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


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The regulatory framework of Europe’s single payments system is effectively in place. But the details of implementation by banks and corporates are still a matter of debate.

Cash management debate - Participants

Cash management debate: Executive summary

• Sepa seeks to improve business efficiency, create a standardized payments world and consolidate infrastructure

• Clear cut-off points need to be established for the adoption of mechanisms, such as Iban and BIC, that will enable the payment systems, and for the abandonment of legacy systems

• More standardization is required in areas that banks have so far regarded as competitive space

• More efforts need to be made to bring bank and corporate bodies together for consultation on mass implementation

• A simplification and consolidation of clearing systems is imperative

Any vision starts with objectives. What were the European Commission’s objectives in creating Sepa?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. MO’D Act Exactly. You have to know what receipts you’ve had in, and be able to match these payments with what you’re expecting. We need this remittance-type information and its delivery with accuracy and certainty. Other benefits may then flow from that. Your bookkeeping can be automated, you can control your credit better because you know you’ve been paid, so you can now ship the next shipment of goods out to that customer. NS, Citi If you create a strategic context it will provide a take-up incentive for the corporates and others. EPC is an institutionalized forum for the banks, right? On the other side we have the corporates. Why don’t we consider creating an institutionalized forum so that the two can come together and we can get this road map onto the CFO’s and CEO’s agenda?EK, European Commission We have not yet stipulated such a requirement, but we can clearly see the need to bring the two sides together. The Sepa process represents agreement by all the 7,000 banks, but if we want that to be broader to cover more of the value chain, we need the corporate side to participate in the standardization process, because banks can’t take that forward alone. AW, ABN Amro We would welcome the opportunity for the banks and corporates to come together because we get feedback that the banks aren’t listening. We cannot afford not to listen. We need the mass migration, otherwise Sepa won’t work for us. We also have to recognize that on the banks’ agenda we had the euro, then we had Y2K, now we have Sepa. We’re starting to free ourselves up now, as we see delivery in the next year, so then we can start talking about widening standardization, because it’s not in our interests to have all these different means of connecting it either. EK, European Commission This is not an either/or question. This is complementary. We first need to get Sepa off the ground. Nothing will stop us from widening the scope thereafter and having a Sepa-plus or e-Sepa that goes into the corporate world. But right now we’re at the stage where we have one standard for one piece of the payments part, but we don’t yet have the same for the rest. So we’re already discussing whether we can design a process similar to what we have done with Sepa. GT, EACT There is a long list of things that corporates would like to see standardized in order to achieve straight-through processing. Why are corporates so passive? Because they are waiting for the banks to tell them how they will interface with them when Sepa comes. Our banks will offer us specific services on January 1 2008, and then they will tell us exactly what formats they want us to populate with our payment orders and so on. NS, Citi I don’t think it’s as passive as that. Corporates have got to take a more strategic view of Sepa in the context of their operating model, their legal vehicle structure, their accounting structures, their liquidity, the information flows, their ERP systems and how will they exploit it to improve automated reconciliation and liquidity or working capital management. You can’t just take the view that on that day I’ll get what I get.

