The rough ride to more efficient payments
Harmonised payments across Europe will not meet the goal of launching by February 2014, because some countries are taking advantage of a two-year extension to the deadline for adopting agreed standards. Businesses still need to adapt to a single system for processing payments across Europe, and they will initially handle data in different ways from country to country.
|Tino Kam, SEPA
Many companies are finding it hard enough to become compliant with the Single Euro Payments Area (SEPA) legislation in time – and now they will have to process payments in two different ways until 2016. Some will be handled within SEPA’s cross-Europe guidelines but others will need to be done on a country-by-country basis – the very thing the new system sought to stop.
Research by EuroFinance shows more than half the businesses operating across Europe have not yet finalised their plans to adopt SEPA, the European Commission’s drive to simplify and harmonise payments across the continent.
According to the European Central Bank (ECB), less than two per cent of the market has started using it for direct debits and only a third for credit transfers.
It seems the authorities had an over-simplified view of the technical requirements needed when they set their timetable. Most small and medium enterprises, and even some big multi-nationals, say they won’t be ready in time.
The Commission is not going to move its deadline of 1 February though, so businesses need to work closely with their banks and move heaven and earth to ensure they are ready in time.
A key requirement, announced by the Commission at the start of 2012, involves all relevant organisations being able to present their data in the agreed, standard format for SEPA – called ISO 2022 XML – by February 2014.
But some countries, like Spain and Italy, have applied for the two-year waiver from these standards.
This wipes out the concept of a level playing field. Even though everyone will be using the same platform, there will be differences in the standards used among countries.
Achieving harmonised payments across the continent has therefore become a three-stage process.
Firstly, the market needs to achieve mass migration of all companies, financial institutions, public authorities and consumers on to SEPA, using the required XML standards, by next February.
Then, we embark on the real road to achieving its ultimate goal – eliminating country variances and ensuring companies are making the most of the benefits.
And finally there are the wider, long-term preparations, with businesses ensuring they can operate within the uniform payments process for years to come and use the relevant technology and standards in other areas.
Many companies had a ‘wait and see’ approach to SEPA and were reluctant to invest in the technical infrastructure needed to meet its migration requirements. They are therefore now late in their preparations to fully leverage the true benefits of the system.
This is where banks can help. Companies need to work with them to ensure they can process payments in this drawn-out transition phase as efficiently and cost-effectively as possible.
Banks are digesting the complexity of each country’s plans to migrate their data to the SEPA standard and advising their clients accordingly. At RBS, we are doing this while providing a platform – the SEPA Accelerator – to help bridge the time gap between now and full migration.
Companies also need to future-proof themselves by adopting SEPA’s XML standard as soon as possible. It really is the standard of the future – not just for payments but beyond.
For example, the Electronic Bank Account Management (eBAM) scheme, which will enable companies to manage bank data, corporate signatories and accounts online, is based on the same XML standards.
More broadly, SEPA will be the blueprint for a host of other pan-European, e-commerce programmes waiting in the wings, such as e-mandates and e-invoicing.
Companies need to look at their digital agenda and think about how the work they’re doing now can provide benefits across their entire operations for years to come.
When fully up and running, SEPA will bring one, simple, fully integrated payments system across the European Union. It will see an end to payments being made in different ways depending on the country – creating a uniform process.
We’re not there yet, and achieving it has become even more complex and troublesome than initially expected. But with the right support from their banks and a forward-looking treasury strategy, companies can make it easier on themselves and start enjoying the benefits sooner than they think.
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