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Over half of corporates have no SEPA idea

It’s interesting that we’re now less than a year away from
SEPA’s end date for the Eurozone and so people are saying to me that SEPA
doesn’t matter so much as a discussion point anymore.

This is because the banks have got it nailed.


What about the corporate customers of the banks?

They also need to be compliant, but survey after survey
demonstrates that they will not be.

In December 2012, Steria published a report 'SEPA: Will
European Businesses be Ready for the Transformation?
'  in collaboration with Edgar, Dunn
& Company. The findings are based on a phone survey of 300 businesses with
250 to 5,000 employees in France, Germany and the UK and more than 15 in-depth
interviews among large corporates and payments experts in Europe.

  • 70 percent of the businesses surveyed indicated
    that they had heard about SDD (87 percent in France; 75 percent in Germany; 26
    percent in UK). The awareness of SDD among respondents increases with the size
    of businesses from 48 percent for businesses with 250 to 499 employees, to 70
    percent for those with 1,000 to 5,000 employees;
  • Almost 80 percent of the businesses surveyed
    knew that the migration to SEPA needs to be completed by 2014 in the euro area.
    While more than 75 percent of UK businesses did not know the deadline to
    migrate, more than 85 percent of French and German businesses were aware of the
    2014 deadline;
  • 70 percent of the businesses surveyed knew that
    they will need to use new bank identifiers for direct debits and credit
    transfers in the first stage of SEPA;
  • Almost half of businesses surveyed were aware of
    the need to implement a new message format for SEPA transactions (ISO20022);
  • 31 percent of businesses issuing direct debits
    had migrated or were in the process of migrating to SDD (42 percent in Germany,
    35 percent in France, 3 percent in the UK);
  • 30 percent of French and German businesses had
    not started to work on migration to SEPA at all. The SDD migration process was
    overall more advanced for larger businesses when including the assessment phase
    and the migration. Half of businesses with less than 1,000 employees had not
    even started to assess the impact of SDD; and
  • All French businesses issuing direct debits and
    a large majority of German businesses issuing direct debits (85 percent) stated
    that they will be SEPA compliant by 1 February 2014.

Also in December 2012, EuroFinance published the results of
its survey, entitled: 'Countdown to SEPA – How ready are corporates for the
February 2014 compliance deadline?

In this survey,  273
finance and treasury professionals were asked: 'What is the current status of your company's
SEPA project?' and their answers show that:

  • 12% had not even started;
  • 29% were evaluating options and planning;
  • 11% are in planning, with teams and budgets in place;
  • 4% have a project underway and are behind schedule; 
  • 18% have a project underway and are on schedule; 
  • 12% are at a point of basic SEPA compliance (no rejected payment instructions)  achieved and no further action
    planned; whilst
  • 15% have already acheived basic SEPA compliance and are now seeking further

The EuroFinance survey found that 59% of
corporates are targeting basic compliance, which means no rejected payment instructions, and only 28% are using SEPA as a platform for creating efficiencies.

A simliar result was found in January with gtnews:

SEPA Compliance Gap
Highlighted by gtnews Payments Survey

According to the latest
gtnews Payments Survey, there are still a significant number of corporates that
have yet to begin a migration programme for the single euro payments area
(SEPA) ahead of the 1 February 2014 migration deadline, with 37% of the 284
corporate treasury readers questioned in October and November of last year,
admitting that they do not yet have SEPA services in place.

Single euro payments
area (SEPA)-related payment formats are very slowly gaining ground ahead of the
1 February 2014 end date, with 42% of respondents, versus 34% previously, now
using SEPA credit transfers (SCTs) and 20% using SEPA direct debits (SDDs),
which was only 14% in the previous ‘gtnews Payments Survey’. However, these
payment formats are still only being used by a minority of the 284 surveyed
corporates, so there is still a lot of work to do to achieve full compliance
just one year before the SEPA deadline hits. The mandate management challenge
facing many corporates on SDDs is likely to remain a considerable challenge
throughout 2013.

The most cited reason
for embarking upon a SEPA project is naturally enough compliance with 64% of
the corporate treasurer readers of gtnews selecting this option. Cost saving is
the next most popular choice (with more than one choice acceptable) with 60% of
respondents selecting this, ahead of 53% seeing benefits in centralising
payments and 41% choosing bank relationship reduction. The latter is possible
because a single bank can now theoretically handle all SEPA payments across
European borders.

