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Sepa handbook Sepa handbook Document Transcript

  • SEPA Handbook 2012 |  1Fifth edition, 2012Hands-on SEPA What you need to know froma corporate perspective
  • End-date forSEPA – timefor action!We live in challenging times. Economic developmentremains weak in many countries and as a result, marketsare being depressed. Several countries in southern Europeare exposed as interest rates are too high for governmentsin need of finance.But this is exactly when we need to focus on the future and takethe necessary steps to stay competitive in the digitalworld.SEPA ispart of the ‘Digital Agenda for Europe’,identified by the EuropeanCommission as one of the most important areas for Europe overthe next 5–10 years.A fully digital Europe will deliver many benefits. More businessesand consumers will use the internet for buying and selling.Thesesafe, efficient transactions will lead to growing confidence withincorporates and public authorities to further explore the benefitsthat the internet offers.When the final steps are taken towards full SEPA, it is importantto understand the value of the Single Market and the enormouspotential that will follow once SEPA has been realised. We willhave credit transfers and direct debits in euro based on a singlestandard that will work in all countries and also for cross-bordertransactions.These benefits will provide a strong foundation for banks and­businesses to change and adopt more cost-efficient procedures.­The need for manual work in payment processing will be greatly­reduced. As a result, our customers can achieve huge savings.At SEB,we are committed to all these changes and are convincedof the long-term benefits.The challenge lies ahead in the next 20months, until the end-date of 1 February 2014. But this end-datealso marks the beginning of an exciting new dawn.From the very beginning,we have worked hard to deliver SEPA andare ready to offer our support to all customers for the migration.Lars MillbergHead of Global Transaction Services
  • Table of contentsSEPA is no longer a vision – it is a reality ..................................................... 5Case study ................................................................................................................... 6Outlining the key challenges prior to SEPA end-date .......................... 8SDD to evolve into a strong and widely used product ....................... 11The critical points for corporate SEPA implementation ................... 12SEPA: The ERP perspective .............................................................................. 14How regulation continues to drive change .............................................. 18ISO 20022 XML extends possibilities ......................................................... 20Market will benefit from the experiences of the earlyadopters ....... 22Case study ................................................................................................................. 24Baltics face up to challenges and opportunities .................................. 26Germany geared up for SEPA challenge .................................................... 28Centralisation gathers pace in Finland ...................................................... 31The hot topics – questions and answers .................................................. 32Meet SEB’s SEPA experts ................................................................................... 34
  • 4  |  SEPA Handbook 2012 The extensive euro crisis has not affected the political aims for a singleeuro payment area.The vision stands strong and additional legislationto support European harmonisation of new efficient electronicpayment means e- and m-payments can be expected. Nothing butmarket adoption at full speed to the new standards is an option.
  • SEPA Handbook 2012 |  5A payment is a payment. They are not normally thatinteresting for those who are driving the core businessor in charge of company investments. SEPA has beencommunicated for many years as a vision of fundamentalimportance for the euro payment market,but the responsefrom users has been indifferent.This is not surprising as theincentives for corporates to invest in payment processinginfrastructural changes have been low in a severe economicclimate. In addition, a couple of well known theories ondifficulties for launches of new infrastructure have beenhighly relevant – complex transition,immature early versionsof the SEPA rulebooks and lack of critical mass have led to afirst mover disadvantage state.Market acceptance of a newstandard is normally a lengthy process.In this perspective,a decade or more for implementing SEPA fully in all eurocountries would not have been an unreasonable timeframealthough this is ineffective with parallel standards,systemsand processes over such a long time. With this in mind,politicians responsible for the single market vision ofincreased efficiency through the harmonisation of europayments across Europe weren’t prepared to wait any longer.Using legislation as their catalyst,they set a sharp end-datefor the migration from legacy euro payments to SEPA credittransfers and direct debits in regulation.The extensive eurocrisis has not affected the political aims for a single europayment area. The vision stands strong and additionallegislation to support European harmonisation of newefficient electronic payment means e- and m-paymentscan be expected.Nothing but market adoption at full speedto the new standards is an option.For corporates and other payment service users,the newSEPA regulation means that changes in the euro paymentprocessing will definitely take place. This must now beconsidered seriously and carefully planned for.In all eurocountries, the full migration of national legacy paymentsto SEPA compliant payments before February 2014 is arequirement.To explore the possible cash managementadvantages that may come from the standardised europayment functionality – domestically and cross-border– and reap the full benefit of it is an additional opportunity.Furthermore,an analysis of the effects that SEPA brings tonon-euro countries should not be forgotten.The main ingredients in SEPA are the euro currency,newstandards – IBAN as account identifier and ISO 20022 XMLas message and reporting format – and harmonisedpayment rules. Euro payments within SEPA not followingthese standards and rules will be rejected.This means thatthe new requirements will not only affect the banks but alsopayment service users.A major question over ISO 20022XML adaptation is how far corporates and their ERP-providers need to go as this format standard is not onlymandatory between payment service providers accordingto the SEPA regulation but also for end users initiatingpayments via bulked files.The question is more accuratelyhow far a corporate wants to go with such adaptation asconversion services to and from some formats will beallowed. The fact is that international and non-eurodomestic payments will still have to be handled beside theSEPA rules.However,it is important to evaluate and see thefull potential in ISO 20022 XML. Migration to this standardmayover time give benefits to corporate payment processingthat goes far beyond SEPA. Banks and ERP-providers inthe frontline of the development can already offer manydifferent solutions based on this format for internationaland non-euro domestic payments.There will now be a strong focus on each country’s migrationof legacy payments to SEPA compliant instruments.Thismeans that the continuous and rather extensive updatesof the SEPA payment rulebooks – SEPA Credit Transferand SEPA Direct Debit – will slow down for a while. Fullyfunctioning SEPA payment schemes ready to replacecurrent domestic schemes are in place as a base forpayment services that can meet all possible demandsfrom users. Any specific national needs identified duringthe migration may be solved by introducing a communityspecific AOS (additional optional service) rather than asa change affecting the common schemes.In summary; no matter how unstable the euro is,investments in time and resources to handle the SEPAmigration is now a necessity for all corporates makingpayments to,from and within euro countries.Henrik BergmanSEPA is no longer a vision– it is a reality
