Ready, willing and able?

Ready, willing and able?

The corporate View on SEPA Implementation

26 October 10

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: Mr Brissaud, corporates are expected to gain the most from the introduction of the schemes and standards including improved cash flow, reduced costs and easy access to new markets. Does the corporate community share these expectations?

Olivier Brissaud: It cannot be said that any business could potentially benefit from the introduction of in the same way. The community of corporates is even more diverse than the banking community: industry, size and market environment are very different throughout Europe. Major multinational corporations have a real need for a standardised European payment infrastructure. Accordingly, such corporations have organised themselves since a long time in order to compensate for poor standardisation and to navigate an international payments landscape being characterised by intransparency in the pre- era. On the other side, SME's and very small businesses that are more domestically oriented express a high level of satisfaction with existing national payment instruments. As regards implementation, they will primarily listen to the advice of their banks, to decide whether to change, when and how. Finally, corporate treasurers keep on saying that payments are just one element of the financial value chain and that a harmonised payments landscape is a good step forward towards overall more efficient processes. The pricing of payments products offered by banks will also play a role as regards the willingness on the corporate side to implement products.

: Just to remind the reader: The rules and standards which make up a payment scheme* are defined by banks for a collaborative space by the in close cooperation with representatives of the corporates in the Customer Stakeholders Forum and in ISO. However, the particular payments services offered to the customers are developed by individual banks or groups of banks operating in a competitive environment. The development of payment products based on the schemes including all product-related features such as pricing is outside the scope of the . Coming back to our topic and given the potential benefits for corporates, what are in your view the reasons for the limited uptake of the Credit Transfer available since January 2008 by the corporate community up to this point?

Olivier Brissaud: There are different reasons: and the Payment Services Directive - PSD - are political initiatives. Banks have been forced to act by the public authorities to deliver schemes and frameworks. They have been working out compromises and tradeoffs between them in the process of defining the schemes and somehow overlooked to associate the users to their endeavor. As a consequence, some important features were missing in the initial versions of the Scheme Rulebooks proposed. In my experience, the marketing of the new  services by individual banks has been as good as inexistent. The public administrations have not been proactive either. And last but not least an important stake of the European banking communities have been clearly opposing the proposed changes, because they do not see any business case, as they say.

: It should be emphasized that all 74 members representing 31 banking communities have committed themselves to support the realisation of which is clearly spelled out in the Charter and that 4300 banks representing about 95 percent of payment volume have joined the Credit Transfer Scheme. Also, customers are encouraged to actively come forward and submit suggestions for the development of the Schemes. Important suggestions of the EACT in fact have been integrated into the schemes. In a press release in October 2008, the EACT stated that provided a number of specific issues are being addressed, the Scheme is fit for mass migration on the customer side. So, which are in your view the major triggers that will convince corporates to fully migrate their current euro payments based on the national schemes to the Credit Transfer Scheme?

Olivier Brissaud: In addition to the elements mentioned earlier, I am convinced that if a product does not sell, you cannot blame the customer. As mentioned above, most customers are happy with what they got and never demanded products to replace national payment products to begin with. will remain a hard sell, even if products and marketing are improved.

: According to one school of thought, payments are hardly ever viewed as a strategic opportunity within a corporate. Corporate decision-makers would still have to recognise that re-engineering payment processes based on innovative end-to-end solutions will reduce costs and drive forward standardisation and automation of the entire financial supply chain. The implementation would in fact be only one element of such a change process. Do you hold this view to be accurate and if so, what needs to be done to make payments a priority for corporate decision-makers?

Olivier Brissaud: I do share this view. As I mentioned earlier, payments are an enabler to a more efficient end-to-end straight-through-processing. As long as the link between changing payment habits in a company and more efficiency is not in the mind of corporate CFO's, it will be extremely difficult for corporate treasurers to get budgets and ICT resources to start migrating towards instruments. Credit transfers are less of a problem because the changes are relatively minor for most customers. Direct Debits will be more difficult to sell to CFOs as well as to consumers.

: As an EACT board member, are you aware whether the EACT members - that is the national corporate treasurer organisations - are sufficiently involved in the activities of the Committees set up at the level of individual countries?

Olivier Brissaud: The situation is very different from one country to another. In some countries there is an official migration committee coached by the National Central Bank. In some of those countries corporate treasures are involved as in France, Italy and Belgium for instance. But most of the National Central Banks are not proactively organising any migration planning, either because their banking community is not interested, or because of a lack of consultation tradition. This is very worrying.

: What does the EACT recommend its members as regards engagement in the process at national level?

Olivier Brissaud: EACT has since more than three years invited its members - the national treasurer's associations - to stimulate their Central Bank in order to organise structured migration committees. In some countries this worked.  

: Like the euro introduction, will impact the treasury management as well as sales, procurement and payroll management of corporates. In the Customer Stakeholders Forum a so-called "Mr concept" was introduced. This concept envisages a manager in a corporate which would facilitate access to all the resources needed at corporate level to become ready. Should such a concept be implemented and if so, how should this be done?

Olivier Brissaud: Every initiative that aims at better explaining why a unified payments area is good for everybody is good. As I said, most banks and public administrations in the countries - with some notable exceptions such as Belgium - have done no communication at all.

: Some observers of the process are of the opinion that the corporate community will migrate to the instruments only if there is a need to comply with regulation. In your view, is that assumption accurate?

Olivier Brissaud: The PSD is already regulation and the implementation thereof should enable migration towards new and efficient payment instruments as long as the customers see a fair adequacy between the new instrument and the price they have to pay for it.

: The PSD is an initiative separate from the realisation of . As regards , the PSD is relevant only as it sets uniform rules on, for example, the authorisation of payments, the return of payments and refund rights which provide the uniform legal basis required for the -wide launch of the Direct Debit. Therefore there seems to be only limited interdepency between implementation of the PSD and the migration of corporates to payment instruments. So, do you believe that a majority of corporates would continue to postpone implementation unless implementation would be a compliance issue - even if communication, products and marketing are further enhanced?

Olivier Brissaud: Even the best Credit Transfer service, for example, will at the end of the day simply transfer funds from account A to account B. Obviously; national payment products do that as well. Again, the vast majority of businesses express a good level of satisfaction - in some countries one could say even a very high level of satisfaction - with payment instruments existing on national level today. Also, the vast majority of payments is executed not cross-border, but domestically. In consequence, corporates have adapted to the existing cross-border payment instruments. In a way, this situation is a compliment to the payments services offered by banks today, but at the same time that situation makes it very difficult to convince CFOs on the need to invest into implementation. We recognise the macro-economic potentials associated with , but these may not be the determining factor of corporate investment decisions. Setting an end-date for national payment instruments would stimulate implementation. The discussion on end-dates, however, should take place involving all market participants and should definitely differentiate between an end-date for existing credit transfer systems and existing direct debit systems.

: The is currently evaluating proposals to set a date after which services for making euro payments based on national payment schemes would no longer be available to customers and related implications. This discussion has not been concluded at this point. Mr Brissaud, thank you very much for this conversation.

The questions were asked by Meral Ruesing on behalf of the .


*The schemes define a set of interbank rules and standards that have to be observed when executing a payment transaction. These rules provide a common understanding between banks (payments services providers) on how to move funds from account A to account B within . The is responsible for the development and maintenance of payment schemes as defined in the Rulebooks for the Credit Transfer and the Direct Debit published by the itself. For further information on the role of in the process refer to chapter 4 of the publication "Making a Reality - the definitive Guide to the Single Euro Payments Area", version 2.0.

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