisation and therefore, meets a key requirement of corporate treasurers. Dr Warncke of Villeroy & Boch says: “The implementation of the ISO 20022 message standards reduces the complexities and application development times required to manage our payment architecture. Adapting to this global standard also allowed us to increase security and improve internal processes.”

Harmonised direct debit instrument allows for easy migration into new European markets

Finally, the simplified process for the collection of direct debits across Europe which results from migration to SDD is important to acknowledge. Having one process to handle SDDs companywide is particularly beneficial when companies are expanding into new markets. Rather than needing to understand the payment demands of each individual market, and consequently spending time re-working existing processes to accommodate, all collections will be consistent and therefore easily repeatable. Thomas Wolpert, senior credit and project manager at UNION TANK Eckstein GmbH & Co. KG (UTA) confirms: “The SDD Schemes facilitate the expansion of businesses across national borders by introducing a standardised payment infrastructure.” Jordan Castellarnau, treasury manager in the Finance Service Centre within TUI Travel Accommodation & Destinations (A&D) reports: “With SDD Business to Business in place, there are now plenty of opportunities for TUI Travel A&D to further enhance its treasury management.” Luc Waterlot, financial systems and interfaces manager at Electrabel GDF Suez Market & Sales, stresses that, last but not least, they have had an excellent response from their customers since the implementation of SDD.

Don’t stop at compliance, seek the efficiencies

law effectively mandates migration to and SDD by 1 February 2014 in the euro area. Early adopters that fully reaped the advantages offered by the Schemes and technical standards emphasise that compliance is just the first step; organisations can then focus on generating the efficiencies. In a case study published in TMI, Federico Focardi, group finance director, Salvatore Ferragamo S.p.A sums it up: “ is an opportunity and a catalyst for change – not simply a compliance issue.” Thomas Wolpert of UTA concludes: “We look forward to the day when and SDD will replace the multitude of national euro credit transfer and direct debit schemes existing today. is an important step towards the further integration of the internal market. The harmonisation of the euro payments market will allow everybody to do more and better business across the European countries.”

For more case studies reporting on the benefits generated by payment service users who completed migration to the payment schemes and technical standards refer to the links below.

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