Nov 2007 accenture sepa implementation


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Nov 2007 accenture sepa implementation

  1. 1. Planning for SEPAImplementation:From Compliance to a Strategic Response
  2. 2. The Opportunities and considers this external change in member states plus Iceland, light of the existing internal Lichtenstein, Norway andThreats of a New Market context - commercial, operational Switzerland. It is impactingContext and technical; and will separate national payments strategies,The European Payment Services those who truly prosper within the industry infrastructure, companiesDirective (PSD) will be transposed new post-SEPA and PSD compliance agendas, and in someinto law and come into force by environment. cases competitive strategy.November 2009, and the Essentially, the change is resultingrequirements imposed by the EPC Payments Revolution: in new legal, business andregarding the Single Euro Payments Single European technical responses to enableArea (SEPA) means compliance borderless processing of creditprogrammes are already well Payments Area (SEPA) transfers, direct debits and cardunderway. Inherently many of Regulatory Milestones payments across the Europe.these programmes are driven to Nov 19th - TARGET2 Go-Livereach minimal technical 28th Jan 2008 - SEPA Credit Key Findings - Therequirements for incoming and Transfers European Paymentsoutgoing payments messages, and May 27th 2008 - Faster Paymentsmany operate within business unit Nov 2009 - PSD Transposition to Revolution: Ansilos. Banks have anticipated that National Law & SEPA Direct Debits Accenture Surveythe cost of compliance will be high; Late 2009 - SEPA Cards • SEPA is costing bankshowever these programmes Late 2010 - EMV Chip and PIN significantly more than expectedtypically do not provide the scheme • 39% of banks and processorsoptimal benefit because they fail to Set on the backdrop of increased plan to replace legacy paymentsaddress the broader strategic threats globalisation and consolidation platformsand opportunities. across the financial services sector, • The scale and complexity of the European payments landscape change around SEPA isThe implications of the regulatory is changing significantly due to overloading banks andchange are significant - regulatory catalysts. Developments processors IT resources, andcompression of transactions fees across the payments market are restricting investment in newand float, pressure to reduce being driven as politicians, product innovationprocessing costs, data management regulators, central banks,challenges associated with • The pressure on financial corporates, banks, and tradetransparency requirements, the institutions business and associations respond to mandatesthreat of new market entrants as technical resources will continue and initiatives such as the Paymentthe Payments Institutions category • Banks are concerned that SEPA Services Directive, Faster Payments,is explicitly created, and the Direct Debit implementation will and the Single Euro Payments Areainstitution of maximum execution be overly complicated (SEPA). SEPA is the harmonisationtime for domestic and cross-border project introduced by the European • Over 70% of banks surveyedpayments of D+3 through 1/1/2012 Payments Council (EPC), involving believe SEPA will ultimatelyand D+1 thereafter. These impacts, national payments schemes, and justify new internal paymentscoupled with increasing customer infrastructure implementing new infrastructure and enableexpectations in the commercial standardised business and technical European expansion, despite thesegment, provide opportunities for frameworks. Importantly, in an challenges surrounding thesavvy market players to lure effort to increase competition in the purely commercial business caselucrative corporates from their processing sector, a core feature of for spending on SEPAtraditional domestic bank with SEPA is a clear separation of the complianceenhanced cash and liquidity brand and scheme from the • Organisations have anmanagement propositions. Other infrastructure and delivery system. expectation of only 37 percentopportunities exist for M & A plays, The reach of SEPA spans the 27 EU that their internal platforms willand for payments insourcing. Astrategic response, in our view, be fully and independently SEPA compliant before 1st January 2008 1
  3. 3. • The greatest opportunities are Clearly the prospective benefits, Executives and managers are being seen to be in the corporate include: revenue growth from confronted by decisions impacting segment, with the result that extended geographic reach, every part of their payments new SEPA payments revenue growth through increased business and IT department. Both a propositions for corporate penetration with core domestic tactical and strategic response to customers are being prioritised customer segments, lower cost-per- SEPA is required to achieve and pursued ahead of those for transaction - primarily achieved compliance and stay competitive. consumers through increased STP rates, and Strategic choices covering the• Euro-zone banks will spend a the cost savings associated with growth agenda, market positioning, higher proportion of their maintaining more simplified key service and product payments platform budgets on payments platforms. propositions, and channel SEPA than non-Eurozone banks sophistication will all