Companies are leaving it very late!

sepa

With only a handful of months to run until the SEPA migration deadline (1st February 2014) it appears that the European Payments Council is struggling to encourage large corporates and public bodies to make complete and timely migrations to SEPA compliance.

The European Central Bank recently stated that although take up of SEPA Credit Transfers has improved, the adoption of SEPA Direct Debits is still languishing at an ‘unacceptable’ level. Also, it appears that European corporates are opting for a minimal effort ‘compliance-only’ approach to SEPA migration, missing the opportunity to make strategic changes to their business systems and enhance organisational efficiency.

We believe the reasons for this absence of enthusiasm are two-fold:

1) A lack of awareness as to what the consequences of late or non-compliance will be, and
2) A shortage of information outlining what large European companies stand to gain from an early and comprehensive conversion to SEPA

The threat of penalty for inactivity is insufficient, as too is the promise of reward for proactivity. The combination of these factors means movement in any direction is slow and uncommitted. Both the carrot and the stick are missing.

Viewing SEPA as a means of centralising an organisation’s payments activity and business technology is a strong starting point. Once the distinction between domestic and international payments has been removed, a whole new area of rationalisation becomes available to the European MNE.

Large companies operating in America have long benefitted from the uniformity of the country’s language, currency, communications and payments system. A company based in New York operating a subsidiary in Chicago is able to use the same cash, cheques, electronic payments systems and business technology to coordinate activity between the two business entities.

For a French company with subsidiary operations in Greece, things as they currently stand, are far more complicated.

With SEPA, companies can remove this impediment to efficiency. The standardisation of payments communications and account identification codes will make it much easier to integrate disparate business systems, standardise payment reconciliation procedures and negate the communication barrier that has so long been a hindrance to European MNEs. In addition, the reduction in processing times will make it more practical and economical to centralise accounts for payments and collections in Europe.

The savings created from the introduction of a consolidated scheme could very well make SEPA migration a self-financing project for many large European corporates. It is always difficult to put a monetary value on efficiency but this incentive should be enough to encourage management to revise their estimations of how SEPA will affect their bottom line.