It’s interesting that we’re now less than a year away from SEPA’s end date for the Eurozone and so people are saying to me that SEPA doesn’t matter so much as a discussion point anymore.
This is because the banks have got it nailed.
What about the corporate customers of the banks?
They also need to be compliant, but survey after survey demonstrates that they will not be.
In December 2012, Steria published a report 'SEPA: Will European Businesses be Ready for the Transformation?' in collaboration with Edgar, Dunn & Company. The findings are based on a phone survey of 300 businesses with 250 to 5,000 employees in France, Germany and the UK and more than 15 in-depth interviews among large corporates and payments experts in Europe.
- 70 percent of the businesses surveyed indicated that they had heard about SDD (87 percent in France; 75 percent in Germany; 26 percent in UK). The awareness of SDD among respondents increases with the size of businesses from 48 percent for businesses with 250 to 499 employees, to 70 percent for those with 1,000 to 5,000 employees;
- Almost 80 percent of the businesses surveyed knew that the migration to SEPA needs to be completed by 2014 in the euro area. While more than 75 percent of UK businesses did not know the deadline to migrate, more than 85 percent of French and German businesses were aware of the 2014 deadline;
- 70 percent of the businesses surveyed knew that they will need to use new bank identifiers for direct debits and credit transfers in the first stage of SEPA;
- Almost half of businesses surveyed were aware of the need to implement a new message format for SEPA transactions (ISO20022);
- 31 percent of businesses issuing direct debits had migrated or were in the process of migrating to SDD (42 percent in Germany, 35 percent in France, 3 percent in the UK);
- 30 percent of French and German businesses had not started to work on migration to SEPA at all. The SDD migration process was overall more advanced for larger businesses when including the assessment phase and the migration. Half of businesses with less than 1,000 employees had not even started to assess the impact of SDD; and
- All French businesses issuing direct debits and a large majority of German businesses issuing direct debits (85 percent) stated that they will be SEPA compliant by 1 February 2014.
Also in December 2012, EuroFinance published the results of its survey, entitled: 'Countdown to SEPA - How ready are corporates for the February 2014 compliance deadline?'
In this survey, 273 finance and treasury professionals were asked: 'What is the current status of your company's SEPA project?' and their answers show that:
- 12% had not even started;
- 29% were evaluating options and planning;
- 11% are in planning, with teams and budgets in place;
- 4% have a project underway and are behind schedule;
- 18% have a project underway and are on schedule;
- 12% are at a point of basic SEPA compliance (no rejected payment instructions) achieved and no further action planned; whilst
- 15% have already acheived basic SEPA compliance and are now seeking further efficiency.
The EuroFinance survey found that 59% of corporates are targeting basic compliance, which means no rejected payment instructions, and only 28% are using SEPA as a platform for creating efficiencies.
A simliar result was found in January with gtnews:
According to the latest gtnews Payments Survey, there are still a significant number of corporates that have yet to begin a migration programme for the single euro payments area (SEPA) ahead of the 1 February 2014 migration deadline, with 37% of the 284 corporate treasury readers questioned in October and November of last year, admitting that they do not yet have SEPA services in place.
Single euro payments area (SEPA)-related payment formats are very slowly gaining ground ahead of the 1 February 2014 end date, with 42% of respondents, versus 34% previously, now using SEPA credit transfers (SCTs) and 20% using SEPA direct debits (SDDs), which was only 14% in the previous ‘gtnews Payments Survey’. However, these payment formats are still only being used by a minority of the 284 surveyed corporates, so there is still a lot of work to do to achieve full compliance just one year before the SEPA deadline hits. The mandate management challenge facing many corporates on SDDs is likely to remain a considerable challenge throughout 2013.
The most cited reason for embarking upon a SEPA project is naturally enough compliance with 64% of the corporate treasurer readers of gtnews selecting this option. Cost saving is the next most popular choice (with more than one choice acceptable) with 60% of respondents selecting this, ahead of 53% seeing benefits in centralising payments and 41% choosing bank relationship reduction. The latter is possible because a single bank can now theoretically handle all SEPA payments across European borders.