Experian followed this up by asking 260 Treasury Managers of
Global Corporations: “how would you assess your organisation’s
readiness for SEPA?” the results showed:

  • 16.8% of corporate treasurers and finance
    professionals are unaware of SEPA and the requirements needed to support SEPA
  • 21.1% of respondents are considered to be ready
    for SEPA today, and a further 7.1% are finishing or testing their implemented
  • 9.7% are currently starting implementation
    projects to meet the required 1st February 2014 end date.

This means that 62.1% of respondents have not yet started
any implementation work. With a little over 12 months to go until SCT and SDD
become mandatory, there is likely to be a significant risk that these
businesses are not ready to use the SEPA schemes in time.

In yet another survey by Pricewaterhousecoopers, 293
companies were surveyed about their readiness for SEPA, and found that 55% of
organisations are at risk of missing the SEPA deadline next February.

Major findings of the survey, 'SEPA Readiness Thermometer –
State of play with one year to go
', include:

  • 21.6% of respondents have yet to define and plan
    their SEPA readiness activities;
  • Few organisations have a comprehensive scope
    defined – for example, fewer than 30% of respondents include review and update
    of master data in their scope, and fewer than 20% involve HR, legal and sales
    departments in their projects. These statistics are even worse for those
    organisations that have yet to plan their SEPA-readiness activities
  • 43.5% of respondents that have planned their
    readiness expect to complete their project uncomfortably close to the deadline
    of 1 February 2014.
  • 43% of respondents are not confident that the
    majority of their customers will be ready for SEPA in time.
  • 92% of respondents mention 'systems readiness'
    as their number one concern

It is clear that over half of the companies that need to be
SEPA compliant will not be by February 2014, which is surprising as the dates are flying by fast:

31 March 2012

Regulation no 260/2012 entered into force; pan-European reach; phasing-out of €50,000 ceiling for equal charges to apply.

1 November 2012

Cross-border transaction MIFs (Multilateral Interchange Fees) eliminated for direct debits.

1 February 2014

SEPA migration deadline for SEPA credit transfer and SEPA direct debit within the euro area; no BIC (Bank Identifier Code) required for national payments.

1 February 2016

No BIC required for cross-border payments; niche products migration complete.

31 October 2016

SEPA credit transfer and SEPA direct debit deadline for non-euro area countries.

1 February 2017

National transaction MIFs (multilateral interchange fees) to be eliminated for direct debits.

So what will it take to get corporates ready for SEPA?

A major shove.

Maybe that shove is demonstrated by another press release
from Experian that finds the cost of non-SEPA compliance will rise to around
€20 billion unless something happens soon.

Euro crisis could get worse without SEPA

The beleaguered
Eurozone could lose up to €20bn as a result of data errors that will slow
payments made using the Single European Payments Area (SEPA) electronic
payments standard which is due to come into force in the Eurozone in 12 months.

Organisations in the
Eurozone must be compliant by February 2014, and non-Eurozone territories
wishing to make and receive payments in euros must be compliant by October

Research from Experian
has revealed that despite time running out for organisations wishing to make
euro transactions to be compliant with SEPA, only 2% of direct debit transfers
and 30% of credit transfers have been migrated. Businesses need to make
customer records SEPA-compliant using International Bank Account Numbers (IBANs)
before migrating to SEPA.

Experian research in
October revealed a large number of errors in customer bank account data. It
found that only 65% of euro transactions were underpinned by fully accurate
destination account data. It also found that 45% of SEPA IBANs stored by large
European businesses do not have the valid corresponding Bank Identifier Codes
(BICs) required.

Anyways, if you're into this SEPA stuff, then please note the Financial Services Club meeting being held on Tuesday 12th March 2013 from 6.00pm at The City IOD, New Broad Street House,
35 New Broad Street, London, EC2M 1NH.

The Subject of the Meeting will
be:  Is SEPA happening and does it matter? a debate with proposers:

  • Jerome Traisnel, Slimpay 
  • Ruth Wandhofer, Head of Market Policy
    and Strategy, EMEA, Global Transaction Services, Citi 
  • Vanessa Manning, Head of EMEA Payment
    Solutions, Transaction Services, International Banking, the Royal Bank of

and opposers:

  • Simon Bailey, Director, Logica
  • Peter Miller, Managing Director,
    Blacksmith Consulting

If you wish to attend then please register as a member or non-member (the cost
for non-members is £95 plus VAT, and is reimbursed in the event of the attendee
subsequently becoming a member).

About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, 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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