Cash management debate: How to make sure that Sepa pays off

Cash management debate - Participants
 

EK, European Commission We are trying to create a business environment where it is easy for companies and citizens to do business. So first, we want to make payments more efficient so that costs fall for users and profits rise for the banks, because they will have to focus more on payments as a profit-generating activity. Secondly, corporates should be able to plug into a standardized world, with just one interface. This has huge potential for improving business efficiencies, integrating the value chain, and the business processes around payments from the invoicing to the reconciliation of accounts payable and accounts receivable. The third objective is infrastructure consolidation, which is already taking place. We think these savings should total up to €200 billion per year, where Sepa is fully implemented, where we have critical mass.

JL, J&W That’s the vision. However, things are not going exactly to plan, are they? My understanding from all my discussions so far is that Sepa won’t happen unless the benefits go beyond and outside of Sepa. Also, the process system is not working, the standards are not available and the implementation’s a horror.

EK, European Commission I don’t have such a pessimistic view. Step by step we are moving though our programme, and we are probably about halfway there. We have done a lot of Sepa explanation. The Payment Services Directive (PSD) was a huge project. EU legislation doesn’t happen overnight, but we’ll have adoption in a few months, so that’s another box to tick. That’s the legal framework that will sort out some questions around the direct debit. The next step is to finish the rulebooks. The last few details need to be sorted out. Then you can tick that box. From there you need to go to banks, and they need to develop their product specifications. The products need to be good enough. It needs to be clear what they will cost, and what they can do for corporates. Each step is in sequence. Without the rulebooks, banks can’t do their specs. So this is why we’re only halfway there. Once they have done their specs, they can do their sales pitch to corporates, because then they can tell corporates much more clearly what they will be confronted with. Then the corporates will need to think, hopefully with the banks’ help, about how to do Iban [international bank account number] and BIC [bank identifier code], how to migrate their mandates, how they leverage their investments. We haven’t even started that step yet. Our biggest concern, once this is all in the market, is how do we get from zero, which is the availability of a product, to 100%, which is the full adoption and replacement of legacy. I know some communities have decided not to replace their legacy for some time. I see that as a bad sign. It’s not a good indicator of their belief and commitment to the products they’re putting on the market. And the same goes for corporates. We need the buy-in. Many corporates believe that as long as this is not a compliance project, as long as they know they can keep what they have they’re not going to change anything. Right, we need a deadline. We need a clear cut-off point for Sepa and legacy.

TB, Twist Banks have been dealing with Sepa and, to a lesser extent, Mifid [the Markets in Financial Instruments Directive], by working with other banks, trying to come to a common infrastructure platform and reduce costs to meet a regulatory requirement, without necessarily focusing on the future. That is quite risky, because you might create something that doesn’t deliver that future. From a managerial point of view, you can see that the banks are working together, but not necessarily the departments within banks. So one building block is very simply better management within the banks themselves. So far the focus has been on minimizing the impact for the bigger industry, not minimizing the impact of migration for customers. For instance, digital signatures, transport of messages, the interfacing between banks and the customers, BIC and Iban – none of these have been dealt with. If you move to a new market environment, you have to lay down the foundations. That means a different style of management, consideration of where the bottlenecks may be, and then looking at the technical components.

GT, EACT We need a lot more co-operation between banks and corporates and more standardization in areas that banks have so far considered competitive space. For example, trade financing has up to now been considered a bilateral affair between a bank and a corporate. We would like to standardize the elements of the invoice that allow banks to finance corporates, because most corporates want to work with different banks at different times without being blocked by proprietary or technological solutions. The banks that want to supply so-called AOS (additional optional services, in the jargon of EPC rulebooks) can pick the standard and incorporate it in their offer.

VH, AFTE Adoption is the key issue. In our organization it’s the CFO who decides on investment. If I tell him that Sepa will be here within a few years, he assumes he can wait a year or two before going in. We need to have more precise facts and we need to know what the global cost and benefits will be. Our preferred payment product at the moment is direct debit, but we don’t feel it will be as good under Sepa, because the customer will have a very long period of time within which to withdraw his payment. I would like banks to develop a product that will ensure that the customer sends the money and that he has no way of refusing to pay a few days later. We also need to receive all the reference information that allows us to integrate that payment automatically in our supply chain. We want credit transfers with full reference information.