TUI Travel PLC: “SEPA Direct Debit Scheme Is Another Step Forward Towa...

TUI Travel PLC: “SEPA Direct Debit Scheme Is Another Step Forward Towards Treasury Efficiency”

The TUI Travel Accommodation & Destinations (TUI Travel A&D) sector´s Finance Service Centre completed migration to SEPA Direct Debit Business to Business in February 2012

29 October 12

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The TUI Travel Accommodation & Destinations sector's Finance Service Centre

UK based TUI Travel PLC is one of the world's leading leisure travel companies, employing approximately 53,000 people and operating in over 180 countries with more than 30 million customers. Its business is grouped into four sectors, Mainstream, Accommodation & Destinations, Specialist & Activity and Emerging Markets. As a part of TUI Travel, the Accommodation & Destinations (A&D) sector has a Finance Service Centre (FSC) providing back office services based in Mallorca, Spain. The FSC trades with over 24,000 customers and 25,000 suppliers in over 80 countries. The TUI Travel A&D's FSC wanted to rationalise its banking relationships globally and fully automate its treasury and enterprise resource planning (ERP) integration in order to standardise internal processes and improve working capital liquidity. Migration to the Credit Transfer ( ) and Direct Debit Business to Business ( ) Schemes was an important part of this project. The company completed migration to in 2010 and migration to in February 2012. This article focuses on the TUI Travel A&D's implementation project.

The challenge

Following successful implementation of , TUI Travel A&D started exploring other areas that could provide further efficiency gains, subsequently attention turned to collections. The challenge here was that the company had fragmented direct debits for collection into local currency accounts in each market - this needed to be made more efficient to save time, money and enhance transparency. Consequently, TUI Travel A&D decided to migrate to the Scheme. The Schemes create for the first time a payment instrument that can be used for both domestic and cross-border collections throughout the 32 Single Euro Payments Area ( ) countries.

The Scheme

The Scheme enables business customers in the role of payers to make payments by direct debit. The Schemes offer businesses significant efficiency gains through the automation of payment processing and the ability of businesses to optimise the cash management process. The latter can be achieved by businesses consolidating accounts currently maintained in different European countries, so that all payments are managed in one single account, thereby centralising liquidity.

The Schemes facilitate the expansion of businesses across national borders by introducing a standardised payment infrastructure. The Schemes therefore support and facilitate trade across the European Union internal market. Innovative end-to-end solutions, based on global standards developed by the International Organization for Standardization (ISO), also lead to decreased IT costs, streamlined back office functions and simplified reconciliation. The economy as a whole will also benefit if invoices are paid when they are due. The business community depends on reliable cash flow and the Schemes enable the biller to collect payments on the exact due date.

The Scheme, in particular, fully supports the intra-European supply chain management of companies on the financial side.

These are the differences between the Scheme and the Scheme:

  • Services and products based on the Scheme are only available to businesses; the payer must not be a private individual (consumer).
  • In the Scheme the payer (a business) is not entitled to obtain a refund of an authorised transaction.
  • The Scheme requires the payer's bank to ensure that the collection is authorised by checking the collection against mandate information. The payer's bank and the payer are required to agree on the verification to be performed for each B2B direct debit.
  • Responding to the specific needs of the business community the Scheme offers a significantly shorter timeline for presenting direct debits and a reduced return period.
The solution

TUI Travel A&D opted for the Scheme using a banking solution for File SAP iDOC with a collection account held in London. This went live in February 2012. The collections are made into the Spanish entity TUI Travel A&D's FSC's account held in London which is linked to the company's centralised liquidity structure. TUI Travel A&D chose the Scheme because of its ability to manage customer disputes. The scheme states that payers1 can claim back funds collected up to 13 months if done without a mandate2 and that payers have no entitlement to a refund of an authorised transaction.

TUI Travel A&D worked closely together with its banking partner to ensure that the technical requirements for SDDs were followed, legal aspects were covered and that there was a shared understanding of the technical and business imperatives. During implementation, TUI Travel A&D was able to obtain their unique creditor identifier with a 48 hour turnaround. This provided a huge time saving for TUI Travel A&D. Billers collecting payments under the Schemes are obliged to obtain a creditor identifier which relates to a legal entity, or an association that is not a legal entity, or a person assuming the role of the biller. The Rulebooks refer to the biller as the 'creditor'. The creditor identifier, in connection with the mandate reference, allows the payer and the payer's bank to verify each payment and to process or reject the direct debit according to the payer's instructions. The identifier must be stable over time to ensure that a payer and the payer's bank can contact the biller if required. This may be necessary, for example, to verify the existence of a mandate or in instances of returns or refunds of a direct debit collection. The creditor identifier is determined on a legal entity basis, regardless of the account location or where it is generated.

The result

With the successful implementation of this centralised transaction by February 2012, TUI Travel A&D now benefits from:

  • Scalability: centralisation enables the creation of shared service centre or central treasury operations by being able to reach across the region (32 countries). This enables TUI Travel A&D to achieve banking relationship rationalisation and further centralisation of account structures.
  • Predictable collection of cross-border invoices enables TUI Travel A&D to collect from business and consumer customers across the European Economic Area.
  • Harmonised standards: standardised mandates, file formats, value dating and processes for all 32 countries increases efficiency. Use of the Business Identifier Code (BIC) and the International Bank Account Number (IBAN) for the identification of the payer's bank and account is mandatory3.
  • Harmonised scheme rules: harmonised Direct Debit scheme rules applicable in every country reduce legal complexities.

is another step forward towards treasury efficiency. Indeed, with this payment scheme in place, there are now plenty of opportunities for TUI Travel A&D to further enhance its treasury management.

Get ready for by 1.2.2014. Act now!

The experience of early movers handling major payment volumes indicates that migration to Schemes and technical standards is beneficial but requires careful planning. Organisations which still have to adapt systems and operations to achieve compliance with the Regulation by 1 February 2014 must become active immediately. The relevant actions and resources should be identified now. The makes available comprehensive information to help market participants manage the transition. These sources are included with the 'related links' at the end of this article (refer to the ' Migration Tool Kit').

 Jordan Castellarnau, Treasury Manager in the Finance Service Centre within TUI Travel A&D.


Related links:

TUI Travel PLC Website

The EPC Migration Tool Kit: Get Ready for SEPA by 1.2.2014. Act Now!


Related articles in this issue:

Time is of the Essence: Get Ready for SEPA. Act Now! Market participants in the euro area must achieve compliance with the core provisions of the European Union Regulation (EU) 260/2012 by 1 February 2014

Belgium: A SEPA Success Story. In Belgium, SEPA Credit Transfer migration rate is 58 percent; SEPA Direct Debit migration rate is 15 percent (July 2012)

SEPA Migration: Facts, Figures and Best Practice. The state-of-play in October 2012


Related articles in previous issues:

EPC Newsletter: Case Studies Highlighting Successful SEPA Migration Projects of Bank Customers


1 The technical terms used in the Direct Debit Rulebooks refer to the payer as 'debtor' and to the biller as 'creditor'.

2 A mandate is signed by the payer to authorise the biller to collect a payment and to instruct the payer's bank to pay those collections. The mandate can be issued in paper form or electronically.

3 In February 2012, the European legislator adopted the 'Regulation ( ) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' which details the timelines for the use of IBAN and BIC by payment service providers and payment service users.

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