Payments News - January 30, 2013

There is only Plan A: get ready for SEPA in the next twelve months

Are you excited yet? After more than a decade of the Single Euro Payments Area (SEPA) in the making, this most ambitious European Union (EU) integration project in the area of electronic euro payments will become a reality in the next twelve months.

Writes Etienne Goosse, EPC Secretary General

As reported on many previous occasions: the ‘Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro’ (the SEPA Regulation) effectively mandates migration to SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) by 1 February 2014 in the euro area. Since the EU lawmaker adopted the SEPA Regulation in February 2012, the focus has been on alerting payment service users (PSUs), in particular those handling major payment volumes, on the need to achieve compliance with this legislative act. Latest available survey data indicates that good progress has been achieved by the corporate sector now preparing for the 1 February 2014 deadline.

In December 2012, Steria published the freely available report ‘SEPA: Will European Businesses be Ready for the Transformation?’ (see links below), which was prepared in collaboration with Edgar, Dunn & Company. The report focuses on corporate SDD readiness. 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. Businesses in the UK, a non euro country, will have to comply with the SEPA Regulation by 31 October 2016. Responses related to three specific aspects relevant to SEPA migration showed:

SEPA end date set to February 2014: 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.
New bank details with Business Identifier Code (BIC) and International Bank Account Number (IBAN):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. When the ‘IBAN-only’ rule (Article 5 (7) of the SEPA Regulation) comes into force, businesses will only need to take into account the IBAN.
New ISO20022 message format: almost half of businesses surveyed were aware of the need to implement a new message format for SEPA transactions.

The Steria report also found that at the time of the survey, 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). The SDD migration process was overall more advanced for larger businesses when including the assessment phase and the migration. Despite the fact that, at the time, 30 percent of French and German businesses had not initiated activity to migrate to SEPA, 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?’ (see links below). A total of 273 finance and treasury professionals responded to the five questions asked within the survey, which was sent out on 27 November 2012. With regard to the question ‘What is the current status of your company’s SEPA project?’, respondents based in SEPA indicated the following:

Not started: 12 percent.
Evaluating options / planning: 29 percent.
Planning, teams and budgets in place: 11 percent.
Project underway and behind schedule: 4 percent.
Project underway and on schedule: 18 percent.
Basic SEPA compliance achieved and no further action planned: 12 percent.
Basic SEPA compliance achieved and now seeking further efficiency: 15 percent.

This data indicates significant progress has been achieved to create awareness among corporates on the legal obligation to comply with the core provisions of the SEPA Regulation by 1 February 2014 in the euro area. It has to be recognised however that 21 percent of corporate direct debit users surveyed by Steria in France, Germany and UK in 2012 had never heard of SEPA; and 31 percent of respondents to the EuroFinance survey located in SEPA stated that they did not know exactly what will be required for their companies to be SEPA compliant. Efforts must therefore continue to engage late movers in the process and educate on how to adapt systems and operations in line with the SEPA Regulation.

There is only Plan A and this means that there is no time to procrastinate further: failure to comply with the core provisions of the SEPA Regulation by the February 2014 deadline risks infringing on EU law. The EPC makes available comprehensive information to help market participants manage the transition. These sources are included with the links at the end of this blog (refer to the ‘EPC Migration Tool Kit’). The next edition of the free online EPC Newsletter to be published end January 2013 provides more information on progress of SEPA roll out and best practice identified by early movers on the demand side who successfully completed migration to SCT and SDD.

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