07 February 2013

EPC: Early movers on the demand side identify best practice – Part I

The SEPA Regulation effectively mandates migration to SCT and SDD in the euro area by 1 February, 2014. This and the next EPC Blog deliver a 'best of best practice' identified by early SEPA movers on the demand side.

Late movers: act now at the very latest!

Luc Waterlot, Financial Systems and Interfaces Manager at Electrabel GDF Suez Market & Sales and responsible for SDD implementation, comments: "Migration to SCT and SDD is feasible, manageable and beneficial. Preparation, however, is everything and time is of the essence. The scope of the changes is extensive. At this point, it also needs to be taken into consideration that the migration approach adopted by Electrabel GDF Suez, i.e. migration to SCT first followed by migration to SDD, is no longer an option."

Organisations that use credit transfers and direct debits and that are only now launching the migration project, will have to manage migration to both SCT and SDD in parallel within the next twelve months. Market participants in the euro area should note that failure to comply with the core provisions of the SEPA Regulation by this deadline risks infringing on EU law.

Appoint a dedicated SEPA implementation team

Waterlot adds: "We set up a dedicated SEPA implementation team including members of our business and IT as well as the marketing, sales, legal, and finance and treasury departments. It is really important to understand that SEPA implementation impacts an organisation at all these levels."

Get ready for the International Bank Account Number (IBAN) and the Business Identifier Code (BIC)

The SEPA Regulation includes detailed provisions on the use of both IBAN and BIC by payers and payees. SEPA project managers unanimously stress the need for careful planning when preparing the transition to IBAN and BIC. They also highlight the importance of thorough testing prior to making the move in the live environment.

Adapt to the usage of the ISO 20022 XML message standards

The SEPA Regulation states that payment service providers (PSPs) must ensure that where a PSU "that is not a consumer or a micro-enterprise, initiates or receives individual credit transfers or individual direct debits which are not transmitted individually, but are bundled together for transmission, the message formats specified in point (1)(b) of the Annex are used". Point (1)(b) of the Annex to the SEPA Regulation clarifies that the message formats referred to are the ISO 20022 XML message standards. Article 16 (5) of the SEPA Regulation, however, allows EU Member States to waive the requirement to use the ISO 20022 message formats for PSUs until 1 February 2016. PSUs will therefore have to make arrangements to adapt to the usage of ISO 20022 XML message standards in the customer-to-bank space in relation to files of payment transactions.

Migration to SEPA pays off

Early movers on the customer side who reported on their migration experience in the EPC Newsletter concur that migration to SEPA pays off. To give an example Dr Markus Warncke, Group Financial Controller at Villeroy & Boch, comments: "The SCT and SDD Schemes work very well for us. Our figures demonstrate that the benefits resulting from migration to the SEPA Schemes and standards exceeded the investment in the first year alone. In line with our expectations, we were able to streamline internal processes, lower IT costs, reduce costs based on bank charges and consolidate the number of bank accounts and cash management systems. In addition, we could further centralise our cash management. The fact that there is now one harmonised SDD Scheme, which allows collecting payments throughout Europe, is also a major advantage. We realised significant efficiency gains from the implementation of the ISO 20022 message standards. The reality is that the benefits of an integrated euro payments market outweigh the short-term efforts to get there."

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