Payments are key

JL, J&W I think Vincent speaks for many corporates when he emphasizes that payments are the key to getting them to focus on implementing Sepa? VH, AFTE The payment part of Sepa is an important building block. Once we have that payments system, any billing, any signature, any standardized exchanged with banks or with e-stakeholders, will help to build financial value chain optimization. We need to know when we will have those other building blocks so we can sell the idea to our CFO that within five years, seven years, we will be able to also transform our financial value chain. Then we’ll have a business case. EK, European Commission That’s an excellent point. We need the strategic road map that embeds the Sepa building block into the corporates’ wider agenda for the financial supply chain. But we also need a credible time line under that. Nobody will invest or plan without being certain when there will be return on their investment. So we need to know when banks will have that on the ground and how many banks will have it implemented. The certainty of the road map is key. JL, J&W But where do we start with payment systems? VH, AFTE The French market already has a fairly automated payment system, so what we need is simplicity. It will be easier for us to move to our new payment instrument if there are not too many options, otherwise we won’t know which banks will accept what. We need a simple instrument that is sure to work Europe-wide so that we have true reachability. SC, ING First of all, we need clarity of standards. The legal harmonization should be finalized. We need a clear infrastructure within which to exchange payments, so a basic clearing and settlement infrastructure. And finally, we still need progress. That is getting more important. The market-driven migration approach assumes that the banks put the products in place and gives our customers the chance to adopt the products. That’s now shifting due to the costly co-existence. Everyone is becoming aware that we will have double costs and that we should shorten this changeover period. We will stick to the market-driven approach, but it is changing from the demand side to the supply side. NS, Citi In addition, once the PSD is approved there will be the outstanding issue of transferring the existing direct debit mandates to the new scheme. That will be a critical point. There are also other important areas, such as the harmonization of taxation and central bank reporting, which will impact the ability of corporates to move to an optimized legal structure and account model.MO’D Act We’ve mentioned reachability. Not all banks or financial institutions are going to offer things like Sepa direct debits, but is there some assurance that they will all be able to take direct credits? I haven’t quite figured out whether effectively a bank can opt out, in which case you haven’t got reachability. SC, ING It will probably be easier to achieve reachability for Sepa credit transfer, because 95% reachability is already achieved in the pre-Sepa Credeuro world. For the ramp-up the clearing houses were leveraged, but we cannot do that for direct debits. So every single bank should become a direct or an indirect participant through another bank or provider, and that is an ambitious challenge. ER, HSBC The legal adherence agreement for credit transfers says that you must be able to receive a credit transfer, ie, be reachable. From our point of view we’d like to see a small number of interoperable clearing and settlement systems. But we are waiting for the European Association of Clearing Houses to provide a clear definition of interoperability. Statistics say that a clearing and settlement mechanism cannot be profitable unless it handles 10 billion to 12 billion transactions. By definition some are too small, so they should evaluate their commercial viability going forward. That would make life much simpler. JL, J&W But it isn’t them, is it? It’s the banks that own them that have to make that decision. ER, HSBC Not necessarily. There are some where banks are shareholders, but not all. Some small clearing systems might not want to become Sepa-compliant and will withdraw from the market. An example where this has happened is Luxembourg There’s a number of other countries where the payments traffic just doesn’t provide a positive business case. The banks need that certainty. VH, AFTE Would it be possible to work more on the credit transfer and give it some features that corporates currently have with direct debits? For instance, Belgium has a transfer with a reference that is totally fixed. In France, we use direct debit because it gives us the opportunity to send the reference and receive the reference back. The customer needs to be able to input that reference in the system through transfer. So if we have a way to receive an exact reference through transfer we may be interested. EK, European Commission There’s no problem with that, because the remittance information is there in both products, and the banks are committed to putting it through. The problem is that there’s no structure yet, and that depends on the corporates’ input. It has simply not been done yet, but it’s agreed that it will be done. JL, J&W So how do we move this forward? GT, EACT It’s a question of how the corporates work with banks. The corporates have to agree on the rules regarding payment initiation and present a concrete proposal of what to do with the 140 characters problem, and then discuss that with the banks. Then it will work. AW, ABN Amro Last year everyone put a lot of effort into laying the foundations of the Sepa credit transfer and Sepa direct debit. We had a structured way of engaging our clients to get their input into the processes as we firmed up the requirements. However, there is a wider issue: many corporates don’t seem to know how to access the appropriate forum in which to raise something, or get a message across. When they take it through us we take it very seriously, because it’s our intention to get mass migration onto these instruments.NS, Citi We have embarked on a very active communication strategy with the marketplace and most importantly with our corporate, financial institution, and public sector clients. We explain the strategic context, and also take it down to a specific level of detail for each client base. For example, with a corporate client, we begin the discussion on what Sepa means for them based on the evolution of their own commercial and treasury models. Then is it important that we get the PSD done, and issues around direct debits sorted out. Finally, to provide a little more incentive down the line, we need to start formalizing corporate standards around the supply chain. ER, HSBC Another important thing to look at is the implementation issue, particularly regarding direct debit. We have customers with millions of direct debit mandates – for example, the phone companies, the insurance companies, the retailers. They’re all excited about the prospect of having a pan-European collection facility and they want to have it immediately. And then they are disappointed when they hear the legal framework isn’t there yet. But few have looked at how they will implement it. Will they ask their millions of customers to sign new mandates? That might be tricky. Can the currently existing mandates be translated into new Sepa mandates? Do we need regulation on that? Mandate handling is different in each country.SC, ING We’re working on it! I’m a member of the EPC Electronic Direct Debit Operational Procedures Work Block. The mission is to complement the rulebook with operational and practical instructions for participating banks to allow for a smooth implementation, so feel free and send it all to me. There are also possibilities offered by vendors to generate the mandates from the payment streams. ER, HSBC Yes, but there is no industry agreement yet. Any corporate with a lot of mandates is very worried about this. No one has the answers yet.

So the problem is how to translate your millions of clients’ local account numbers into BIC and Iban ones. In France, we have decided how to go from our national bank account number to Iban, because it’s mathematical, and there is no possible error, although that is not the case in all countries. The banks have also agreed to give us an electronic way to receive BIC. But each country must decide if it needs to change its legal framework to allow the mandate to be valid. That is a domestic issue.

Working capital benefits

JL, J&W What do you see in terms of the working capital efficiency, the financial supply chain efficiency and the opportunities for you? VH, AFTE I agree that payment is only a small part of the real efficiency potential and if in 10 years’ time we’ve made these savings, there will be more focus on the highly specialized people that deal with IT and there will be fewer back-office problems with all the financial supply chain integration. Payments won’t be the problem they are today. MO’D Act It’s a hugely labour-intensive process, creating invoices, checking them, processing them and reconciling the receipts. If that can be automated, which is what this vision is all about, there are some massive efficiency benefits for the corporate.

I wanted to mention the global aspect. Many large corporates do not find it easy to deal globally. They deal regionally, and many are dissatisfied because of the fragmentation in Europe. It’s too complicated. So our vision is to enable large corporates to transact globally and not having to worry about regional issues. That will be a consequence of Sepa, Mifid and other regulations, all leading towards the single market. NS, Citi Focusing on the mid-tier corporates, in a transparent environment which is e-solution and e-invoicing driven, you are better able to monitor the health of the organization, which can lead to a reduction in bankruptcy. And once you have better working capital efficiencies, you’re able to offset some of the negative impact of Basle II. Improved ratings and risk profile may create alternative means of financing. The more the business is automated through technology the more, the bank can look at the flows very clearly and bring in discounting, factoring and those sorts of disciplines. EK, European Commission Sepa will have three big groups of impacts for corporates. One is purely financial; cashflow, better predictability, better access to finance, e-finance and refinance which is important particularly for small and medium-sized enterprises. Banks will be making new products available. Secondly there’s the automation side, which involves better internal processes. Invoicing and cashing-in will be less labour intensive, as will VAT issues. And finally, risk management. It will become much more transparent, which is not to everybody’s liking, but clearly that has a lot of benefits for the economy. AW, ABN Amro We believe that Europe will be a pace-setter for standards for the rest of the world, so in 10 years’ time we expect corporates to be pushing for the same standards to be applied in other regions.

Prompting take-up

AW, ABN Amro I have a question for Vincent. Do you think that your take-up of the Sepa payment instrument is going to be reliant on having a positive financial supply chain business case? Or do you think that you will treat both of them as separate activities within your organization? VH, AFTE Well, right now, looking only at the Sepa payment parts, I don’t see a positive business case. But maybe I’m wrong. Once we see what the banks are offering we will be able to see if it’s worth going directly to the Sepa instruments. If there is no business case there, then we’ll have to look at the larger financial value chain, but that may take years. We should keep working on e-signature, on e-invoicing in parallel to Sepa and in parallel to the payment system. MO’D Act It’s all about getting corporates and customers to agree that there’s something better within Sepa. Some of the bigger multinationals may have already got in-country domestic pools in place and all the complicated work-arounds to access local direct debit systems or whatever. Maybe we should be targeting the SME or middle-ranking companies, who are perhaps struggling at the moment. For them, it’s not worth setting up bank accounts in foreign countries, but when this product comes along there will certainly be a benefit for them. Perversely, could it be the medium-sized and small boys who drive the implementation?EK, European Commission SMEs have a very small migration hurdle in terms of system change but can gain substantially more from this new product than big corporates, which might have already put in a lot of effort and spent a lot to integrate their payments and their treasury. If you look at the technicalities of change, Iban and BIC will become mandatory for domestic payments. We’re not talking about Sepa – yes or no? The payment services directive will say banks can choose, and they will choose one standard for doing a payment and for identifying their customer. It will be the Iban and BIC, so everyone will have to change. That’s not voluntary, so the additional step towards Sepa is whether you use the ISO standards to send messages or not, whether you use a converter or not. But you don’t need to. You can already use Sepa, because many banks are putting in their propositions to help them do the messaging and routing. So the details suggest you could make migration much easier. NS, Citi There is a clear economic incentive but it will also depend on how the financial institutions wrap Sepa with the other components to deliver the end-to-end solution. At Citi we are investing in Sepa, but also in integrating local capabilities, that will exist during the transition, with the regional and global platforms. We’re also forming strategic alliances in processing, distribution, flow access and the target market access dimension. This gives us a range of capabilities. Based on a clients’ need, we can structure something that plays to their exact problem or issue. Even if they believe that Sepa is economically inefficient for them in the short term, the overall value the solution is delivering is the important issue, not Sepa itself. ER, HSBC Sepa is a great opportunity for us to more efficiently utilize our geographic coverage. But large and small companies differ in terms of benefits they will derive from Sepa, and there is also a difference between those that mostly collect and those that mostly make payments. As a bank, we advise and consult with these companies depending on their specific needs. If a company mainly collects and needs international direct debit, they should appoint an internal Sepa project manager to pull everything together. For a company that just does payments, the internal changes are less significant. So whether or not they appoint a Sepa project manager depends on what type of company they are. GT, EACT I agree with buying Sepa embedded in larger products. In Italy, for instance, the new local cash management system, the equivalent of Isobel, is coming out with invoicing, plus the Sepa credit transfer and they will also implement direct debit. If there are new services available through Sepa, you may buy a larger package because you don’t see the limitations or the cost of Sepa itself. But local adoption of the direct debit is the crucial point in the whole Sepa migration plan.

Big bang or slow burn?

JL, J&W The next big question is whether we go for a period of commingling of the different solutions or we go for the ‘big bang’. NS, Citi A prolonged transition will not be in the interest of any constituents of the marketplace.

TB, Twist
In the Nordic countries for example, it was very natural to decommission existing infrastructures after a few years. So we should set a time line, let’s say five years.

MO’D Act
I fear it will be a very slow take-up. If you’ve got a domestic system, and by and large 90% of your payments are done domestically, you’ll stay with what you’ve got. If we’re not careful, it will be a long transition.

But what’s ‘long’? Is five years too long? EK, European Commission You have to ask the banks if they can live with five years of parallel systems maintenance. Five years would mean a lot of money. Two years ago the Commission wrote a paper asking whether or not we should have a clear cut-off time line for Sepa. There was an outcry from the banks. How could we interfere in this wonderful market-driven process? Now, however, many banks are having doubts that they will get adoption, let alone get the critical mass. What’s worse, the corporates won’t get involved before they have critical mass. It’s become rather circular. I personally believe that we need a cut-off point. Initially it will not suit everybody, but in the end everybody will agree, like with the euro. Once there’s a date, everybody does it, even if they complain about the length of the time period. AW, ABN Amro I agree. Gianco is already talking about standardization in other parts of the supply chain, and the reality is, as long as this co-existence drags on, we continue to invest in our legacy infrastructure and can’t focus on the standardization and the other aspects you want. VH, AFTE If you want to make my life easier, go for a big bang. If we have a date, I can ask my CFO for the money and I don’t need to convince him. But a big bang would much more expensive than a long adoption period. Five years seems realistic because in large corporates there’s a yearly budget. So if today we decide to go ahead, that means it’s taken from the budget in 2008. It’s a large project, so we need another 12 months, because we wouldn’t send out millions of direct debits without doing a lot of testing. So we are already talking 2009. We have several systems, and so we maybe need one more year – 2010. That’s the reality for large corporates. EK, European Commission That’s a credible plan I could buy into. But we’re not there yet. There is nobody discussing a deadline.

Next steps

JL, J&W So what are the key components that have to be on the table, Gianco and the corporates, before you can tell your bosses it is on it’s way? Obviously the PSD must be sorted out, and some of the rulebooks in place. But what else do you need? TB, Twist We need a minimum cost migration plan.

MO’D Act
You need to see the banks knocking on the door selling the product, and from what I’m hearing that’s beginning to happen.

ER, HSBC But it’s this vicious circle again. If you speak with corporates about migrating to Sepa, it is difficult to be specific enough when there is no definite end-date for the period of duality. If we had a definite end-date, corporates would be more inclined to listen and act. MO’D Act I don’t like being told what to do, but I accept that you probably need a big bang, because an end date creates certainty.

What key features should be on the corporates’ to-do lists? AW, ABN Amro The larger corporates should appoint a Sepa champion. Vincent highlighted that it’s to do with implementation, it’s IT, it’s right across the organization, and those people are not coming together today to discuss the impact of Sepa. So that’s number one. And from a tactical perspective, we must ensure that BIC and Iban are into all the payments and receivables. Then someone has got to start looking at the whole impact on the process, because it’s not just the interfacing with the banks. It’s also the ERP systems’ impact and other systems that might be used internally. The other key thing is engagement with the bank. You need to understand what they are doing in terms of Sepa and Sepa-plus, so you can decide which bank you want to be your partner going forward. GT, EACT The corporates should try to sort out the problems on the direct debit side and make a specific proposal to the banks so that we get the rulebook we need. The corporates, the banks and the local community need to make a checklist of things that have to be decided upon before they can accept the new offering. We also have to solve the AOS issues, otherwise we’ll still be discussing Sepa in two years’ time. NS, Citi I think you’ve got to take a strategic view, build a business case and have the organization structure and institutional support behind it.

MO’D Act
Some of the corporate community should try to help finish off and improve the added things, both within the existing rulebooks and the Sepa extras. Being a bit more controversial, though, an awful lot of corporates should do nothing. They’d be wasting their time at the moment. When there’s something more definitive, and they know what the costs are, then they can start doing the cost-benefit and restructuring analysis. Some corporates should be quite happy to accept a suite of products, because there are banks that commercially want to build something that will sell, and will therefore be servicing their needs. Other companies will want to take the initiative and input into that process. ER, HSBC Corporates should continue with efforts to centralize and introduce efficiency into their company before switching to Sepa instruments. Secondly, don’t get into local domestic instruments now unless you absolutely have to, because eventually these will become obsolete.SC, ING My concern is that Sepa isn’t on most corporates’ to-do list for 2007. So my first suggestion is to put it on the to-do list for 2008. Plan an exercise with your vendor and your bank. Plan the business case and work out the difference between the costs now and the costs in Sepa. We are already doing that with some corporates, and it helps. EK, European Commission Corporates are not living in the perfect world. Considering their current situation, they could gain a lot, and so I can’t understand this ‘sit back and wait’ approach. I would ask them to get more active in both fields; in direct Sepa and in Sepa-plus. Not all banks are completely plan-less and idea-less. Quite a few already have a full product suite that can do much more than the core Sepa. Speak to them! Some strategic questions can be addressed now. What’s more, if corporates want more efficiencies in the whole business process, they need to contribute to the specs. It’s not enough to complain that you’re not present. The invitations have been issued. TB, Twist The appointment of a project manager should be on the CFO’s agenda. He might well identify one within his financial controls department, rather than the treasury, because most of the operational benefits will come out of the accounts receivable and accounts payable departments, with links to customers and suppliers. Sales and controls departments are much closer to it than the treasury. Once it’s on the CFO’s agenda it’s easier to engage the IT department, because they have to manage the IT infrastructure.VH, AFTE I would say, "Just publish the PSD. Stop the rulebooks discussion." Publish them and say they are final so we can start working on the implementation.

