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Understanding SEPA’s long and winding road

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At the Euro Finance conference in Frankfurt this week was a stream all about transaction banking which yours truly attended.

The great and the good of our transaction world were also in attendance, as demonstrated by this short list of speakers:

  • Albert Lechner, Vorstand Zahlungsverkehr, Betriebs-Center für Banken AG, München
  • Andreas Kaiser, Leiter Cashmanagement, Bayer AG, Leverkusen
  • Andreas Wolf, CEO, Clearstream Banking AG, Frankfurt a.M.
  • Annie-Claude Jacquet, Head of Products and Transversal Projects, Global Payments & Cash Management, HSBC France, Paris
  • Armin Gerhardt, Geschäftsführer, EFiS Polska SP.Z.oo., Gdansk
  • Björn Flismark, Deputy Chairman, Euro Banking Association, Paris
  • Charles Cock, Head of Client Development and Member of the Executive Committee, BNP Paribas Security Services, Paris
  • Christian Schürlein, Senior Project Manager, Market Development, Xetra, Deutsche Börse Group, Frankfurt a.M.
  • Christian Schürlein, Senior Project Manager, Market Development, Xetra, Deutsche Börse Group,
  • Claus F. Hilles, Regional Representative D-A-CH, EBA Group, Frankfurt a.M.
  • Damian Preisner, Treasury Operations and Processes, Global Treasury, SAP AG, Walldorf
  • Dominik Adler, Division Manager Financial Markets, Bundesverband deutscher Banken, Berlin
  • Dr. Heike Winter, Bundesbankdirektorin, Grundsatzfragen Massenzahlungsverkehr, Deutsche Bundesbank, Frankfurt a.M.
  • Frank Annuscheit, Group Chief Operating Officer and Member of the Board of Managing Directors, Commerzbank AG, Frankfurt a.M.
  • Frankfurt a.M.Geert Vanderbeke, Head of Sales Europe, ABN AMRO Clearing Bank N.V., Brussels
  • Gertrude Tumpel-Gugerell, Member of the Executive Board, European Central Bank, Frankfurt a.M.
  • Gilbert Lichter, CEO, EBA CLEARING, Paris
  • Harald Keller, Senior Manager, Payments Markets, EMEA, SWIFT Germany GmbH, Frankfurt a.M.
  • Jörg Wiemer, Senior Vice President, Head of Global Treasury, SAP AG, Walldorf
  • Karoline von Richthofen, Global Head of Payment Markets, Deutsche Bank AG, Frankfurt a.M.
  • Marc Aguilar, General Manager Multi-Channel Bank, BGL BNP Paribas, Luxembourg
  • Marc Bayle, T2S Programme Manager, European Central Bank, Frankfurt a.M.
  • Marc Rommerswinkel, Head of Payment & Collection Management, Corporate Finance, Treasury Processing, Henkel AG & Co. KGaA, Düsseldorf
  • Mark S. Garvin, Chairman, Treasury & Securities Services – International, J.P. Morgan Europe Limited, London
  • Nils Jung, Principal Consultant, Payments, Capco, Frankfurt a.M.
  • Ruth Wandhöfer, EMEA Head Payment Strategy & Market Policy, Treasury and Trade Solutions, Citi, London
  • Thomas Egner, Group Banking Operations – Payments Processes and Vendor Management, Director, Commerzbank AG, Frankfurt a.M.
  • Werner Steinmüller, Head of Global Transaction Banking, Member of the Group Executive Committee, Deutsche Bank AG, Frankfurt a.M.

As you can see, with that list of the great and the good, it was bound to be an interesting day, and it was ... although coming so soon on the back of SIBOS, it could have been dull as dishwater.

The reason it wasn’t for me, is that I spent most of SIBOS locked in the innotribe stream, so I was happy to be updated on SEPA, T2S, Treasury ops and all sorts of other dialogue I missed in Amsterdam.

Most of the SEPA discussion focused on end-dates, with everyone saying that SEPA will only succeed when the end-date is in place.

Tell me something we don’t know.

Nevertheless, when Gertrude Tumpel-Gugerell said that: “2012 for SEPA Credit Transfers (SCT) and 2013 for SEPA Direct Debit (SDD) would be a good agenda to follow”, I could see a lot of shaking heads in the audience, as the bankers are working to 2016 and 2018 respectively and the corporates even longer.

But an end-date will come, with consultations today in Brussels and the Commission claiming they will announce a regulated end-date for conformance with SEPA instruments by end of year.

That is good as, with no business case at all to justify using SEPA instruments today, something needs to be done.

As Gertrude herself admitted: “one of the biggest challenges was the design of SDD and, one year on, it still has no practical usage.”


