Talking about SEPA to Small Businesses? Food for Thought for Public Au...

Talking about SEPA to Small Businesses? Food for Thought for Public Authorities, Banks and Other Service Providers: “Keep it Simple,” Says the Owner of Dance and Gymnastics School Girlfriends (45 Direct Debit Collections per Month)

25 October 13

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From 1 February 2014 onwards, organisations making payments in the euro area will have to carry out credit transfer and direct debit transactions in line with the core provisions set out in the European Union (EU) ‘Regulation (EU) No 260/2012’, establishing technical and business requirements for credit transfers and direct debits in euro’ (see link below). This legislative act is commonly referenced as the Single Euro Payments Area () Regulation. Effectively, this means that as of 1 February 2014, existing national euro credit transfer and direct debit schemes in the euro area will be replaced by Credit Transfer () and Direct Debit (SDD). Also payment service users have to achieve compliance with the Regulation, otherwise they risk refusal of payment transactions by payment service providers () from 1 February 2014.

Latest data on the progress of migration suggests that many payment service users – and, in particular, small and medium-sized enterprises (SMEs) – currently plan to complete the transition very close to the 1 February 2014 deadline. This is particularly likely with regard to migration to SDD. According to the European Commission Directorate General Enterprise and Industry, SMEs represent 99 percent of all European businesses. The focus must therefore, be on joining forces to assist SMEs to achieve compliance with the Regulation by 1 February 2014. This requires coordinated efforts by national public authorities and trade associations representing businesses and banks. In this blog, we share some insight from the owner of a business, which currently collects 45 direct debit payments per month, on how to motivate small businesses to get ready for .

Facts and figures on migration: the state-of-play

In June 2013, the European Central Bank (ECB) published updated qualitative indicators (see link below), which measure the level of preparedness by stakeholder groups at country level as of the first quarter of 2013. These most recent qualitative indicators provide the following outlook with regard to readiness of euro area stakeholders by 1 February 2014:

  • All will be ready. In the majority of euro area countries, have already completed preparations.
  • ‘Big billers’ in almost all euro area countries will be ready. Currently, it  appears that the corporate sector in France might not complete migration to SDD, while corporates in Estonia might not complete migration to .
  • Public administrations in all euro area countries except Estonia will be ready.
  • SMEs in Austria, Cyprus, France, Germany and Spain are all at risk of missing the 1 February 2014 deadline with regard to both and SDD.

According to the latest quantitative indicators (see link below) also published by the ECB, the share of transactions amounts to 47 percent as of June 2013 and the share of SDD transactions has reached 3.7 percent. The quantitative indicators measure the share of and SDD transactions as a percentage of the total volume of credit transfers and direct debits generated by bank customers in the euro area.

“Talking about migration to small businesses: Keep it simple!” says the owner of dance and gymnastics school Girlfriends

Andrea Hasselbach is the owner and sole staff of the dance and gymnastics school Girlfriends in Cologne, Germany (see link below). Still in the start-up phase, this small business currently collects 45 direct debit payments from customers monthly. Ms Hasselbach points out: “In the past year, my bank sent me a very comprehensive brochure, two letters, various booklets, and three emails informing me on the obligation to achieve compliance with the Regulation by 1 February 2014. I find these alerts with my account statements as well, when logging into the online banking interface and in a newsfeed for business customers that my bank offers. Last but not least, the subject has been covered several times by our local newspaper. So, I have been aware for many months that there is something related to payments and Europe in the pipeline, which impacts my business.” Ms Hasselbach diligently filed away this comprehensive information with the commitment to study it in detail as soon as her busy schedule would allow. This was the case in May 2013.

She explains: “When I first started receiving the information from my bank last year, 1 February 2014 sounded like a long time off. Considering the many immediate matters I have to take care of in the day-to-day management of my business, was not a priority for me. The information I received was also very comprehensive; i.e. I knew I had to really carve out the time to sit down and work through this.” She adds: “I think one also has to take into account that if you run a small business that operates primarily locally, you are simply very much accustomed to making and collecting payments in an established way. To be honest, I never spent a thought in my life on differences between ‘payment schemes’ or related technical formats or standards. So, when I first heard about , European direct debits and credit transfers, International Bank Account Number (IBAN) and Business Identifier Code (BIC), it all sounded very remote and abstract to me. In short, ‘migrating to ’ seemed about as thrilling as a visit to the dentist or doing my tax return. One knows it must be done, but procrastinates as long as possible.”

It was a phone call from her bank that eventually convinced Ms Hasselbach to dedicate attention to : “As I mentioned, my bank has been really adamant about getting my attention on this for a year. In May 2013, my bank advisor called me and explained that this European law on literally prohibits banks to process payment orders – including my direct debit collections – unless the payment orders are in line with the requirements. Now that was something I understood right away. Obviously, no business can afford a disruption of its cash flow. At the end of May, I therefore dusted off the information I had previously received from my bank and hunkered down on a Sunday to work through it.”

Ms Hasselbach met with her bank advisor to discuss migration in June 2013. She identified the following steps she will have to take to make her business -compliant: (1) inform business partners of the IBAN and BIC of her business account; (2) change the account information of clients and suppliers to IBAN and BIC; (3) get a creditor identifier; (4) assign a mandate reference number for each mandate underlying a direct debit collection; (5) send a letter to those clients who are already paying by direct debit to inform them that these will be collected by SDD going forward and inform them of her creditor identifier and the relevant mandate reference. “My bank continues to be very responsive to any questions that I have and makes available tools helping me to manage this process,” she confirms. In July 2013, Ms Hasselbach estimates that she will have to invest about 15 to 20 hours to make the transition.

She has this advice for public authorities, and other service providers eager to motivate small businesses to get -ready: “Keep it simple. A fifty-page manual might be relevant for large enterprises however; it is not for me. After I had worked through the 50-plus pages, I realised that I need to take five steps to make my small business -compliant. Why not put this information in a one-page flyer available in electronic format with relevant website links included?” Ms Hasselbach clarifies: “Time is money, especially for people running a small business with few or no additional staff. information should be adjusted to the scope of our operations and resources.”

She took note of her bank’s recommendation to complete the migration process as soon as possible, but has other plans: “I will focus on several non- related business projects during the summer. It is also the only time of the year when I can take a couple of weeks off and I will not cancel my holidays for .” She currently considers finalising the Girlfriends migration project in October of 2013.

The July 2013 edition of the Newsletter features a detailed interview with Ms Hasselbach on the ongoing migration project of the dance and gymnastics school Girlfriends (see link below).

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