Do not look at only as a compliance issue
In February 2012, the European Union ( ) legislator, i.e. the European Parliament and the Council of the representing Member States, adopted the ‘Regulation ( ) No 260/2012’, establishing technical and business requirements for credit transfers and direct debits in euro, (the Single Euro Payments Area ( ) Regulation). This law effectively mandates migration to Credit Transfer ( ) and Direct Debit ( ) in the euro area by 1 February 2014. 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 represents an infringement on law. Any organisation still in the process of adapting its systems and operations in line with the requirements mandated by the Regulation might however take courage from the testimony of early adopters on the demand side who are already fully reaping the benefits associated with migration to .
The representatives of corporates, small and medium-sized enterprises (SMEs), public administrations and government agencies, who reported on their successfully completed projects (through the Newsletter case studies section since April 2011 and in other media) confirm that migration to the new payment schemes and technical standards is both manageable and feasible. They also demonstrate that migration to leads to significant benefits. There is no doubt that the scope of change required to ensure compliance is extensive, but it does pay off.
Streamlined internal processes
A common theme amongst corporates, SMEs, public administrations and government agencies 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. Kerry Lebel, senior director of product marketing for Automic who helped Carphone Warehouse, Europe’s largest mobile phone retailer automate its payment-collection processes, commented that through migration, it “streamlined much of the back-end processing of information going into and coming out of its core enterprises.2” This will reduce the complexity of back office processes and create a system that is easier to manage. Denis Hilaire, financial director of the Mazet Group also found that streamlining of processes through is not simply a matter of compliance, but results in “optimised financial operations.3” 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.4”
For a majority of these case studies, reduced overall cost is cited as a significant benefit of the transition. Migration to harmonised payment schemes and technical standards reduces the time and resources that companies require to make a payment, therefore reducing the individual cost of each payment. Andreas Kriz, head of treasury, MIAG C.V. (part of METRO GROUP) reported that with migration to , due to competitive transactions rates and being able to make payments on behalf of group entities, the company has reduced its bank charges by around 40 percent5. Dr Hochhold 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.6” In addition, Dr Markus Warncke, group financial controller at ceramics manufacturing company Villeroy & Boch commented “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.7”
Centralised cash management
In addition, businesses and public sector entities should see compliance as an opportunity to review all of their cash management processes which will considerably impact the day-to-day running of an organisation. A centralised payment processing system will be easier to run, require less time and resources, and as a result improve the overall efficiency of an organisation. Again, MIAG C.V. is proof of this. It found 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.8” Andreas Kriz, head of treasury, MIAG C.V., 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.9” 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.10”
Efficiency and integration of payment business
As well as reducing costs and centralising cash management processes, instruments will lead to considerable benefits through the integration and efficiency of the payment business. Nokia is a great example of how can lead to real advantages through the integration of a payment business. Jani Relander, VP, head of treasury at Nokia commented, “the quality of payments has improved in terms of a reduction in failed transactions attracting an exceptions-handling fee - and in terms of the rich data that can be seen by the treasury right throughout the financial supply chain.11” Kerry Lebel, senior director of product marketing for Automic also commented: “The automated handling of exceptions (for Carphone Warehouse) has reduced direct debit failures by more than 90 percent.12” Jordan Castellarnau, treasury manager in the Finance Service Centre within TUI Travel Accommodation & Destinations (A&D), reports: “With Business to Business in place, there are now plenty of opportunities for TUI Travel A&D to further enhance its treasury management.13” Dr Warncke of Villeroy & Boch also points to the efficiency gains resulting from the implementation of the ISO 20022 message standards: “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.14”
Collection of direct debits
Finally, the simplified process for the collection of direct debits across Europe which results from migration to is important to acknowledge. This consolidation of the collection process will ease the migration to new markets as well as help to manage existing markets. Firstly, the ability to report on collection process across all operations in real time will give the potential to easily access (and therefore react to) important data which can give insight and comparisons into current markets. Nokia has found that “real time data rich information (...) provides greater cash visibility.15”
Secondly, 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, UNION TANK Eckstein GmbH & Co. KG (UTA) commented: “The Schemes facilitate the expansion of businesses across national borders by introducing a standardised payment infrastructure.16"
Luc Waterlot, financial systems and interfaces manager at Electrabel GDF Suez Market & Sales, stressed that, last but not least, they have had an excellent response from their customers since the implementation of 17.