impact The second approach, Minimalistic revenues, costs and competitor• With the advent of SEPA, Visa Compliance, as the name suggests, behaviour. Further difficulties are and MasterCard are expected to is anchored to the principle of encountered when considering the emerge as strong competitors to investment avoidance. Ironically, operating model to execute the major US and European cards the scale of change involved will strategy. Should the bank retain processing companies necessitate a compliance-related internal processing or outsource spend for large banks estimated atThe SEPA Opportunity & €50M - €70 for business and commoditised back-office to a lower cost provider, or look toChallenge technology initiatives. While achieve the scale required to in-For banks, the market change is immediate-term savings are to be source payments?forcing hard business decisions on had by doing as little as possible to- geographic reach, use of internal achieve compliance, these players External Considerationspayments schemes and systems, are still conducting examinationsnew products and services of strategy around conducting & Contextofferings, new customer segments transactions. We have surfaced a • Decision required on rule booksto target, IT and channel number of key considerations and version to be used forinvestment, operational constraints, regardless of approach requirements gathering. Thereorganisation, and governance. adopted, that are driven by internal Direct Debit Rulebook andClever innovation and new and external contextual factors (see Implementation Guide versionpropositions will create value for sidebar - SEPA Considerations). 2.3 is now available, may nocustomers, from consumers to longer be relevant for direct There are significant challenges for debits in 2009.corporates, and serve to replace the banks as they proceed withdiminishing revenues from • Inconsistencies and omissions addressing SEPA:transactions fees and float. within the implementation • Bank and processor market guides, when compared to ISOTwo approaches are being adopted consolidation 20022to address SEPA: CompetitiveInvestment and Minimalistic • Threat of new market entrants • Reachability requirementsCompliance. Those subscribing to • Poor supplier service levels assumptions must be made duethe former are seizing the • Imperfect information as to routing vagary within the ruleopportunity to extend their scheme rules are updated booksgeographic reach by targeting non- • Delivery within the timeframe • Assumptions and decisions aredomestic customer segments which driven by the need to be required regarding bilateralhave historically been their most compliant agreements and CSMprofitable at home. Also, this • Lack of necessary skills to participation, especially in lightapproach is often accompanied by innovate of industry consolidation, tothe development of new customer- minimise costly duplication andcentric value propositions and • Aging legacy technology the risk of inconsistent customerpayments channel innovation, such coupled with implementing serviceas mobile-banking solutions. large scale platform refresh 2
  4. 4. • Implications of the outputs from optional routing that may be solutions needed to onboard the EPC working groups on e- costly to implement payments from smaller banks Invoicing and mobile payments without unnecessary re-work. • Customer-to-bank• Potential institution of a third communication can be defined • Sophisticated regional and global direct debit card scheme, and by the banks, because the payments solutions with enabling any card at any rulebooks only provide a consistent pricing and high terminal recommendation - format and service levels are demanded - technology must be decided cash and liquidity management,• Clarification of central bank reporting requirements for • Implications of SDD calendar shortened settlement cycles, and payments over €10,000 logic: due date = settlement date high quality information. = execution date• Customer propositions regarding • We forecast a fragmentation of the utilisation of the 140 • Possible implication on the the payments value chain and an character field (such as providing minimum reserve requirements with emergence of value chain their defined reference data for the central bank specialists and insourcers, with ease of reconciliation) some positioning as lost cost • Possible change of risk profile of providers operating at scale.• Application of national rules corporates that are allowed to regarding tax residency and submit direct debits, as the new • Many Banks need to re-platform account ownership process exposes banks to their payment systems. Multiple increased credit risk single purpose applications• Potential retention of national payments infrastructure and • Compulsory acceptance of all combined with applications going development of national AOS SEPA Direct Debits, regardless of out of maintenance, and a loss of source bank critical tacit knowledge isAccenture Point of View contributing to higher operational • Creation of a database to enable risk and incr easing cost ofInternal Considerations & Context routing to approximately 7,000 maintenance. Current payment• Impacts within the branch European banks systems are not flexible enough network and operations of payments processes, procedures We have recognised the to allow banks to react to and workflow implications of SEPA