In fact, in the later panel discussion on SDDs explicitly, there were some interesting comments made particularly by Karoline von Richthofen, Global Head of Payment Markets for Deutsche Bank. First, she made clear that there are cultural differences between France, Germany and Italy in relation to transitioning to SDD and you cannot treat all of them the same.

For example, Germany’s transition is challenged by IBAN. In France, it is not as the French account numbering system was a mess before and so IBAN has been a blessing there. In France and Italy it is far more to do with repudiation and revocation of an incorrect direct debit amount that is the issue.

Therefore each country should be dealt with differently

This was a point raised in my own panel session.

My panel was focused upon the challenges to corporate for transaction banking, and consisted of

  • Michael Hofmann, Branch Manager Germany, ABN AMRO Bank N.V., Frankfurt a.M.
  • S. Rajgopal, Director, Head of Product Management, Standard Chartered Bank, Frankfurt a.M.
  • Stefan Scheidgen, Head of Cash Management/Billing, Deutsche Post Renten Service, Cologne
  • Alain Rividi, Treasury Program Manager Europe, IBM France, Paris

Michael Hoffman reinforced Karoline’s point by saying that he was in charge of the operations across Netherlands and Germany, and that the two countries are radically different.

In the Netherlands, everything is electronic and has moved to epay systems like iDEAL. In Germany, online banking and epayments are recognised but not nearly used as much as in the Netherlands due to concerns amongst citizens and businesses of the security and safety of online systems.

This raised an interesting question as you then have border overlaps, such as Northern Germany and the Netherlands, and Southern Germany and France.

A point underscored by an Austrian bank who could not understand what the hell were the demands of the Italian banks.

This led to other interesting dialogue.

For example, where is the demand for cross-border direct debits?

Karoline says it is from two camps:

Business-to-Business (B2B) which see the efficiencies and, for Business-to-Consumer (B2C) as an arbitrage of fees, where corporates in France want to collect consumer payments in Germany if the bank fees are less.

The latter point is particularly important in these border areas of France, Spain, Germany and Italy.

Equally, Annie-Claude Jacquet, Head of Products and Transversal Projects for HSBC France pointed out that such take-up would be limited in France for SDDs as: “5% of IBANs are incorrect which means that the rejects on SEPA payments are three times higher than on domestic payments for SCTs and is the reason why SDD is not taking off.”

Hmmmm ... teething troubles or long-term issue?

A final point worth noting on the practicalities of using SEPA instruments was raised by Stefan Scheidgen of Deutsche Post who gave a fascinating case study of their issues as a corporate user.

Deutsche Post has been used as a frontrunner for SEPA migration, and is moving all of their pension payments across to SCT formats.

That’s 26 million pension payments per month of which 24 million are domestic.

They moved 300,000 payments across in November 2009 and now make over 4 million payments through SCTs per month.

The problems they encountered however were multiple, specifically:

Legacy data migration

The continual changes in the financial industry

The requirements for global transaction processing

On the first point, a pension systems runs with account data that can be traced back over almost half a century for a pensioner, which creates big challenges due to multiple bank account formats over the years. Therefore, the legacy data migration from BBAN to IBAN was a big issue for the company, and although most banks offer some sort of data reconciliation services to the corporate clients, these are not consistent and do not cover all the bases.

The continual changes in the financial industry and the use of payments, for example, the move to new online and mobile payments, are causing problems. Just the migration to SEPA instruments within the banks and implementation of IBAN is an issue for example. Stefan believes there are far more frequent system changes and failures today than before, with five banks recently failing to deliver cross-border payment capabilities on time.

For these reason, it causes issues back to the corporate, with some banks limited the number of payments that can be communicated in each batch file to under 100,000. That sounds ok, but if Deutsche Post are to process 26 million pension payments per month at end of month, that’s more than 26 transaction files that have to be sent through on the last day of the month, cut and diced to suit the banks’ rather than the corporates’ payment processing capabilities. The reconciliation on those files is also a huge headache.

Finally, there are requirements from a corporate user to have an SGPA, Single Global Payments Area, rather than just a European one as the issue is global connectivity to payments systems, not just those within Europe.

The global processing requirements have not been addressed and most banks that call themselves Global Transaction Banks are just using this as a marketing label than a real capability. For example, they may be able to process across lots of regional hubs, but then the last mile is always a stretch. It might be the Cote D’Ivoire or Mauritius or Lagos or somewhere, but there’s always a part of the global transaction chain the bank has not got covered.

All in all a fascinating discussion of the challenges on both sides of the payments chain and maybe something I’ll spend some more time discussing later this week.

Meantime, just spent four hours at a foggy Heathrow trying to get to La Coruna, Spain, and now up in the air so it’s time for some relaxation ... something that European banks sound vastly in need of today.


Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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