  • 6  |  SEPA Handbook 2012Migrating all SEPA payments across12 euro countries represented asignificant investment in time andresources for one particular company’sSwiss-based Global Treasury team.Progress has been good,with SEPApayments now implemented for alleuro payments within the group.The group had already centralisedsupplier payments and convertedthem to SCT (SEPA credit transfer) ata Payment Factory in 2008.With SEPAas the driver, other types of payments,such as services and local operationalcosts, also became centralised.Over a two year period – fromSeptember 2010 to July 2012,domestic payments in 12 eurocountries were moved from localbanks to the centralised PaymentFactory. This saw the development ­of what would become a tried andtested three month implementationplan per country which includedpreparation, conversion to BIC andIBAN, implementation in the PaymentFactory and follow up. Progress isvery much on-target, though withany project of this nature, additionaltargets are set when they becomeapparent: SEPA Direct Debit is thenext challenge looming.Harmonisation proved a majorchallenge, but was overcome whensufficient IT resources were securedfor the project. The Global Treasuryteam also had to face varyingapproaches by different banks,not allof whom follow the SEPA rulebook,specifically with regard to SCTpayment information. One lessonlearned is that payment information isnot always forwarded in full to thebeneficiary by his bank.This area needsto be improved so that beneficiariesget full payment information, whichhelps reconciliation. Information onreturned payments must also beimproved.The aim is to work with CGI (commonglobal implementation) standards onPAIN (payment initiation) and CAMT(cash management) messages so asto have only one common imple-mentation of the standard.Looking ahead, the biggest challengefor SEPA Direct Debit will be the cutoff times.A D-1 cut off time wouldbe preferable but is not yet offered. ­The EPC rulebook only gives rules onpayment initiation without providingclear instruction on the customerreporting side. In this instance,SEPA does not really improve STPreconciliation processes withbeneficiaries and is not fully deliver-ing as intended with clear room forimprovement.Global Treasury has always remainedfocused on the end benefits of SEPAthroughout, so all participants weremotivated for the preparations.Theteam took the lead in the project andoffered central support for BIC/IBANconversion and the whole paymentstructure with only two banks. In termsof resources, this involved up to 3people in each country, supported bya team of 3 from Global Treasury.Clear benefits have already emerged– a central payment solution for localpayments was much smoother toimplement with SCT than workingwith local standards specific to eachcountry. From one single account, theteam is now able to perform paymentson behalf of all Group companies ineuroland to all euro suppliers at alow cost.This has enabled a globalcost-efficient payment set up.For Global Treasury, it was veryimportant to get a clear messagefrom the European Union (EU) aboutfuture SEPA end-dates. As a compli-ance matter, it was easier to have theproject prioritised. This ensured thenecessary focus and resourceallocation. The new SEPA regulationhas immediately impacted supplierspositively thanks to new equal pricingrule of national and cross-borderpayment in eurozone and removalof euro 50,000 threshold.The Global Treasury team revealedthat the support from SEB was goodfrom the outset. As one of the firstcorporates to start a global projecton SCT with IBAN/BIC conversion andXML format, Global Treasury and SEBworked as a team with professionalinput from both sides in order to reachan efficient set up. SEB demonstratedgreat flexibility and was extremelysupportive throughout the wholeproject. Of particular importance wasthe specialist knowledge it was ableto offer on the different SEPA productssuch as SCT, XML and SEPA DirectDebit and its involvements in keystandardisation initiatives like ISO20022 XML and CGI.When a global company with activities right across the eurozone decidedto make the migration to SEPA, it was a massive undertaking. This articleexamines some of the challenges involved, understands how they wereovercome and looks at the role played by SEB in the process.SEPA CASE STUDY
  • SEPA Handbook 2012 |  7SEB demonstrated greatflexibility and wasextremely supportivethroughout the wholeproject. Of particularimportance was thespecialist knowledge it wasable to offer on the differentSEPA products such as SCT,XML and SEPA Direct Debitand its involvements in keystandardisation initiativeslike ISO 20022 XML and CGI.
  • 8  |  SEPA Handbook 2012It seems that the extreme – or at least the unusual – hasbecome the new normal. We live with sovereign debtcrises, bank crises, euro crises, peak oil and climate crises.To top it all, the Mayan calendar predicts we will witnessthe end of time by December 21 2012. In this ratherextreme context, the closedown and replacement ofdozens of euro payment systems within a rather shortperiod, the SEPA end-date in February, 2014, may notappear as headline news.However, we believe it is a very significant event and wedevote this article to various aspects of the SEPA end-date,which perhaps more accurately should be called the SEPAstart-date. Here, we present a brief inventory of migrationchallenges.Incentives and mindsetChange often creates incentives and disincentives thatmake people act in certain ways. For SEPA, it has beenobvious that the benefits of inexpensive and speediercross-border SEPA payments rapidly caused payers tochange behaviour and switch to SEPA credit transfers.Conversely, the take-up of SEPA for domestic use has,with some exceptions, been slow as incentives are fewand people generally act rationally. In particular, forpurely national businesses or public sector organisations,replacement of one payment type with another has noobvious benefit but a very certain cost. Therefore, even ifeveryone agrees that a common union-wide paymentstandard is a good thing, the willingness to sacrifice forthe greater good is not always a priority. This is, of course,the reason why SEPA needs to be enforced by legislation.The transformation of current eurozone payment systemswill therefore be more driven by the stick than the carrot.The major threat is a tendency to focus on meeting legalrequirements rather than to actually make things work.Therefore it can be tempting to take shortcuts in order tomeet legal requirements even if this is counterproductiveto overall harmonisation. In practice, it is a significant riskthat individual countries implement their own versions ofSEPA, as Finland has already done. The major losers areinternational companies that would otherwise benefit themost from a standardised eurozone payment area. Forusers with purely domestic requirements, it is hard to seeany direct upside except for the indirect benefits from amore efficient economy in the union.National migration plansEach eurozone country has some kind of SEPA migrationcommittee. These groups are expected to manage thenational migration plan for SEPA implementation andphase-out of legacy payment systems. A quick comparisonof the different country plans gives the strong impressionthat national planning is not conducted at the same levelsor with the same ambitions. Considering the rather limitedtime before 2014, these inconsistencies in nationalpreparation should cause some alarm.Payment instrument scopingSEPA is designed to replace existing national paymentsin the eurozone, but there are quite a few exceptions.SEPA does not deal with cash payments, nor is it intendedto replace paper instruments like cheques.Other exceptionsinclude high value and mobile payments. It is not entirelyOutlining the key challengesprior to SEPA end-date In practice, it is a significant risk that individual countries implementtheir own versions of SEPA.The major losers are international companiesthat would otherwise benefit the most from a standardised eurozonepayment area.