and defined a sophisticated customer demands clear point of view on the areas quickly and in a cost-efficient• Consumer and small business - way. upon which our clients need to competitive responses for focus: revenue protection of national • Payment systems cannot be retail and business banking • Cost pressure that is eroding examined in isolation. The markets against new entry and margins means that costs for breadth of regulatory changes fee erosion, and to address pan- core processing have to decrease (Third AML Directive, Solvency II, European growth opportunities in order to maintain margins, MiFID, Faster Payments Basle II) and STP rates must be increased. require modifications to several• Corporates and large business - A sourcing strategy should be systems and processes, and cost- seizing opportunities to retain defined to enable niche banks to savings can be achieved by domestic clients through minimize investment and future addressing them concurrently. enhanced products / services mix, while increasing pan- operating costs, while partnering • Processing efficiencies must be European footprint and providing to receive required service driven from an improvement in corporate solutions that allow levels. Transactions banks with quality for the customer. In the optimal payments initiation, sizeable volumes will develop current environment there is reporting and cash management the payments processing often insufficient validation, and capabilities required to insource• Formulating an approach for maintenance of parameters is ad payments, and the modular handling paper-based credit hoc. transfer payments post-SEPA• Address Debit Mandate Flow - 3
  5. 5. • The onus is on the legislative Accenture Capabilities Selected Accenture SEPA community to generate SEPA momentum, by potentially by Accenture is a global management Credentials consulting, technology services and mandating that public sector outsourcing company. We have payments are issued in SEPA over 160,000 employees in 48 Leading Irish Bank compliant formats, thus countries, and annual revenues in SEPA Business Requirements establishing the momentum excess of $16B. Our Banking Gathering - Accenture were required to reach the critical practice in Europe employs over engaged to assist the Bank in the mass of volumes required to 10,000 people. gathering of business requirements reach the tipping point at which the decommissioning of to address the SEPA legislation. Accenture possesses a great breadth legacy systems makes sense. The scope of the overall programme and depth of experience in the spans payment origination, payments area. In fact, we haveSEPA Technical Considerations maintenance, validation, extraction, approximately 1,000 people posting, clearing, settlement and• Implications of the Direct Debit worldwide working on payments reporting. The requirements mandate and transactions related projects in Banking; and gathering served as a part of an databases within the current IT within Europe, we have over 700 overall organisational programme infrastructure, and implications people supporting payments to define a business operating regarding interchange fees systems through outsourcing model, and to implement the arrangements and over 200 people• Choice of XML parser technology change through the systems working on consulting and system for conversion and validation, development lifecycle. The integration engagements for especially in relation to requirements address such areas as: electronic payments and cards in performance and volume major banks. For this work, we use • Payments value limits• Consideration of approximately a variety of payments strategy 2700 attributes for handling, tools, reference architectures, • Validity time of mandates especially since identical tags in process and operating models and • Settlement of returns different XML branches (different diagnostics (see Accenture SEPA context) have different meanings Assets below). Our payments work • Timing of returns, rejects, covers strategy, business reversals and refusals• Channel enablement - decision architectures, operating models, and which channels to enable for technical architectures. It also • Agency arrangements SEPA XML messages covers the management of physical• Scalable architecture that can • Validation of outgoing remits / cash and financial supply chain support future expected growth mandates optimisation. The implementation of SEPA transaction volume of payments transformation • Mandate storage and de-• Messages have to be sent to the programmes is a core capability at materialisation debtor bank ahead of the actual Accenture, and we work across the technical delivery lifecycle A process was utilised to processing and booking, implementing most of the major conceptualise current state, to apply requiring the uncoupling of the payments software platforms: ACI, deep knowledge of the SEPA internal and external side of a SAP PE, iFlex, Clear2Pay, rulebooks and implementation given payment Tietonator and Fundtech. guide (versions 2.2), and to• Impacts on account management ultimately deliver the complete set systems and statement printing We structure our engagement teams of business requirements, and systems (correspondence), and with the optimal mix of functional, associated traceability matrix, to possibly the Payments workflow technical / product experts and enable inward and outward bulk as SDD requires an extension of industry specialists to formulate SCT and SDD functionality. the payments system format solutions based on market relevant strategies which incorporate industry best practice. 4
