One in five European businesses issuing debits (21%) is unaware of the single euro payments area (SEPA) direct debit requirement, which comes into force on 1 February 2014, according to a study from IT vendor Steria, prepared in collaboration with strategy consulting firm Edgar, Dunn & Company (EDC). Large European banks, which are generally more prepared for SEPA and are looking to attract volume to their newly upgraded platforms, will no doubt be disappointed by the findings. Not to mention IT vendors looking for business.
The EDC report, funded by Steria, is based on a survey of 300 migrating businesses with 250 to 5,000 employees in France, Germany and the UK. It suggests that public and private sector organisations risk missing out on the benefits of SEPA migration.
Although SEPA affects the vast majority of EU businesses, with organisations using credit transfers or direct debits in euros needing to migrate before 1 February 2014, the survey indicates that only 31% of organisations have so far migrated, or are in the process of migrating, to SEPA direct debits (SDDs). In Germany 42% have migrated, 35% in France and just 3% in the UK, although the UK is not due to migrate to SEPA until October 2016 as a non-euro country. More than 60% in the UK have not started to work on migration to SEPA at all, including SEPA Credit Transfers (SCTs), against 30% of French and German businesses.
Despite the lack of preparation, 54% of European businesses agree that SDDs will generate more benefits than disadvantages to organisations. As the survey notes, SEPA is an opportunity for businesses to plan ahead, redesign cash management systems and processes and generate synergies between business units – a key benefit in today’s economy. However, to reap these benefits it is vital that organisations plan thoroughly and migrate properly.
The study found that a quarter of European businesses are considering working with external payment partners to help them to migrate adequately. Migrating could be a mammoth task for unprepared organisations, given the limited time left before the new legislation comes into force.
“Organisations that view SEPA as merely a compliance burden are missing a trick,” said Jean-François Mansart, head of the group advanced payment practice at Steria. “Smart companies will take SEPA as an opportunity to optimise their cash management systems and processes and reduce fraud and bad debt. But they need to allow themselves adequate time to prepare to avoid potentially costly errors and to ensure that the benefits outweigh the costs of migrating.”