  • SEPA Handbook 2012 |  9clear what will happen to bills of exchange type productscommonly found in Latin countries, such as the ItalianRIBA, but there a fair chance they will remain for quitesome time. Card payments and foreign currency paymentsare also excluded from the SEPA migration. In summary,this means that euro payments via credit transfer anddirect debit are covered by SEPA, but a number of othercommonly used payment instruments are not. From acorporate perspective this means that the impact of SEPAcould be very different depending on payment behaviour.A retailer, for example, can be expected to face differentissues to a manufacturer. The often mentioned SEPAbenefit of needing only a single European euro accountwill of course be an option for some companies, but themajority will need to retain their national accounts as theyalso use non-SEPA instruments.Reference handling and automatic reconciliationUsing SEPA direct debits, companies can achieve fullautomation of accounts receivables matching but forpayments received as a SEPA credit transfer, SCT, thesituation is much worse. The SCT provides for either 140characters of free text or a single XML-encoded structuredreference such as an invoice number. This means thatbusiness customers who want to settle more than oneinvoice using a single payment will do so using the freetext format which is difficult to use for automaticreconciliation. Consumers may not pay multiple invoicesfrom the same vendor but are unlikely to be fluent in XMLencoding and their payment details will be in free textformat unless guided otherwise by their internet bank,payment slip or any other method. It is exactly for thesereasons that Finnish banks decided that the basic SCTcould not maintain the automation levels and why theyenhanced the SCT with additional structured referencesfor domestic purposes, the so called AOS 2. The Finnsalso developed a check digit based structured creditorreference that has become international standard as ISO11649. Using the structured reference one can circumventthe SCT limitation allowing only a single structuredreference and fill the 140 characters of free text with halfa dozen or more structured references. However, even ifthese measures have provided a solution in Finland, thereis little certainty that these enhancements will becomeeurozone market practice and is why reference handlingremains an unclear topic.→
  • 10  |  SEPA Handbook 2012Regulatory reporting and tax implicationsRepresentatives of the European Commission have overthe years been harassed as to why companies need toreport SEPA payments to the central bank as these arepayments made within what should be a ‘single paymentarea’. The SEPA regulation has addressed this issue andstipulates that balance of payment reporting shall beabolished from 2016. When reading the fine print, it isclear that member states can no longer require banks toassist in this reporting but there is certainly no ban onrequiring companies to report directly to central banksand tax authorities. In fact, the legislation even mentionsthat direct reporting could be an alternative.This is, of course, a blow to corporate initiatives to use acentral euro pool for subsidiaries in different countries asthese subsidiaries may be required to report even localpayments. In fact, both the subsidiary and its counterpartymay be required to report a transaction, that in reality ispurely domestic, in case a foreign euro account is usedfor either origination or receipt of the payment.ConclusionsThe issues mentioned in this article may sound like gloomand doom prophecies solely focusing on problems. Still, inthese difficult times for EU and the euro, it would be foolishto neglect the risks that the continued SEPA migrationfaces and after all, it is better to be safe than sorry.That said, there are many opportunities with SEPA,specifically so for international companies. A smart movecould be to tone down the SEPA focus and to think broader,think business and think outside the SEPA box.This meansthinking about how to improve payments and collectionsprocesses and the SEPA part will most certainly be resolved.Another way of saying this is: Try to keep it simple!Johan Waldemarsson
  • SEPA Handbook 2012 |  11The SEPA benefit of reaching one large market with acommon framework allows companies to streamlineprocesses and individuals to be able to choose from agreater base of products and companies to do businesswith. Despite this, the migration from legacy direct debitsto SEPA direct debits (SDD) has been slow. The truth isthat fewer than 1% of total volumes of euro direct debittransactions have migrated to SDD. With new legislation inplace and governmental agencies pressured to move fromlegacy direct debit schemes to SDD, the migration will pickup pace. There is no doubt that SDD is set for a dramaticupswing in numbers of transactions.Despite the likely scenario of rapidly growing volumes thequestion remains whether SDD will be as successful as itslocal predecessors. As the migration end-date approaches,the answer lies in the near future and will depend on howadaptable both collectors and payers are to the benefitsand rules that make up the new direct debit system.SDD is the result of negotiations and compromises whichhave led to a product that no country’s residents will feelcompletely at home with. At the same time, similarcompeting products, like e-invoicing, are providingalternatives with similar functionality. One clear exampleof the move to other products is in Finland, where marketparticipants decided to migrate legacy direct debits toe-invoicing rather than SDD. Similar discussions are takingplace in several countries that are more familiar withdebtor driven mandate flows.Same day value, high security of payment and the tightrelationship created between buyer and supplier in themandate process are some of the reasons stronglysupporting the SDD. As collections are migrated, bothdebtors and creditors will discover the benefits andimproved reach that SDD has. Therefore, we believe thatSDD will evolve into a strong and well used product fillingan important function in Europe.Jonas PalmSDD to evolve into a strongand widely used product With new legislation in place and governmental agencies pressuredto move from legacy direct debit schemes to SDD, the migration willpick up pace. There is no doubt that SDD is set for a dramaticupswing in numbers of transactions.
  • 12  |  SEPA Handbook 2012The critical points for corporateSEPA implementationThere are many different aspects for a corporate to analyse before deciding how tobest handle the new requirements and opportunities in its euro cash management.Our strong belief is that SEPA is beneficial for corporatesand will give long term benefits as it:• Provides overall standardisation within the eurozoneand all SEPA countries on euro transaction processing• Improves corporate processes as the driver forstreamlining processes within treasuries• Standardises the behaviour of counterparties andtheir banks (for example, day of crediting account,how charges are applied etc.)This article outlines some aspects that have proved criticalfor successful SEPA implementation and – looking atthings from a wider perspective – improving corporatecash management processes. As a bank, we have beeninvolved in SEPA transition on both a market andcustomer level and we are often asked our opinion ofthe work required for SEPA transition. With this in mind,we would like to pinpoint some of the key areas whenplanning and realising SEPA transition.1Current state – establishing thestarting point (pre-study activities)An important first step is the analysis ofbackground data, which includes payment typeand volumes and bank set-up.Collecting all the necessarydetails in the current set-up can be time-consuming andcumbersome, but it is essential not only for a properbusiness case but also for establishing the correctprocesses and for correct estimates of the work involved.The as-is analysis summary should include all geographiesincluding structure and type of bank accounts, cash-poolset-ups and whether other liquidity concentrationarrangements are used.On the positive side,this improvescommunication within the corporation making it moreaware of the upcoming transition.2Setting the scope and objectivesfor SEPA transition (project)Set the vision and ambition level both in theshort- and long-term. Our experience is that aclear vision broken down to tangible goals and deliveriesmakes it possible to monitor progress and ensures thatthe journey is much smoother, both for management andfor those driving the project.Practical aspects to take into consideration when settingthe scope, objectives and priorities include:Use of SEPA products and product features – the naturalstarting point is the SEPAcredit transfer for regular paymentsboth for supplier payments and also for HR needs such assalary payments. SEPA direct debit now gives mass-billersa new and powerful tool with the same process for bothdomestic and cross-border collections. It also presents theopportunity of handling the corporate bank accounts indifferent locations for liquidity management.Internal structure and organisation – centralised ordecentralised organisation? Centralising accounts is anarea that should be considered in order to improveefficiency, reduce costs and also to align account structurewith centralisation of processes and concentrating cash.But there are also other aspects to consider for the earlymovers. If local sales companies’ accounts are closed andthe flows are moved to a central location, this haspractical implications. The local company would have toinstruct their customers to make SEPA payments toanother account possibly having also changed otherpractical aspects of when payment needs to be initiated.
  • SEPA Handbook 2012 |  13Local considerations – There are still differences withinSEPA when it comes to practicalities. These include localreporting in areas like balance of payment and statisticalreturns where authorities are asking clients to provideadditional reporting when the euro account is located inanother country. The SEPA regulation makes it clearwhen it comes to reducing the burden of reporting forpayment service providers but it is not clear if and whentransaction reporting will be completely abolished forpayment service users.3Background research– ERP vendor and capabilitiesEstablish a clear position and understandingon all internal systems related to paymenttransaction processing and reporting: ERP systemsincluding accounts payable and accounts receivable(possibly treasury management systems) and how theseare interfacing with your bank. The capability of yourinternal system environment is the natural starting pointfor your vendor discussion. How your vendor can help youadapt to the SEPA realities ISO 20022 XML standard is nowmandatory according to the legal regulation and can makea big difference for your project. Other key areas to analysefurther with your vendor: ISO 20022 XML capabilities, andmaster data conversion capabilities such as the capabilitiesof updating your ledgers according to the ISO standard,from BBAN to IBAN are important.Understand your partners’ and vendors’ commitment andexperience and your expectations of what the journeylooks like for the future.This does not stop in 2014 or 2016and they must be with you for several years.When settingthe business requirements there is also an important taskof securing the service levels needed internally to fit yourbusiness needs, for example from your IT organisation.4Project and implementationIf the ambition is to standardise processes andreduce the number of processing units byapplying the structure of a shared service centre,then a lot of work and co-ordination activities need to beplanned. This means communication and dialogue withcustomers and suppliers who will be affected by thecentralisation of processes and accounts and also indefining and agreeing the interfaces between the differententities, for example sales companies and the sharedservice centre (SSC). In the roll-out per country, percurrency and per unit it will be of key importance to breakup the old national procedures where possible in order tostandardise the work of the SSC.The ambition level and scope should be set in order tomake the most of a centralised payment process and thisshould ideally also include other local and internationalpayments.In the delivery phase, focus on harmonising the masstransaction processing. Exceptions should be monitoredcarefully. 100 % harmonisation is very rarely feasible oroptimal. But be cautious with the exceptions as these canbe large cost drivers and could for that reason have othertype of priorities or improvements needed in order toreach overall business goals.In the delivery phase it is beneficial to benchmark againstother corporates and local municipalities running similarimplementation projects. Your bank or your ERP vendorcan help you to find relevant examples. Good luck on yourSEPA journey!Daniel Lexander Our experience is that a clear vision broken down to tangible goals anddeliveries makes it possible to monitor progress and ensures the SEPAjourney is much smoother, both for management and for those drivingthe project.
  • 14  |  SEPA Handbook 2012The recently passed SEPA regulation is unusual in the sensethat it explicitly stipulates the technical standard to use forpayments files,i.e.ISO 20022 XML.The legislation statesthat banks must be able to accept the ISO 20022 XMLstandard from customers but also requires that theirbusiness clients use ISO 20022 XML standard for bulkhandling of payments.However, although the file format is stipulated bylegislation it does not mean that ERP vendors can usethe legislation as a specification for programming theirbanking interfaces. In fact, they cannot even use the ISO20022 XML specification for this purpose as it does notspecify details about individual payment types. Instead,they have to turn to the various national or supranationalgroups that interpret the standards and decide upon thefiner details. One such notable group is CGI, short for‘Common Global Implementation’, which consists ofparticipants from leading banks and global corporations.CGI is working on standardisation of the ISO 20022 XMLstandard from a global perspective, and is not onlyfocused on SEPA. National standards organisations mayalso issue their recommendations and individual banksand companies may choose to adhere to standards, ortake a proprietary route, as long as it does not deviatetoo far from ISO 20022 XML.The differences between different ISO 20022 XMLimplementations of SEPApayments should perhaps not beexaggerated as in most cases only small details will differ.The problem though is that computer systems aren’t thatflexible when it comes to minor deviations in details and thisis why there is a significant risk that ERPvendors will need toprovide different national or even bank specific versions ofthe ISO standard.Still,it may not be format issues that will become the majorconcern but rather timing,scoping considerations and lackof co-ordination between national migration plans aspreviously described.This timing issue relates to the period between thepublication of the final version of the format for a certaincountry or bank until the ERP vendor or consultant hasimplemented this specification in the company’s ERPsystem and tested it with the bank. With thousands oreven millions of business entities migrating at the sametime this could turn into a nightmare.The scoping issue has been touched upon before,namelythat quite a few payment instruments will live on and arenot replaced by SEPA.It is therefore quite unclear if bills ofexchange,drafts and money orders should be initiated in theISO 20022 XML format or using other standards andwhose responsibility it is to determine these standards.Here, CGI may play an important role as national SEPAcommittees may scope out anything that is not a SEPAinstrument.It is difficult to generalise SEPA impact on ERP as it maydiffer significantly between systems, countries andcompanies, but a common factor for many companiesmay be that requirements will come as a surprise, withlittle time to implement and no budget set aside – unlessyou read this section on ERP challenges of course.SEPA: The ERP perspectiveMigration to SEPA involves a huge challenge for any company in terms of time and resources.Perhaps the heaviest burden falls on Enterprise Resource Planning (ERP) systems, whichimpact across multiple areas of an organisation. This section looks at some of the challengesand attitudes of the corporates facing SEPA involved as well as some of the technical detailthat will have to be overcome. SEB is working with a range of ERP providers across manyEuropean markets, including SAP, Logica, Tieto and Visma. After this introductory article youcan read about their views on SEPA challenges and opportunities.
