All Set for SEPA or Time for Plan B?

With the single euro payments area (SEPA) migration end date of 1 February 2014 now imminent, Garry Young, director of corporate services at CGI, assesses the readiness of corporate treasuries, public sector and other organisations for the coming European harmonisation project, while also exploring if a ‘plan b’ delay is in any way possible. The …

October 29, 2013 | CGI

With the single euro payments area (SEPA) migration end date of 1 February 2014 now imminent, Garry Young, director of corporate services at CGI, assesses the readiness of corporate treasuries, public sector and other organisations for the coming European harmonisation project, while also exploring if a ‘plan b’ delay is in any way possible.

The latest single euro payments area (SEPA) migration statistics from the European Central Bank (ECB) make for disappointing reading, with only just over half of European organisations 50% compliant with SEPA Credit Transfers (SCTs) so far, while the SEPA Direct Debit (SDD) compliance figures are still in single figures, according to the ECB SEPA Indicators website. Reports also indicate that one in three corporates run the risk of missing the SEPA payment harmonisation deadline and nearly one in two treasuries admit to not having a backup plan.

The numbers are frightening – and it’s difficult to see how SEPA migration will be completed on time at this present rate of compliance. Officially, the deadline will not be extended. There’s been too much political and financial investment and the ECB always insists that ‘there is no plan b’ to achieving full compliance. However, that doesn’t mean that there won’t be agitation for a ‘fudge’ as the 1 February 2014 deadline looms ever nearer. We’ve already seen some countries delaying the use of the supposedly mandatory XML ISO 20022 messaging requirements, so why not some of the payment formats or other stipulations? Is this possible?

The Consequences of Not Complying with SEPA
It is worth at this point examining the consequences for corporates of not complying with the SEPA formats and stipulations. Some countries such as Cyprus have legislated hefty financial penalties that will apply fines of up to €20,000 for directors of firms that aren’t SEPA-compliant, plus additional daily fees of up to €1,000.

Corporate treasuries run the risk of being unable to make or receive payments if they don’t achieve compliance, impacting their cash flow and working capital. Broken financial supply chains could also result from non-compliance, including from companies outside of the continent, and this is another crucial concern. Banks or regulators could impose fines, but the key damage could result from these broken chains and disruptions to ‘just-in-time’ systems and logistics.

The key to compliance for many corporates, public sector, charities and other organisations will be to establish a ‘plan B’ quickly – there is unlikely to be any delay from the ECB. So what are the choices for latecomers to compliance?

Fast SEPA Compliance Options
Decreasing the scope of SEPA projects can be a practical option for achieving fast compliance ahead of the 1 February 2014 deadline. Companies can achieve minimum compliance, for example, by collecting the required data for SEPA and then using a conversion service for the final step. Many vendors are offering these SEPA conversion services. In addition, the market will continue to see increased use of alternatives to SDDs, which is presenting the primary problem at the moment, with services such as SEPAmail in France and Finland’s Finvoice currently available.

In my opinion, a sensible compliance approach is to consider subscribing to an outsourced SEPA platform. These Software-as-a-Service (SaaS) solutions can help accelerate migration efforts and even provide a viable insurance policy if in-house projects aren’t ready on time – they can also often be accessed on a ‘just in case’ back-up basis. Demand for such SEPA solutions is growing and will I predict continue to rise as the migration deadline nears. Securing on-boarding slots and getting connected now removes the risk of being too late, due to resource capacity issues in the market, and simply a lack of skilled engineers and professionals who’ve been booked by other late compliers.

No one can say that they didn’t see SEPA coming. However, the availability of SaaS SEPA conversion solutions means that firms at risk of missing the deadline can still achieve compliance in time, if they choose to act now.

• To see the ECB’S country-by-country compliance assessments of the SEPA European payments harmonisation project, and other SEPA compliance data including SCT and SDD migration volumes, please click HERE. bobsguide has also been running a number of recent SEPA blogs about the project from Reval, Experian, Kyriba and the European Payments Council (EPC) among others. Please click on the highlighted text to see these and visit the bobsguide blog section for the latest updates or the news section for news updates.

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