Experian followed this up by asking 260 Treasury Managers of Global Corporations: “how would you assess your organisation’s readiness for SEPA?” the results showed:
- 16.8% of corporate treasurers and finance professionals are unaware of SEPA and the requirements needed to support SEPA compliance.
- 21.1% of respondents are considered to be ready for SEPA today, and a further 7.1% are finishing or testing their implemented solutions.
- 9.7% are currently starting implementation projects to meet the required 1st February 2014 end date.
This means that 62.1% of respondents have not yet started any implementation work. With a little over 12 months to go until SCT and SDD become mandatory, there is likely to be a significant risk that these businesses are not ready to use the SEPA schemes in time.
In yet another survey by Pricewaterhousecoopers, 293 companies were surveyed about their readiness for SEPA, and found that 55% of organisations are at risk of missing the SEPA deadline next February.
Major findings of the survey, 'SEPA Readiness Thermometer - State of play with one year to go', include:
- 21.6% of respondents have yet to define and plan their SEPA readiness activities;
- Few organisations have a comprehensive scope defined – for example, fewer than 30% of respondents include review and update of master data in their scope, and fewer than 20% involve HR, legal and sales departments in their projects. These statistics are even worse for those organisations that have yet to plan their SEPA-readiness activities
- 43.5% of respondents that have planned their readiness expect to complete their project uncomfortably close to the deadline of 1 February 2014.
- 43% of respondents are not confident that the majority of their customers will be ready for SEPA in time.
- 92% of respondents mention 'systems readiness' as their number one concern
It is clear that over half of the companies that need to be SEPA compliant will not be by February 2014, which is surprising as the dates are flying by fast:
31 March 2012
Regulation no 260/2012 entered into force; pan-European reach; phasing-out of €50,000 ceiling for equal charges to apply.
1 November 2012
Cross-border transaction MIFs (Multilateral Interchange Fees) eliminated for direct debits.
1 February 2014
SEPA migration deadline for SEPA credit transfer and SEPA direct debit within the euro area; no BIC (Bank Identifier Code) required for national payments.
1 February 2016
No BIC required for cross-border payments; niche products migration complete.
31 October 2016
SEPA credit transfer and SEPA direct debit deadline for non-euro area countries.
1 February 2017
National transaction MIFs (multilateral interchange fees) to be eliminated for direct debits.
So what will it take to get corporates ready for SEPA?
A major shove.
Maybe that shove is demonstrated by another press release from Experian that finds the cost of non-SEPA compliance will rise to around €20 billion unless something happens soon.
The beleaguered Eurozone could lose up to €20bn as a result of data errors that will slow payments made using the Single European Payments Area (SEPA) electronic payments standard which is due to come into force in the Eurozone in 12 months.
Organisations in the Eurozone must be compliant by February 2014, and non-Eurozone territories wishing to make and receive payments in euros must be compliant by October 2016.
Research from Experian has revealed that despite time running out for organisations wishing to make euro transactions to be compliant with SEPA, only 2% of direct debit transfers and 30% of credit transfers have been migrated. Businesses need to make customer records SEPA-compliant using International Bank Account Numbers (IBANs) before migrating to SEPA.
Experian research in October revealed a large number of errors in customer bank account data. It found that only 65% of euro transactions were underpinned by fully accurate destination account data. It also found that 45% of SEPA IBANs stored by large European businesses do not have the valid corresponding Bank Identifier Codes (BICs) required.
Anyways, if you're into this SEPA stuff, then please note the Financial Services Club meeting being held on Tuesday 12th March 2013 from 6.00pm at The City IOD, New Broad Street House, 35 New Broad Street, London, EC2M 1NH.
The Subject of the Meeting will
be: Is SEPA happening and does it matter? a debate with proposers:
- Jerome Traisnel, Slimpay
- Ruth Wandhofer, Head of Market Policy and Strategy, EMEA, Global Transaction Services, Citi
- Vanessa Manning, Head of EMEA Payment Solutions, Transaction Services, International Banking, the Royal Bank of Scotland
- Simon Bailey, Director, Logica
- Peter Miller, Managing Director, Blacksmith Consulting