  • SEPA Handbook 2012 |  15TietoMarkus Hautala, DirectorHow do you feel corporates are handlingSEPA Migration? ­Are they planning sufficiently?Tieto is a large international company with more than 18,000employees. We only tend to work with large global organisationsand I would say that from my point of view, these types ofcompanies are well prepared for SEPA. They were very welleducated about the changes at the outset and as a result havemade the necessary preparations and as a rule, have plannedfairly meticulously.What is your view on the end-date?For large corporations, I don’t see that there will be an end-dateproblem. They have done the planning and have the resourcesand know-how to be thoroughly prepared. I can say with somecertainty that there will be a huge demand for conversionservices in the market and I can see many companies facingdifficulty, but I see this being limited to the SME sector wherethere will be organisations that respond too close to thedeadline.How are you meeting the corporations’ needs?We have a practice area of 200 experts working in this area andhave already successfully delivered a number of migration projects,including in Finland which is generally seen as being some wayahead of the curve in terms of SEPA readiness. It’s also worthremembering that the majority of our customers have beeninvolved in centralising processes and establishing sharedservice centres for some time, so they are ell equipped to meetthe further challenge that SEPA brings.Do you see any spin-off benefits with implementing SEPA?From my point of view, I do see SEPA as something of anaccelerator, especially where projects can impact an organisationglobally. I do believe, for example, that ISO 20022 XML haspotential to become a standard that is used globally. Thus, acompany with operations in the Americas, across Europe andthroughout the Far East, could use ISO 20022 XML as thespringboard to drive change through a single standard. Thiswould be a real game-changer and is potentially very exciting.What additional challenges lie ahead?I think that there are additional challenges ahead, particularlyin bringing bank statements in line with the ISO 20022 XMLstandard, as well as aligning e-invoicing with payments toprovide a complete end-to-end picture. Process standardisationis not yet as it should be and there is more work that needs tobe done.VismaUlf Björnvold,Product Management ExecutiveHow do you feel corporates are handlingSEPA Migration? Are they planning sufficiently?I think that corporates are handling SEPA migration well. Theyare prepared and they have engaged with the process. As aNordic wide ERP vendor, Visma has been helped by the factthat Finland effectively made SEPA standards mandatory inOctober 2011, much earlier than the formal deadline. As such,there have been very high levels of awareness over SEPA.What is your view on the end-date?I don’t personally see an end-date problem. Most corporations arewell on track or have already completed and there is now a hugeamount of expertise in the market to be able to meet client needswhere required. I do, however, think we will see a demand forservices rise towards the end date.How are you meeting the corporations’ needs?We have been well prepared and have been working with allmajor banks for more than two years. We have around 500,000customers across the Nordics and have developed a Cloudapproach to SEPA. This means that we can offer a centralisedservice that enables clients to standardise their payments –and we can deploy this without a need for a protracted on siteERP project. This currently supports 5 currencies, rising to 15 bythe end of the year. Now, in the Nordics for example, our clientscan centralise their payment handling services from one point ofentry across all four markets. As our coverage grows to othermarkets, you can see just how powerful a proposition this is forlarge international companies.Do you see any spin-off benefits with implementing SEPA?SEPA has been the driver from a regulatory perspective but clientsare alive to the benefits. They welcome faster payments overborders, savings in transaction costs, using just one bank account,reliability and common standards and rules. Large corporates knowthat common standards enable the construction of one standardplatform for payments in SEPA resulting in major savings. Andcorporates understand that SEPA is just the first step towardsongoing change.What additional challenges lie ahead?We are looking at SEPA as just the beginning of a journeytowards centralisation and harmonisation. We see CommonGlobal Implementation (CGI) as the next major challenge andhave just completed – in partnership with SEB – the first crossNordic implementation.→
  • 16  |  SEPA Handbook 2012Logicanow part of CGIGarry Young, DirectorSaaS & Corporate ServicesHow doyou feel corporates are handling the SEPA Migration?Are they planning sufficiently?Since the European Parliament voted through the end-dateearlier this year, we have seen a marked hike in corporate activityaround SEPA. Large multi-nationals are always seeking furtheropportunities for payments standardisation and centralisation.They are looking at how they can get the most out of SEPA andgenerally have well established SEPA readiness programmes.Those companies yet to start such programmes, or who see it asa question of compliance, need to be aware of the potential risksof approaching SEPA haphazardly.What is your view on the end-date?The end-date has been essential to kick start SEPA. However,many corporates have been caught by surprise and may nottherefore have budgeted. Some corporates will struggle to meetthe end-date. The challenges they face are significant and thereare not many working days until February 2014. There are somecorporates who still believe it won’t happen or who believe thatsomehow banks will fix the problem. But leaving SEPA to the lastminute is a major risk. There will be a spike in demand for servicesup to 2014 and competition for SEPA resources.How are you meeting the corporations’ needs?Logica, now part of CGI, has a strategic focus on SEPA. Our SEPAbusiness includes consultancy, implementation, testing, andmarket and solution validation. We have delivered technology,services and advice across multiple countries and accounts asthe SEPA vision has become reality.We provide a comprehensive Mandate Management and SEPACredit Transfer platform as a full SEPA compliant end-to-endservice for corporates (and banks). Mandate Management isdesigned to enable corporates to easily migrate from legacydirect debit and credit transfers to SEPA. Paper mandates canbe uploaded using our European scanning service, and mandatepacks easily printed and sent cost effectively to end customersfor signature.We provide a one stop shop for SEPA from technology solutionsand services to business consulting and advice.Do you see any spin-off benefits with implementing SEPA?Yes; SEPA is much more than a compliance issue for corporates.As a European corporate you cannot afford to discuss paymentscentralisation without considering the impact of SEPA. SEPAsupports the corporate drivers of cash visibility,reduced risk andcost reduction.Those companiesyet to start SEPAreadinessprogrammes, orwho see it as aquestion ofcompliance, needto be aware of thepotential risks ofapproaching SEPAhaphazardly.
