1 August 2014 marked the end of the additional six-month transition period for migration to the Single Euro Payments Area () in the euro area
The European Commission introduced, on 9 January 2014, a proposal for a new European Union (EU) Regulation amending ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation), to “give an extra transition period of six months during which payments which differ from the SEPA format” could still be accepted in the euro area after 1 February 2014. In February 2014, the European Parliament and the Council of the EU representing EU governments, respectively, adopted the new ‘Regulation (EU) No 248/2014 amending Regulation (EU) No 260/2012 as regards the migration to Union-wide credit transfers and direct debits’. Regulation (EU) No 248/2014 states that (italics added) “ [payment service providers] may continue, until 1 August 2014, to process payment transactions in euro in formats that are different from those” established with the SEPA Regulation. Different euro area countries decided on different timelines during which they made use of the option to continue processing non-SEPA formats (i.e some countries did so during the full six month transition period agreed by the Commission, the European Parliament and the Council of the EU while others have opted for a shorter timeline).
According to the quantitative SEPA indicators published by the European Central Bank (ECB), the share of SEPA Credit Transfer () transactions amounted to 99.4 percent in August 2014. Furthermore, the share of SEPA Direct Debit (SDD) transactions had reached 99.9 percent. The quantitative SEPA indicators measure the share of SCT and SDD transactions as a percentage of the total volume of credit transfers and direct debits generated by bank customers in the euro area. On 15 August 2014, EuroTreasurer commented: “There have been no public complaints about problems with SEPA transactions, and banks and corporate treasurers that EuroTreasurer has been in contact with did not report any difficulties due to the [1 August 2014] deadline”. This statement confirms the information – gathered based on various sources including media coverage and debate on social platforms across the euro area – available to the European Payments Council (), i.e. the migration on 1 August 2014 went very smoothly.
Meeting the 1 August 2014 milestone in the SEPA process: market reactions
On 1 August 2014, the ECB pointed out that with migration to SCT and SDD complete, every month “more than 2 billion payments will now flow across the euro area in new standardised formats.” Michel Barnier, Vice-President of the European Commission concluded: “Completing the migration of payments to SEPA today is a real success. (…) I would like to congratulate national authorities, Ministries of Finance and Central banks as well as the European Central Bank that have made considerable efforts over the last two and a half years to this major achievement. I would also like to thank payments services providers, banks, the European Payments Council (EPC) and all market players for their commitment to SEPA”.
A variety of other commentators share this sentiment:
Martin Bresson, Mandy Shi Lai and Marijn Swinters reported on the blog ‘Public Affairs 2.0’: “While this migration is in many ways a technical achievement rather than a political one, the idea of SEPA is deeply rooted in the idea of the Single Market, making this largely unnoticed event one to remember for the spiritual descendants of the likes of Jacques Delors” and they went on to say that “it is undeniable that SEPA is one of the most successful outcomes of the Euro project”.
Edith Rigler commented in gtnews: “So in conclusion, the critics, sceptics, doomsayers and naysayers around SEPA have become remarkably quiet over the last few months. Ultimately, SEPA has made a good start despite all the negative press it received in earlier years. We can look forward to further progress”.
Also in gtnews, Arn Knol pointed out: “Clearly the lack of recent news relating to SEPA – not only in industry media (…) but also in the mainstream media – suggests a very smooth transition.”
A blog posted on Free News Pos stated: “I found it a bit strange that the coming into force of the Single European Payments Area (SEPA) on the 1 August was given practically no publicity. (…) I am one of those who believe that membership of the euro zone is putting some of its members at an economic disadvantage. However clearly, arrangements that make it easier to carry out financial transactions over the European space do not count among these disadvantages. To the contrary, such developments are useful and efforts should be made to improve their implementation.”
The EPC, tasked by the EU authorities to develop the SCT and SDD Schemes in close dialogue with the customer community, concurs that congratulations are in order. EPC Chair Javier Santamaría commented: “Meeting this milestone has been a tremendous effort for everybody on the demand and supply sides. The industry is proud to have contributed, together with all other stakeholders, to realising this unique integration project launched by the EU institutions and EU governments with the introduction of the euro currency in 1999.” The EPC believes that it is also important to recognise that, according to data made available by the ECB, the vast majority of stakeholders in the euro area had achieved SEPA compliance by 1 February 2014 (the formal deadline for compliance in the euro area with the Regulation (EU) No 260/2012).
What have the positive impacts of SEPA been?
Corporates, small and medium-sized enterprises (SMEs), public administrations and government agencies that had achieved full SEPA compliance early in the process confirmed that migration to SEPA leads to significant benefits. There is no doubt that the scope of change required to ensure SEPA readiness was extensive, but it does pay off.
These benefits include:
- Streamlined internal processes leading to the easing of the day-to-day running of businesses. Stefan Scheidgen, head of cash management and accounting at Deutsche Post Pension Service Business Division stated: “In the process of migrating to SEPA, we consolidated the previous four payment systems into one. We plan to further automate our banking processes, based on the implementation of SEPA Schemes and standards, which will result in even more efficiency.”