  6. 6. Leading Global Financial • Aligned proceses and • Requirements analysis andInstitution technology across the European specification based on client IT landscape and business units. inputThis top 10 European paymentsprocessor, operating on a global Achieved the the on-schedule • Architecture / Technical Design,scale, faced a number of challenges completion of a programme plan to Build and Test of SAP PEin creating a holistic SEPA realise a central core payments solution, and compliance for the • High-quality implementationresponse, including a disparate SEPA Credit Transfer deadline in adhering to SAP standardtechnical environments due to a January 2008. guidelinesnumber of mergers. Theirobjectives, included: • Accenture has leveraged its Large Pan-European Bank global repository of proven• Creation of a European core As a payments insourcer this large methodologies, tools and assets payments solutions for both German bank processes for other to create a highly detailed and SEPA Credit Transfer and SEPA banks - totalling 5.3 billion complete specification for the Direct Debit transactions annually. Volumes of Payment Engine solution.• Convergence of core payments payments handled account for approximately 16% of all domestic Testing expertise in complex architecture to realize a central payments in Germany development scenarios has been solution for multiple product brought to bear to ensure a robust lines Key challenges facing the Bank solution throughout the• Distributed development in included: implementation based on SAP PE offshore delivery centres Core Release 2.2, and Accenture • Payment volumes from other has been asked to make a proposalAccenture partnered with the to Banks under cost pressure due on further systems integrationbring rigor and expertise to the to EU regulation on Single services.programme in various areas: European Payments Area Leading Austrian Bank• Developed a solution blueprint • Reaching the goal of increased and business requirements, ROI through insourcing A leading financial services including an architecture design provider in Central Europe, and • Meeting ambitious timeline for based in Austria, this bank is focusing on systems integration SEPA introduction in Q1/2008 Central Europes foremost financial and performing requirements management Accenture has played a key role in services group providing banking, the development of this mission investment, loans and insurance• Leveraged expertise in complex services, and focuses on consumers critical component of the banks project management by and small to medium-sized technical infrastructure. Ongoing executing a programme companies. The Group has enhancement and implementation planning exercise subsidiaries in a number of CEE of the SAP Payment Engine solution has necessitated project countries. In 2006 a group wide• Led the programme management expertise, with programme (GPI = Group Payments management, including particular emphasis on deep Initiative) was established to coaching the clients own expertise in relation the SEPA address the Single European project managers throughout the rulebooks and implementation Payments Area at a group level and entire cycle of the project, and guide as they relate to enhancing the banks capabilities in supporting build activities by implementing SCT and SDD the area of payments (Group driving the issue management functionality. The SAP Payments Payments Initiative). The process Engine solution has aided in the programme started in January 2007• Created test scenarios and test following areas: with the centralisation of cross- cases border customer payments using the Banks existing payments 5
  7. 7. infrastructure (processing only) and payments to electronic cheque and SEPA Implementationalso took the first steps in creating high value low volume Support Toolsa central function. (RTGS/Wire) payments. The development included requirements Accenture has developed a set ofAccenture was asked to support the and design iterations, and implementation tools ranging fromBanks Programme Management to significant testing due to the XML parser performancemanage this complex multi-site complexity of functionality. The assessments, function maps, andprogramme, especially in the areas software is being installed in a SEPA test files to detailed XMLof: major bank in Germany which is field mappings. These tools can be operating as a payments used in implementation projects to• Business case for transaction insourcer for two other help to avoid common pitfalls and implementation of a processing major German banks and is to facilitate technology decision hub for cross-border customer marketed by SAP to banks making processes. payments, including quantification of benefits worldwide. Accenture continues to Accenture SEPA Test Quick maintain and further enhance the Starter Kit• Preparation of payments software - we have conducted Accenture offers a test package to strategy requirements gathering, analysis, assess SEPA-compliance and and design for SDD and SCT• Programme planning operational readiness. This offering functionality. The requirements saves cost to assess SEPA• Establishing programme