  • SEPA Handbook 2012 |  17SAPMárton Lupták, Product ManagerHow do you feel corporates are handling theSEPA Migration? Are they planning sufficiently?We put out a lot of information about SEPA from the very beginning,but since SEPA became mandatory there has been a significantlyincreased level of interest and lots more enquiries at a local level.We have always pushed the view that SEPA should be approachedas more than just a compliance issue because of the opportunitiesit affords large corporations to achieve significant business benefits.What is your view on the end-date?While the end-date is now not far off,we don’t see an issue for thelarge corporations in terms of SEPA readiness.We do suspect thatthere will be an increase in demand as the end date approaches,particularly in the SME sector,but the ERP market now has a gooddeal of collective knowledge around SEPA and has learnt much fromthe early adopters. For everyone except those who really do leavetheir planning to the very last minute,there shouldn’t be a problemmeeting the end-date.How are you meeting the corporations’ needs?SAP has, for a long time, communicated with our clients andmade them aware of both the legal requirement for SEPA, butmore importantly of the strategic opportunity.We have now completed a large significant number of SEPAimplementations across Europe and expect to get busier in therun up to the end-date itself.Our now well established SEPA offering enables customers whoare running SAP ERP Financials to quickly adapt to SEPA throughapplications including the SAP Bank Communication Management,SAP Integration Package for SWIFT, and the SAP In-House Cashapplication. Our technical offer is supported by SAP Consulting,who can help companies successfully manage the migration toSEPA. SAP Consulting has established a SEPA centre of excellenceto provide a variety of specialised consulting services.We also have a very active user group around SEPA and corporatescan clearly understand their SEPA journey through this and throughvarious e-learning resources that are available.Do you see any spin-off benefits with implementing SEPA?Corporates do understand the range of benefits that come withimplementation, including reduction of costs and improvedefficiency. But SEPA is the just the beginning of a journey that willsee an overhaul of centralised processing standards.The commonglobal implementation (CGI) initiative is an area that we areparticularly excited about as it has the potential to change thelandscape for the big global operators. SEPA as a subset of theISO20022 XML messages is one of the major topics within CGIand we are already compliant with that as well.SAP has, for along time,communicatedwith our clientsand made themaware of both thelegal requirementfor SEPA, butmore importantlyof the strategicopportunity.
  • 18  |  SEPA Handbook 2012Since the adoption of the SEPA regulation1)in March 2012,the migration to SEPA compliant credit transfers and directdebits is required by regulation.Legacy euro payments mustbe replaced, or adapted, to be compliant with the require-ments on formats and data set in the regulation.This will,of course, mean a major undertaking for payment serviceproviders and payment service users in euro countries andalso have an impact in non-euro countries.The deadlinefor migration to SEPA compliant payment instruments is assoon as 1 February 2014 for euro countries. Read moreabout the scope in ‘Brief facts about the SEPA regulation’on the facing page.The SEPA vision is not changed with the introduction ­of the new legislation. Before this was introduced, therealisation of a harmonised euro payment infrastructurewas supposed to occur through self-regulation amongpayment service providers. An extensive initiative forstandardisation has been driven for many years by themajor banks collaborating through the European PaymentsCouncil (EPC). Major deliverables from this organisa-tion have been rulebooks for credit transfers whichwere introduced in 2008 and direct debits which werelaunched two years later. Updated versions of theserulebooks are published each year. The regulationrequirements for credit transfers and direct debits haveto a large extent been based on these rulebooks. EPCwill publish updated rulebook versions before the endof 2012 that will be in force from 1 February 2014 and befully compliant with the SEPA regulation.The Payment Services Directive (PSD) was adopted in2007 and implemented as national law in all EU/EEAcountries during 2009. The main objective of this act is toregulate the relation between payment service providersand payment service users with a strong focus onconsumer protection. Payment services in all EU/EEAmember currencies are in scope but there are also certainparagraphs with specific purpose to support SEPA. Oneexample regarding payment execution times is that since1 January 2012, a euro payment or a payment in anothermember state currency must be credited to the beneficiary’saccount no later than the business ­day after it wasinitiated. During 2012, the European Commission isinvestigating the effects of the PSD implementationsand a revision of the directive may follow.In 2002, a regulation was introduced with the purposeof creating harmonised conditions for cross-border europayments within EU/EEA. The portal paragraph of thislegislation says that a cross-border euro payment withinEU/EEA must not be priced higher than a correspondingnational euro payment. This regulation was updated andrenamed 20092)and extended to include direct debits.It was further revised in 2012 with the introduction of theSEPA regulation.With the ’Digital agenda for Europe‘ as a major objective­– meaning that services should go digital for increasedefficiency and competitiveness – the European Commissionhave expressed their ambitions to further push thedevelopment of payment services.A white paper on cards,e- and m-payments has been published for commentsand is expected to soon result in more regulation.As described above, there is already a range of paymentlegislation with the objective to support SEPA and furtherdevelopment of effective payment services is expected tobe within the scope of new regulations or additions toexisting ones.Henrik BergmanHow regulation continuesto drive change1)Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro2)Regulation (EC) No 924/2009 on cross-border payments in the Community The SEPA vision is not changed with the introduction of thenew legislation. Before this was introduced, the realisation of aharmonised euro payment infrastructure was supposed to occurthrough self-regulation among payment service providers.
  • SEPA Handbook 2012 |  19Main content Euro credit transfers and direct debits withinEU/EEA in scope End-date for current national credit transfersand direct debits Transitional period for niche products IBAN compulsory. BIC does not have to beprovided by payer after end-date ISO 20022 XML-format mandatory betweenpayment service providers. Also imposedfor customer-to-bank bulked filesKey dates and impact From entry into force31 March 2012 – reachability From 1 Feb 2014 – end legacy products From 1 Feb 2016 – end niche products From 31 Oct 2016 – end legacy euro CTand DD in non-euro countries** Domestic CT and DD in national currenciesin non-EUR countries are not impactedBrief facts on the SEPA regulation
  • 20  |  SEPA Handbook 2012But what does this mean in practice? For the first timein the history of money transfers, the whole moneytransaction chain and related information delivery usesthe same standard. From the debtor to its bank, throughto the creditor’s bank and finally to the creditor, the datais passed without tampering, stripping or converting theend-corporate critical reconciliation data. This means –finally – true 100 % Straight Through Processing (STP).Following the SEPA-transition period, this ISO 20022 XMLbased infrastructure will be available in all euro countrieslocally and for all euro transactions in other SEPA coun-tries. It will replace euro-countries’ local clearing systemsand open up all the benefits to end customers adapting thenew standards.The transition enables corporates to startusing the same accurate reconciliation processes to a vastamount of originally cross-border transactions that arerun under SEPA schemes.Finland has already successfully migrated all its file-basedpayment initiation customers to the ISO 20022 XMLstandard instead of local well-standardised formats andlocal non direct debit payment schemes.This was done notonly for normal local credit transactions but also for salariesand tax payments.Additionally,initiations of local expresspayments and cross-border payments are now run withISO 20022 XML messages too. Finnish migration wassmall in scale compared to the challenges that the bigCentral-European euro countries face in the next two years,yet the scope of migration was larger than specified in theend-date regulation text. Good progress has been madeamong the ERP- and middle-ware vendors that haveimplemented their applications to be more easily adjustableto ISO 20022 XML initiation and reporting file exchangeand processing between end-customers and their banks.ISO 20022 XMLextends possibilitiesSEPA is based on the ISO 20022 XML standard, which is the universal financial industryscheme. Under ISO 20022 XML, Bank-to-Bank messages in SEPA become mandatory. Thismeans that the SEPA clearing and settlement mechanisms use this standard by default andwithout option. The SEPA regulation mandates that banks ensure that end-corporate usersuse ISO 20022 XML when sending and receiving SEPA instrument bulk files.
  • SEPA Handbook 2012 |  21Corporates and banks now have incredible developmentand business tools at their disposal. Using ISO 20022 XMLfor SEPA offers a financial interchange platform that canbe easily expanded for other purposes. Finnish customershave already taken advantage of this. By default, there wasan obligation to start using cross-border initiations withthe ISO 20022 XML pain.001 payment initiation message.This opened the eyes of some companies that are activein non euro countries. With banking partners like SEB, it isnow possible to make all local featured payments with theISO 20022 XML in Sweden, Norway, Denmark, Latvia,Lithuania and the UK. Poland will join shortly.SEB supports the Scandinavian local schemes with ISO20022 XML initiations corresponding to creditor servicesfor SEPA Direct Debit schemes. This offers huge potentialfor corporates to harmonise their Accounts Payable andAccounts Receivable processes. This extends not just tothe standard output and input with their partner banks,but also the actual payment and collection processesespecially when these are centralised.ISO 20022 XML integrity and harmonised developmentamong banks, ERP vendors and corporate end-users isensured through the Common Global Implementation(CGI) group where SEB has worked actively alongsidethe large international banks since its creation in 2009.CGI group’s mission is to simplify the ISO 20022 XMLimplementation for corporate users and,thereby,topromote wider acceptance of ISO 20022 XML as thecommon XML standard used between corporates andbanks. The CGI group’s mission is achieved throughconsultation, collaboration and agreement on commonimplementation templates for relevant ISO 20022 XMLfinancial messages that are published and promoted inorder to attain widespread recognition and adoption.Under CGI guidelines, ERP vendors can develop toolsthat ensure end-corporate implementations with ISO20022 XML easier. There are now around 60 contributingmembers in the group and the documentation is widelyused in ISO 20022 XML Payments Domain integrationwork among the market players. The CGI group justreleased its new home site under the SWIFT corporatesinternet page area with this web link www.swift.com/cgi.Setting a proper and solid ISO 20022 XML standard usageguideline is finally a benefit for all market stakeholders.ISO 20022 XML has already started to spread to thedevelopment of other local clearing mechanisms inseveral countries. As corporate end users expectreliable and common use from their partner banks,infrastructure changes are required to ensure flawlessinformation flow from debtor to creditor. ISO 20022XML is a much bigger entity than just SEPA. That is whyI have jokingly said that whatever happens to SEPA oreuro, ISO 20022 XML will prosper in any event.Harri RantanenFor the first time in thehistory of money transfers,the whole money transactionchain and related informationdelivery uses the samestandard… This means– finally – true 100 %Straight ThroughProcessing (STP).
  • 22  |  SEPA Handbook 2012Luxembourg was the first country to migrate, beginning in2006, a few years before SEPA. The background to thiswas a desire to move from the local clearing house (ACH)to the central STEP2 platform provided by EBA Clearing,so this change was not primarily SEPA driven.The second country to take the step towards SEPA wasFinland. This migration was very carefully planned anddriven by a national SEPA Forum with representativesfrom all important stakeholders. The Finnish banks gottogether in a group called SEEBACH to work together onall the changes that were needed, including,• Designing two Additional Optional Services (AOS).AOS 1 specifies Acceptance date and AOS 2 is usedfor bundling several invoices and credit notes intoone payment.• Selecting the STEP 2 platform for SEPA processing.• Informing all customers, in particular corporates andpublic entities, that the migration to SEPA would alsorequire a move to the ISO 20022 XML standard andto IBAN.A number of other countries, including Belgium, Spain,Cyprus and France have also made good migrationprogress. The big picture is that around 25 % of credittransfers and 0.01 % of direct debits have been migrated.So a lot of work remains ahead, as a few countries havebarely begun migration.SEPA regulation now makes it mandatory for everybody,with a few exceptions, to move to SEPA by 1st February2014. Some important lessons can be learnt from earlyadopters and lessons can be learnt to avoid pitfalls.The key points are: Information about the migration must be communicatedearly to all stakeholders. The move to SEPA will oftenmean that corporates and public entities must imple-ment IT changes and the lead-time is often long. ­So an early alert is essential. Corporate customers and public authorities will beaffected since all their domestic payments and directdebits will have to change and can only be processedin accordance with the rules of the SEPA regulation.This will have a significant impact since the domesticvolumes, often making up 99 % of all payments anddirect debits, must move to the new SEPA standard.Does the new system have the capacity to handle thenew volume? It is also important to ensure that thesystem has the same very high level of straightthrough processing to avoid manual intervention.Market will benefit fromthe experiences of theearly adoptersSEPA started in 2008 with the introduction of the credit transfer followed two yearslater by the launch of the direct debit. But only in a very few cases did countriestake an early decision to move to SEPA. Over the coming months, member states will review their migrationplans and take all the provisions in the regulation into account. Inparticular, decisions must be taken in relation to national paymentproducts with special features.