- Reduced costs through optimised financial operations and the consolidation of bank accounts. EuroMoney reported in its Sibos 2014 edition that Bruno Demonie, deputy director of finance at Cigna Global Health Benefits said that with migration to SEPA, the company has been able to consolidate to a single account held in Belgium. For him, it has been a value-adding regulation. There is a big saving to be made on the reduction of transaction fees between countries. Rather than paying the cost imposed from each country, it is now based on the amount from the country of origin, which adds up to a big sum when multiplied across the whole business.
- Centralised cash management and improved liquidity management. Gerwin Braam, senior bank manager at AkzoNobel Treasury & Investor Relations and its SEPA project manager concluded: “SEPA implementation for AkzoNobel has led to more efficient account reconciliations for our SDD payments, lower IT costs, increased scale of automatic processing, reduced number of bank accounts and banking relations, easier centralisation of our cash management, and increased business opportunities across the SEPA region.”
- 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 Manfred Hochhold, SEPA project manager at the Austrian Federal Ministry of Finance observed that “implementation of the SEPA 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.”
- Implementation of the ISO 20022 message standards drives forward standardisation, automation and dematerialisation. Luc Waterlot, financial systems and interfaces manager at Electrabel GDF Suez Market & Sales pointed out: “Using the ISO 20022 XML formats enables us to integrate SEPA and non-SEPA payments. Electrabel is part of the global group GDF SUEZ; within the global group it is expected that standardisation of payment processes based on the ISO 20022 XML formats will lead to cost reductions.”
- Simplified process for the collection of direct debits across Europe has resulted in easy migration into new European markets. Luc Waterlot of Electrabel GDF Suez Market & Sales stressed that they have had an excellent response from their customers since the implementation of . Jordan Castellarnau, treasury manager in the Finance Service Centre within TUI Travel Accommodation & Destinations (A&D) reported: “With SDD Business to Business (B2B) in place, there are now plenty of opportunities for TUI Travel A&D to further enhance its treasury management.”
These early adopters who fully reaped the advantages offered with the SEPA payment schemes and technical standards emphasised that compliance is just the first step, organisations can now focus on generating the efficiencies.
Joanna Wright of Fundtech also pointed out that for stakeholders who to date viewed migration to SEPA primarily as a compliance project, the next step is “to move forward through improving tactical solutions and taking advantage of internal consolidation opportunities that SEPA offers”.
SEPA remains a work in progress: comments from market participants on next steps to bring about ‘SEPA 2.0’
As reported previously in this newsletter, the European authorities driving the SEPA process – the European Commission, the European Parliament, the Council of the EU representing EU governments and the ECB – have clarified that migration to harmonised SEPA payment schemes and technical standards, as mandated by EU law, does not conclude this EU integration project. SEPA is “more than just credit transfers and direct debits. It is also about card payments and might also cover internet and mobile payments. It will contribute to the further harmonisation of retail payments in the internal market”, Vice-President of the European Commission Michel Barnier reiterated on 1 August 2014. (For detailed information on the subject, refer to the EPC Newsletter article, entitled ‘SEPA 2.0: an Overview of Regulatory Action Now in the Pipeline Impacting the European Payments Market Going Forward’ included in the ‘related articles in previous issues’ below.)
In ‘Promoting Efficient Retail Payments in Europe’, Iftekhar Hasan, Emmi Martikainen and Tuomas Takalo argued that SEPA “does not automatically increase the speed of convergence of payment habits” across Europe, “nor does it ensure that such convergence would lead to an efficient payment frontier”. They went on to say that SEPA “is an important policy initiative to harmonise payment methods in Europe. But SEPA alone is hardly enough, thus much more could be done to ensure the development of efficient retail payment infrastructure in Europe”.
Asking whether SEPA’s mission has been accomplished, Joanna Wright of Fundtech observed: “Perhaps it never will be, and rather serves as a moving target that is constantly being chased”. She added that “one needs to consider whether SEPA ever had a single mission to accomplish. Its original objectives were set in 2002 and huge technological developments have meant that it has been impossible for the objectives to remain the same. (…) the introduction and expansion of the internet, social media, mobile communications and smart phones, and new payment providers such as PayPal have all changed the way consumers, corporates and banks conduct business. SEPA’s mission needs to reflect this today, and change continues into the future.”
Helen Sanders, editor of Treasury Management International also concluded that “perhaps the biggest issue with SEPA is that we have expected too much. Creating a harmonised payments area for the euro was, and remains, worthwhile and indeed essential for a single currency. SCT is six years old but 24/7 payments have become a reality in the meantime.”
Michael Burtscher of Credorax made the point that “one thing is certain - the merchants, PSPs, card schemes, regulators, processers and mobile network operators (MNOs) all have their eyes on what the next generation SEPA will look like as its roll-out continues.”
Looking beyond migration to SCT and SDD, various other market observers suggested moving forward on initiatives such as, for example, pan-European e-mandate solutions, e-invoicing, and real time payment schemes.
(The article, entitled ‘Learn More About Work Items Related to SEPA Credit Transfer and SEPA Direct Debit Addressed by the New Euro Retail Payments Board () Chaired by the European Central Bank’ in this edition of the EPC Newsletter provides information on the ERPB working group on pan-European electronic mandate solutions for SDDs.)
Last but not least: get ready for SEPA 2016
1 August 2014 however, does not mark the end of the migration process. The following deadlines mandated with the SEPA Regulation also apply:
1 February 2016:
- Transitional arrangements in EU Member States: the SEPA Regulation has introduced several possible exemptions regarding the use of the International Bank Account Number (IBAN), the Business Identifier Code (BIC) and the ISO 20022 XML message standards by the February 2014 deadline. EU Member States have discretion as to whether they will use any or all of the options to derogate from the 1 February 2014 deadline (until 1 February 2016) with regard to the use of the IBAN, the BIC and the ISO 20022 XML message standards by payment service users.
- Niche products which have been granted an exemption: the SEPA Regulation, in particular, stipulates that some types of credit transfer and direct debit transactions with a cumulative market share of less than 10 percent in an EU Member State could comply with the provisions set out in this legislative act only by 1 February 2016.
31 October 2016: non-euro countries will have to comply with the SEPA Regulation by that date.
It is important that countries in- and outside of the euro area do not overlook these other deadlines, but rather actively prepare to ensure that they are ready to meet them on time. The articles entitled, respectively, ‘1 August 2014 Does Not Mark the End of the Migration Process. Get Ready for SEPA 2016. Act Now’ and ‘Get Ready for 2016 and Get Inspired: the Belgian Experience Shows that Timely Migration to SEPA Is Manageable and Feasible’ published in the July 2014 edition of the EPC Newsletter share best practices identified in the euro area during the migration process (see ‘related articles in previous issues’ below). The recommendation is to take these into consideration when preparing for SEPA 2016.
Etienne Goosse is the EPC Secretary General.
Related articles in this issue:
European Payments Council 2.0: with SEPA Migration (Euro Area) Complete, the EPC Adapts its Structure to Further Enhance Governance and Stakeholder Involvement. The new EPC governance model will become operational in the first quarter of 2015
The New European Commission: a Closer Look at President Juncker’s Vision for the EU Internal Market and Economic and Monetary Union. The European Commission will continue to play a principal role in the SEPA process going forward
SCT and SDD Rulebooks: Modifications to the Rulebooks to Take Effect in November 2015 and November 2016, Respectively. Based on feedback received during the 2014 public consultation on changes to the rulebooks, the EPC resolved to update the release schedule applicable to the next rulebooks generations
Learn More About Work Items Related to SEPA Credit Transfer and SEPA Direct Debit Addressed by the New Euro Retail Payments Board (ERPB) Chaired by the European Central Bank. The ERPB represents the demand and supply sides of the payments market with participation of national central banks
Related articles in previous issue:
1 August 2014 Does Not Mark the End of the Migration Process. Get Ready for SEPA 2016. Act Now. SEPA migration in the euro area showed that preparation is everything and time is of the essence (EPC Newsletter, Issue 23, July 2014)
Get Ready for 2016 and Get Inspired: the Belgian Experience Shows that Timely Migration to SEPA Is Manageable and Feasible. Best practice identified by the Belgian Steering Committee on the Future Means of Payment chaired by the National Bank of Belgium (EPC Newsletter, Issue 23, July 2014)
SEPA 2.0: an Overview of Regulatory Action Now in the Pipeline Impacting the European Payments Market Going Forward. The European authorities have clarified that migration to harmonised SEPA payment schemes and technical standards does not conclude this EU integration project (EPC Newsletter, Issue 23, July 2014)
From Theory to Practice and What Comes Next? Challenges and Opportunities After More than a Decade of SEPA in the Making. A commentary: “Like all major new economic initiatives, SEPA needs time to find its feet and achieve all it set out to accomplish.” (EPC Newsletter, Issue 22, April 2014)
SEPA Facts and Figures (January 2014): “If the Current Pace of Migration Continues, the Vast Majority of Stakeholders Will Complete Their Migration by 1 February 2014,” Says European Central Bank (EPC Newsletter, Issue 21, January 2014)
AkzoNobel: “We Have Already Seen a Return on Our Investment into SEPA Migration through the Benefits We Have Received” (EPC Newsletter, Issue 22, April 2014)
SEPA 2014: Businesses and Public Administrations Identify Main Benefits. Case Studies Confirm: Migration to SEPA Generates Tangible Advantages (EPC Newsletter, Issue 20, October 2013)
Electrabel GDF Suez: “We Are Delighted to Offer Our Customers SEPA Direct Debit Services!” (EPC Newsletter, Issue 17, January 2013)
Austrian Federal Ministry of Finance: "We Were Determined to Lead SEPA Migration by Example" (EPC Newsletter, Issue 15, July 2012)
TUI Travel PLC: “SEPA Direct Debit Scheme Is Another Step Forward Towards Treasury Efficiency” (EPC Newsletter, SEPA Case Studies, Issue 16, October 2012)
Ahead of the Curve: Deutsche Post Pension Service Completes SEPA Migration. This early mover currently disburses 22.5 million SEPA payments monthly (EPC Newsletter, Issue 13, January 2012)
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