and analysis, functional and technical compliance, helps identify project management structure: design are now complete using opportunities to gain competitive status reporting, scope version 2.2 of the rulebooks, and advantage as well as ensures management, issue and change construction and iterative testing of completeness of the test approach request management, meeting the SCT and SDD input/output when assessing SEPA compliance. facilitation, collaboration tools, formatters and processing rules is The ready-to-use test kit contains a etc. progressing on time. test approach outline, test plan including resource requirements• Stakeholder management (C- Accenture SEPA Assets and usage, generic and easy to level and below) customise test cases, generic andThe Global Payments Initiative is SEPA Business Requirements easy to customise test data. We alsoon time and budget for group provide support at various levels Accenture offers a set of ready-to- depending on client use SEPA business requirementsSoftware Vendor that have been distilled out of the SAP Payments Engine SEPA relevant SEPA documents (namely AcceleratorSAP engaged Accenture to develop EPC Rulebook, EPC Implementation The SAP Payments Engine SEPAthe SAP Payments Engine which is Guide, PSD) and have been Accelerator provides clients with apart of SAPs core banking suite. combined with the experience of tactical solution to achieveThe SAP Payment Engine is several SEPA implementations to compliance by using existingdesigned to be the central payment create an excellent foundation for domestic systems (namelyprocessing hub of a financial any SEPA business requirements payments systems and accountinstitution. The functionality of phase. The requirements also management systems) to interfacingthe Payment Engine encompasses include recommendations for the account management systems withinput/output formatting, routing, customer-to-bank space and parts of the Payments Engineclearing, validation, and repair, for discuss the subject of currency functionality to send and receivebulk and single message payments. conversion for SEPA transaction SEPA payments in parallel withThis allows the Payment Engine to from non-Euro accounts. domestic payment systems. It is acover a wide range of payments comparatively low risk solution asproducts reaching from high it leaves existing processesvolume and low value (ACH) relatively untouched. Strategic 6
  8. 8. flexibility is enhanced as later increased supply of competitivemigration to the full Payments payment processors (both cards andEngine solution is possible once full ACH); and the opportunitiesimplications of SEPA are known. associated with M & A plays, payments insourcing businessAccenture European Payments models and new pan-EuropeanSurvey cash management propositions toAccenture commissioned the lure corporates from theirEuropean Payments Survey to traditional domestic bank.create a clear picture of currentposition of payments in Europe and Next Stepsthe forces that will reshape the Would you like to investigate theindustry over the next five years. ideas in this paper more deeply byIts scope encompasses Automated identifying the most appropriateClearing Houses (credit transfers response to this changingand direct debits) and cards regulatory environment? If so, thepayments (debit card and credit next step is to gain ancard). The survey objectives understanding of the depth andincluded an examination of the breadth of our SEPA offering, anddegree of change planned, the to discuss how we might be ofexpected impact of SEPA, and the assistance as you navigate thefuture shape of the industry. The SEPA change. For moresurvey also focused on how information, please contact either:Europes banks and paymentsprocessors intend to respond to Julian Skanperceived opportunities and market Partner Banking Practicechanges. Accenture Financial Services Julian.Skan@accenture.comConclusion Tel: +44(0)207 844 5125SEPA is catalysing change anddriving innovation! The SEPA Dale Fickettprogramme industry-wide will SEPA Lead - UK & Irelandresult in tremendous change for Accenture Strategy Consultingbanks and the wider European dale.s.fickett@accenture.compayments industry. Banks initially Mobile: +353 87 998 2616anticipate that the main impact tobe the high cost of compliance.Many banks also predict thecollateral damage from SEPAimplementation will include asubstantial reduction in revenueassociated with transactions feesand float, pressure to reduce thecosts of payments processing, datamanagement challenges due totransparency requirements, andreduced execution times onEuropean cross-border payments.However, on the positive side,banks will have access to an 7
  9. 9. About AccentureAccenture is a global managementconsulting, technology services andoutsourcing company. Committed todelivering innovation, Accenturecollaborates with its clients to helpthem become high-performancebusinesses and governments. Withdeep industry and business processexpertise, broad global resources and aproven track record, Accenture canmobilize the right people, skills andtechnologies to help clients improvetheir performance. With approximately170,000 people in 49 countries, thecompany generated net revenues ofUS$19.70 billion for the fiscal yearended Aug. 31, 2007. Its home page © 2007 AccentureAll rights reserved.Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture.