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The SEPA migration deadline may have passed, but most companies have yet to gain the full benefits offered by the Single Euro Payments Area initiative. Now would be a good time for treasurers to ask how they can get more out of their SEPA investments.

The February 1 SEPA migration deadline has come and gone, and the six-month extended transition period announced earlier this year has now ended. Most companies can breathe a sigh of relief, having completed the migration process: As of June, more than 97% of credit transfers and 95% of direct debits in the eurozone were processed using the new SEPA payment instruments.

However, the end of the migration period is not the end of the SEPA story. In reality, most companies have focused on achieving compliance within the deadline, rather than using SEPA, at a more fundamental level, as a means of improving their payments structure. As a result, many of the opportunities that SEPA promises are still unrealized. “We don’t believe that there is any one corporate that can truly say they have achieved all of the benefits that SEPA promises,” remarked Ad van der Poel, head of product management, corporates, global transaction services (GTS), EMEA, at Bank of America Merrill Lynch.

In the scramble to migrate ahead of the deadline, many companies adopted interim solutions such as Extensible Markup Language (XML) conversion services, while others have had to put on ice any plans they may have had to reengineer their payments structure. At the same time, inconsistencies across the industry continue to prevent some companies from achieving the full benefits of SEPA.

“There has not been quite the harmonization from day one that, ideally, you’d like to see—for example, the inconsistent use of SEPA direct-debit return codes and the inconsistent application of return fees,” says Susan Dean, head of transaction services for EMEA at J.P. Morgan. “The industry is working to make sure we get some consistency in this new environment.”

Enrico Rao, group treasurer of Italian tourism company Alpitour, says that the company’s SEPA migration is 85% complete and that some minor issues still need to be addressed. “Italian banks give you a tool to translate the old [payments] format into the new SEPA XML format, so if you have the supplier’s IBAN (International Bank Account Number) and BIC (Bank Identifier Code), you are able to make SEPA credit transfer payments with no big effort,” he adds. “The SEPA direct debit is more complicated because you have to reinvent the old system.” 

Rao points out that data provided by customers is not always completely correct, meaning that direct debits cannot be successfully executed on the first attempt, which can result in more work for the company.

SEPA 2.0

Van der Poel, BofA Merrill: No corporate can truly say they have achieved all of the benefits that SEPA promises.

Given that most companies have yet to realize the full benefits of SEPA, treasurers are now asking what they can do next to benefit from the investments they have already made. “Now is the time for corporates to really reap the benefits of SEPA by automating processes across countries, rationalizing accounts back to one account or at least one account per country, and, possibly, centralizing payments and collections,” comments Rob Allighan, SEPA product manager, GTS, EMEA, at Bank of America Merrill Lynch.

The standardization of cross-border payments may even enable companies to access new customer bases. “Depending on their strategy and positioning, ambitious companies will now be looking to leverage those investments to spread their business across borders and target customers in different European countries,” says Andrew Copeman, an analyst at research advisory firm Aite Group.

Corporations that are using niche payment instruments—particularly those to be phased out in 2016—could also start looking to migrate away from these. “Where companies are used to different instruments outside of SEPA, they can now work with their suppliers to move them onto SEPA transactions,” says Dean of J.P. Morgan.

Other opportunities SEPA affords include the ability to streamline liquidity management solutions. Instead of sweeping funds from multiple European accounts to a header account, companies can reduce the number of accounts held across Europe—and consequently simplify their pooling structures. In light of these opportunities, many
companies are already contemplating a secondary SEPA project. George Dessing, vice president and corporate treasurer of Wolters Kluwer, says now that the information services and publishing company has successfully executed its SEPA migration project, the next step is to capture additional benefits.

“We took a two-step approach with SEPA. The first step was to obtain compliance, and that’s now a tick in the box,” he says. “We are now making sure that our units are grabbing the potential that SEPA can offer to them in terms of further centralization and greater visibility over cash.”


Dessing, Wolters Kluwer: The development of electronic direct-debit mandate solutions will be of interest.

Looking further ahead, Dessing says the development of electronic direct-debit mandate solutions will be of interest. Mandate management solutions are also a point of interest for Alpitour. In the past, Italian banks managed direct-debit mandates on behalf of their corporate clients, but under SEPA this service is no longer available. Rao says that the development of the SEPA-compliant Electronic Database Alignment (SEDA), an additional optional service developed by Italian banks, will help corporations manage their mandates more effectively in the future.

Monique Kienhuis, principal business consultant, payments, at infotech and business services firm CGI, adds, “Corporates are really looking for a European solution for e-mandates, but this is not available. The European Banking Association tried with MyBank, but there were not enough participants. There have been all kinds of initiatives on a country level, but some banks will not participate in country-specific solutions because their clients work at a European level.”


XML is another area in which companies may seek further improvements. “There are still a number of corporations, which haven’t made the move to XML,” says Martin Runow, head of cash management corporates, the Americas, for global transaction banking at Deutsche Bank. “They are still relying on their banks or vendors to convert payments to XML. These services will become more expensive over time as the industry migrates to XML, so companies which haven’t addressed this area yet will need to do so with haste.”

Although SEPA is a European initiative, there are already signs that companies are applying the lessons learned in Europe to their payment structures at a global level. “XML is the format that is most conducive to achieving this globally,” explains Runow. “Companies are required to use XML in Europe, but they can use that situation to create the budget needed to create an XML layer in their systems. Then they will be in a strong position to use XML at the global level.”

With SEPA migration under their belts, treasurers may welcome the prospect of moving on from this long-winded initiative once and for all. However, it is only now—with the pressure of the compliance deadlines lifted—that many will have the opportunity to sit down and ask how SEPA can really help them. Upon reviewing everything from their bank account structures to their use of XML, companies should be asking how they can benefit further from the investments they have made during the past couple of years.