has all the potential to pay off
There is little doubt that the scope of activity required to achieve full compliance is extensive, especially as the 1 February 2014 deadline approaches. However, these case studies show that compliance does pay off across a business’s operations. The 1 February 2014 deadline has been in place now for a long time and organisations must prepare properly and timely. Evidence suggests when this happens, there is a real benefit to compliance through streamlined internal processes, reduced cost, centralised cash management, integration of payment business and collection of direct debits across Europe. Federico Focardi, group finance director, Salvatore Ferragamo S.p.A sums it up: “SEPA is an opportunity and a catalyst for change – not simply a compliance issue.18 ”
Javier Santamaría is the Chair of the .
The Mazet Group: “Migration to SEPA Credit Transfer and SEPA Direct Debit Has Generated Tangible Benefits for Us” ( Newsletter, Case Studies, Issue 19, July 2013)
UNION TANK Eckstein: “SEPA Credit Transfer and Direct Debit Allow Everyone to Do More and Better Business across Europe” ( Newsletter, Case Studies, Issue 18, April 2013)
Electrabel GDF Suez: “We Are Delighted to Offer Our Customers Direct Debit Services!” ( Newsletter, Case Studies, Issue 17, January 2013)
TUI Travel PLC: “SEPA Direct Debit Scheme Is Another Step Forward Towards Treasury Efficiency” ( Newsletter, Case Studies, Issue 16, October 2012)
Austrian Federal Ministry of Finance: "We Were Determined to Lead SEPA Migration by Example" ( Newsletter, Case Studies, Issue 15, July 2012)
Villeroy & Boch: “The Long Term Benefits of SEPA Exceed the Short Term Efforts to Get There.” ( Newsletter, Issue 14, April 2012)
Ahead of the Curve: Deutsche Post Pension Service Completes SEPA Migration ( Newsletter, Case Studies, Issue 13, January 2012)
UNIQA Group Austria: Business is Better with ! ( Newsletter, Case Studies, Issue 12, October 2011)
The Trailblazer ( Newsletter, Case Studies, Issue 10, April 2011)
If You Have Not Migrated to SEPA Yet - Get Ready and Get Inspired: SEPA Pioneers on the Demand Side Share Best Practice ( Newsletter, Case Studies, Issue 18, April 2013)
Related articles in this issue:
SEPA Fact Check: The SEPA Benefits Projected by EU Governments, the European Parliament, the European Commission and the European Central Bank (1999 – 2013). SEPA is an EU integration initiative driven by EU governments and the EU institutions. Note: the European Payments Council is not part of the EU institutional framework.
SEPA 2014 - the European Central Bank Reiterates: "Everybody Has to be Ready on 1 February 2014 or Risk Disruptions in Their Individual Handling of Payment Orders." European Central Bank publishes second migration report and warns against risks of 'Big Bang' migration scenario
SEPA 2014 - the State of Play (October 2013): a Large Majority of Stakeholders Are Expected to Meet the 1 February 2014 Migration Deadline. Late Movers Must Catch Up. Now. The most significant risk to business operations is non-compliance, i.e. failure to meet the migration deadline applicable in the euro area mandated by law
SEPA 2014: Clearing and Settlement Mechanisms are Ready to Turn up the Volume. Clearing and settlement mechanisms are prepared for the ramp-up towards the SEPA-only environment in the euro area by 1 February 2014
Related articles in previous issues:
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