The cash-management space has experienced a wealth of change in recent times, but no more so than in Europe with the implementation of Sepa.
The arrival of the single euro payments area in combination with the adoption of the ISO 20022 payment standard, has created a payments landscape that is not replicated so holistically in any other region.
| Many clients are now looking at virtual accounts|
“Last year was one of the most active we have seen in some time,” says Matthew Davies, co-head of product management, GTS EMEA at Bank of America Merrill Lynch (BAML). “Sepa enabled treasurers to change and consolidate their systems whilst reconsidering their operating model, taking full advantage of the opportunities that Sepa can offer.”
Despite the delay in the implementation, once the final deadline of August 1, 2014, was reached the transfer to the single-payment format has been relatively seamless. The implementation has changed how corporate treasury can be managed across Europe. It is opening up new opportunities to make the region’s corporate treasury functionality the most unified in the world.
Andy Reid, managing director, head of corporate cash management EMEA, at Deutsche Bank, says: “Sepa has been a strategic opportunity.”
The challenge, now that it has been implemented, is to leverage the benefits of the new infrastructure across the whole region. A key change was the arrival of the XML ISO 200022 messaging standard. As other regions look towards it as a strategic differentiator, in Europe it is now the only messaging platform that will be accepted.
“Where previously standards varied by country, Sepa has helped to push the standard to XML,” says BAML's Davies.
The implementation removed the region’s previously disparate payments methods, paving the way towards full standardization of payments platforms. Another layer of standardization came with the introduction of electronic bank account management (eBAM).
The eBAM system allows for the further automation of the process, allowing corporates to electronically open, close and manage their accounts. The system is most commonly facilitated through the implementation of the ISO 20022 platform.
Sepa also enabled the corporates to dramatically reduce the number of bank accounts they held, as it was no longer necessary to open an account in each new country. Numbers could be cut from dozens of accounts across the whole region or one or two, which could be managed from one location.
Main Incubator GmbH
The goal now is to see concrete business benefits of this homogenization, from time and financial efficiencies.
“Many clients are now looking at virtual accounts,” says Davies. "In a centralized treasury, these give the treasurer a greater level of oversight and flexibility, and can significantly reduce the number of physical bank accounts that they need to maintain.”
The ability to move payments is enabling treasurers to attempt more sophisticated methods of treasury management. Payments on behalf of is emerging off the back of the change.
“Sepa has been the catalyst for centralization and defining standards,” says Deutsche's Reid. "It has created more options for corporates, opening up the chance to use in-house banks and virtual accounts.”
Treasurers are figuring out how to make the most of the harmonization of payments processes that Sepa has enabled.
Banks are now creating tools specifically to educate their corporate clients on the ever-increasing new ways to manage their business.
Take Commerzbank's treasury-tools app, which suggests to a corporate how much they could save through implementing different functions, such as consolidating their accounts or establishing payments factories.
The tool is specifically marketed towards SMEs as this corporate segment, in particular, has yet to fully capitalize on the full capabilities now open to them.
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“The treasury tool has been made to stimulate awareness for the customer of points in their business they need to consider to make their operations efficient,” Klaus Müller, head of product management, cash transaction services, Commerzbank. "There are often small details they overlook which can have an impact on their business.”
Reid explains the use of more in-house treasury processes are starting to become more popular for corporates, to the point they are starting to ask for help in setting up the services. He says: “Payments on behalf of is starting to pick up pace. For a long time it was just something that was discussed at conferences but now we are seeing RFPs that are looking for ways to implement it.”
A more-sophisticated understanding of new payment processes and digitization of the banking space, more generally, are pushing the market to innovate further.
Commerzbank, for example, has in recent years created divisions to look into how it can work more closely with the emerging fintech companies, and develop a reciprocally beneficial service.
Christian Hoppe, CEO of Main Incubator GmbH, Commerzbank, says: “We invest strongly in fintech. We look at every segment within the fintech universe, for example payments, big data. We also analyse the developments in the cryptocurrencies space.”