February 1, 2014, is the deadline for banks and corporations in the eurozone to comply with the core provisions of the Sepa regulation, the EUs flagship cross-border payments system, aimed at making cash transfers between European countries as fast, cheap and simple as domestic payments. By this date, banks and companies must have replaced their existing national euro credit transfer and direct debit schemes with the standardized Sepa credit transfer (SCT) and Sepa direct debit (SDD). However, for many companies it is looking unlikely the deadline will be met. Research published by AccessPay last week was just the latest in a series of surveys underlining the shortfall: only 2% of the corporates surveyed said they are fully Sepa compliant and, more worryingly, 41% had not yet started their migration project. While many companies have yet to begin migrating, for Swiss healthcare company Roche the process began six years ago, long before most companies had even contemplated Sepa adoption. Headquartered in Switzerland, Roche is one of the worlds leading healthcare companies with annual revenues of more than SFr45 billion. Run as a combined treasury and IT project, the companys Sepa migration began with the harmonization of its banking infrastructure in Europe. The objective was to begin exchanging payment files in a single format with a small number of banks but with SCT and SDD not even available at that time, the company had to do some things differently. Although Sepas formats are based on ISO 20022 XML, when Roche began its migration the perception was that XML did not offer the standardization and maturity that was needed.
While many treasurers continue to work with as many as 15 or 20 banks, hoping that Sepa will standardize their European landscape, Martin Schlageter, head of treasury operations at Roche, argues this approach has some drawbacks when it comes to Sepa migration and that it is in the banks interest to differentiate, rather than standardize, their product offerings.
Consequently, the banking industry has historically not been interested in a completely harmonized XML.
Roche therefore chose to adopt an SAP format as its standard in the first instance. We didnt want to apply XML too early in the process because we might have had to upgrade our processes over time the XML standard wasnt really there yet, says Schlageter.
However, as banks have moved towards standardization via the ISO 20022 CGI initiative, Roche has likewise begun to adopt XML.
Schlageter says working with a small number of banks is one of the factors that has enabled Roche to benefit from the Sepa migration from the outset.
We did not want to miss out on the benefits of Sepa by working with multiple banks, says Schlageter. We reduced our European banking partners down to two banks, who then agreed to work to a set of clearly defined standardized formats that we had laid down.
This enabled us to react quickly and apply IBAN [international bank account number] and BIC [business identifier code] by changing the master data of our suppliers and customers without changing our payment landscape and infrastructure.
As a result, Schlageter says the company was quickly able to access all the benefits of Sepa.
However, migrating to SDD has proved more difficult. The company has chosen to adopt the business-to-business scheme rather than the core scheme, and consequently customers have to sign new mandates. While Roche is live with the SDD in some countries, this part of the project continues to be a work in progress.
Aside from converting the remaining countries to SDD, other loose ends include ensuring that master data is up to date. In some countries, Roche is using local conversion tools to automate the conversion from local bank account numbers to IBAN and BICs.
Beating the clock As an early adopter of Sepa, Roche is well positioned to complete its migration project ahead of the February 2014 deadline. However, most companies have far more ground to cover before migration is complete.
For companies that have only just started planning their Sepa migration projects, Schlageter believes achieving compliance on time is likely to be challenging particularly for organizations that are working with a number of different banks.
Many companies are hoping that there will be an extension to the deadline for turning off other legacy systems, but we have worked on the assumption that we need to be fully live by February 2014, says Schlageter.
We are now busy with the final stages of Sepa implementation. There is no room for complacency. We still have a lot of work to be done, but we are keeping to our timetable and we are confident that we will meet the deadline of February 2014.
For those which have only recently set the wheels of Sepa adoption in motion or have not yet begun the process the date February 2014 might bring rather more concern. What is not clear is what the consequences will be for companies not ready by the end-date.
|Martin Schlageter, head of treasury operations, Roche|