So what should the banks do? Gianco? GT, EACT They should listen to us.

MO’D Act
They should start or expand the process of giving information to the corporates, because there’s a lot of uncertainty and ignorance.

TB, Twist
I think more engagement between product management, sales, the payment service and the supply chain financing service offerings.

Easier financing would be an incentive for corporates to go to Sepa, especially for SMEs.

EK, European Commission
Adoption is much more supply-side-driven than the banks think. They might delegate too much to market-driven approach. They could do lots intra-community and also across communities to agree on an implementation plan that’s more concrete and delivers more benefits. Banks need to be putting more effort into the planning and the timing of the Sepa implementation, and that would help to push Sepa through.

New products

JL, J&W Finally, without giving your secrets away, what new products do you see catering for this new environment? SC, ING We will leverage our current mass payment processing capabilities. We will offer a single STP pipeline, not necessarily Sepa-only, to public authorities, governments and to big corporates. And on the direct debit side we can expect a lot of value-added services in mandate management, creating aggregated views, extensive credit advice and flexible notification management. And customers want a one-stop-shop service experience every time they call us. AW, ABN Amro More than new products, I think the innovation will be in the way that a lot of things are delivered. There will be a one-stop-shop, and whatever sort of payment providers they are will be responsible then for pulling various parts of that distribution chain together in order to deliver. There are already a lot of innovative products today. They will become business as usual but will be delivered in new ways. ER, HSBC The new products may come from the internationalization that’s possible under Sepa, because smaller and medium-sized businesses can expand more easily across national borders. The labour market is becoming more flexible and mobile with the enlargement of the EU. People moving from country to country need investment products, pensions, savings products that they can take with them. Mifid allows investment management firms to offer services or products in multiple countries, through passporting. Both corporates and individuals will be beneficiaries and there will be a demand for that. All of these products have a cash management, a payments aspect to them, because if you invest you ultimately have to transfer money. So I think Sepa offers an opportunity to get into the area of portable international products. NS, Citi There will be innovation along the supply chain. Once payments have become very efficient, you’ve got to help drive out any other inefficiencies. Once e-invoicing, e-reconciliation and other non-conventional products have been optimized, the solution is set for what we term end-to-end treasury. The information and analytics are there. And if the CFO and treasurer have that latest liquidity position in front of them, they can start driving the decisions as to which payment, collection and investment products they need. As the traditional treasury model becomes more efficient, the CFO and treasurers focus will shift towards policy and strategy. Sepa will be a catalyst for accelerating that momentum, but currently the focus is on driving inefficiencies out of the payment market. Once you have done that, we’ll look for the next wave of efficiency. That’s where the innovation’s going to happen. AW, ABN Amro The paving stones are being put in place today for what will happen in 10 years’ time, and that will be the delivery. But by then we will be looking at getting the Sepa concept in Asia or elsewhere and we will shift the innovation to another region. If Sepa succeeds, it will be the driver for efficiencies in the financial supply chain in other regions. It has to be. TB, Twist I think the best product would be OPM – other people’s money – an opening up of tailor-made financing in corporate supply chains from stakeholders and capital markets. One of the key drivers beneath Sepa and Mifid is the easy flow of information. That transparency means you can get money from your bank, from hedge funds, from the taxman or from a major trading partner. So beyond efficiency gains in the next decade I see easier access for, in particular, small companies to other people’s money, in whatever form – not only from banks but from trading partners and other parties. GT, EACT If or when banks and corporates are well integrated, with all parties working on the same network to the same standards, it will be possible to have four-corner models, enabling reverse financing. One bank can turn to the supplier rather than to his client, and on behalf of the client supply money to the supplier. That information and transparency will diminish the risks of financing and create more forms of financing. Everybody will feel safer because the procedure will be totally automated and with no risk.

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