  • SEPA Handbook 2012 |  23 ISO 20022 XML should be used for all payment transac-tions covered by the Regulation. This requirement ismandatory in the interbank space.The banks also haveto ensure that customers use the ISO 20022 XML format.For customers that do not process in this format, it willbe necessary to utilise some sort of conversion servicein order to deliver Regulation-compliant files.Payments that are processed through Large Value PaymentSystems, like Target2 and EURO1 are not covered by theRegulation. This means that these payments will beprocessed using the legacy format and they will not becovered by the requirement for ISO 20022 XML.The Regulation introduces an end-date of 1 February 2014.This date marks the end for all domestic euro paymentsprocessing in the eurozone and only Regulation- compliantcredit transfers and direct debits will be processed afterthis date.Over the coming months,Member states will review theirmigration plans and take all the provisions in the Regulationinto account. In particular, decisions must be taken inrelation to national payment products with specialfeatures, called niche products in the Regulation. Mostof these will probably be phased out before 1 February2016. In some cases they will be replaced by regulationcompliant payment types supported by an AOS.There are a number of exceptions in the Regulation whichallow Member states to delay a number of the provisionsuntil 1 February 2016. These relate to the obligation to useISO 2002 XML for corporates and to countries that haveyet not adopted the euro. Member states must notify theCommission by early 2013 of any exception that theywould like to exercise.It will take some time before full clarity is reached on allthese complex questions. The banking industry will needto follow these developments closely.Björn Flismark
  • 24  |  SEPA Handbook 2012The Volvo Car Group is ready to meetthe initial requirements for SEPAthanks to a cash management projectwhich began in mid 2011.Working inconjunction with SEB, this projectinvolves currency cash pools inSweden in addition to an automaticcash concentration solution with dailysweep arrangements in marketsacross Euroland, Sweden, the UnitedKingdom, Norway, Denmark, Hungary,the Czech Republic and Switzerland.To ensure a true Europe-wide solution,Volvo Car Group also engaged ING towork in partnership with SEB.The cash management project wasan enabler to implement SEPA, and asubproject was established with VolvoCar Group’s Treasury as sponsor.Volvo Car Group initially concentratedits efforts on the two markets where ithad the largest operations – Swedenand Belgium. Both of these majormanufacturing plants generate largeamounts of invoicing for supplierpayments and it was decided toimplement SEPA compliant paymentdata (ISO 20022 XML standard) inthese two countries first.These twoplants account for the major share ofVolvo Car Group’s outgoing payments.Volvo Car Group managed themigration through a dedicated projectteam – though it should be stressedthat this team took on responsibilityfor SEPA in addition to their normalday-to-day activities. The SEPAProject ownership was sharedbetween a project leader fromaccounting and one from IT – the twoareas of the business most significantlyimpacted by the migration.In terms of benefits from the changes,the company is pragmatic.The changeswere made first and foremost becausethere was a requirement to do so.One immediate benefit, therefore, isthat the legal requirement has beenmet. But there have been others.SEPA has increased security andminimised operational risk using amuch more secure communication inreplacing old banking technologyand also reducing the number ofbank interfaces. Another major plushas been the harmonisation of bankpayments and the reconciliation ofaccounts and incoming and outgoingpayments. Whereas this previouslyrequired Volvo Car Group to movecash to different banks to effectpayments, the new process is muchsmoother, giving greater efficiency ofsupplier payments. The companyalso reveals that information is muchmore available and accessible thanpreviously, giving a more effectivebasis upon which to act. Informationis now sent directly to the ERPsystem – a huge step forward frompreviously where payment detailshad to be scanned and forwarded on.For Volvo Car Group, SEB has beena reliable working partner. As well asexceptional project management,SEB has been able to deliver marketknowledge and technical expertise.Naturally, as with any project thissize, there have been challenges toovercome and lessons to be learnt,but when these have arisen, therehas been a clear willingness on bothsides to correct these as soon aspossible.Founded in Sweden in 1927 and acquired by Zhejiang Geely Holding Groupin 2010,the Volvo Car Group is one of the world’s most respected and trustedcar brands. In 2011, some 2,283 Volvo dealers sold 449,255 cars in morethan 100 countries around the world.Volvo designs and manufactures carsin Gothenburg, Sweden, and also has a plant in Ghent, Belgium. It currentlyemploys around 21,500 people. This article explores how this major globalplayer is gearing up for SEPA.SEPA CASE STUDY
  • SEPA Handbook 2012 |  25SEPA has increasedsecurity and minimisedoperational riskusing a much more securecommunication inreplacing old bankingtechnology and alsoreducing the number ofbank interfaces.
  • 26  |  SEPA Handbook 2012Since Estonia became the 17th member of the eurozoneon 1 January 2011,attention has turned to the neighbouringBaltic states of Latvia and Lithuania. Latvia is next in lineto join the eurozone in 2014 along with Lithuania, thoughthe latter still has to overcome some political challengesto make this date a reality. If all three Baltic countries ­do become members of the eurozone, it will create anumber of significant opportunities, especially as, withharmonisation, all three countries could be treated asone homogenous entity with customers not facingsignificant differences between the three.Estonia is a forerunner and is the gateway to the Baltics. ­The country is well on course for SEPA compliance. Existingdomestic payment products are highly efficient with sameday settlement and 10 clearing cycles each day. In terms ofimplementing standards within the other Baltic countries,SEB believes that both Latvia and Lithuania can learn fromits neighbour, making eventual transition smoother.Baltics face up to challengesand opportunitiesSEPA has wide ranging implications for countries both within and outside theeurozone. Here we look at some of the challenges and opportunities of migratingto SEPA facing the Baltic countries.
  • SEPA Handbook 2012 |  27 If all three Baltic countries do become members of the eurozone, itwill create a number of significant opportunities, as,with harmonisation,all three could be treated as one homogenous entity.Adoption of these standards has already brought tangiblebenefits to Estonia, with a 30 % increase in its Nordiccustomer base. It is hoped that this can be extended toLithuania and Latvia by adopting the same standards.Additional and harmonised clearing cycles for fast andwell functioning euro credit transfers is one suggestedrequirement. The SEPA Direct Debit (SDD) remains of greatinterest and Estonia is fully focused on enhancing existingproducts and further improving service levels in this area.The SEB approach to SEPA has been underpinned through-out by co-operation and shared using experiences. In theBaltics, this will mean using experiences from Estonia butalso taking best practice from Finland and other countries.As the second largest bank in Estonia and the marketleader in Latvia and Lithuania, SEB believes it is in a primeposition to push SEPA forward, but acknowledges aresponsibility to lead the market in implementation,providing customers with service excellence wherevertheir businesses are based. The vision is to centralise allactivities within the Baltics.Jaana Otsasoo
  • 28  |  SEPA Handbook 2012Large and mid corporates have only partly discovered themajor advantages a Single European Payment Area offers:They quickly adjusted their systems in order to enablethem to send euros as SEPA payments to other Europeancountries. But the majority of domestic payments are stillbeing transferred using the German payment platform.The domestic mass-billers, such as the statutory healthinsurance companies and other public bodies, stillstruggle with the new system. Many of the tasks arisingfrom switching to SEPA standards, such as investigatingtheir software programs for compatibility, establishing amandate system or adjusting their processes call forinternal project groups.German companies today rely on one of the best paymentsystems in the European market, which ensures very lowfees and fast settlement – from as low as one day – forelectronic transactions.With 17.3 bn payments a year, the German payment marketis huge, representing approximately 20 per cent of theentire European market. Nearly all of these paymentsare electronic, with credit transfers amounting to 33.9 percent, direct debits to 50.2 per cent. Therefore, using SEPAdirect debits does not mean venturing into unchartedterritory. In Germany, there are already two kinds of directdebits, comparable to SEPA core and business to businessdirect debits.Under SEPA, prices will remain more or less the same,whereas the transaction times for direct debits has initiallyincreased. This is due to the Sepa Direct Debit (SDD) coretime cycle, according to which the payer’s bank mustreceive the request for a first direct debit collection orone-off direct debit collection at least five business daysbefore the due date. From November 2012, an option willbe introduced in the SDD Rulebook so that collectionswithin one day prior to the due date are possible. Handlingof mandates will also be subject to change.Last year, SEB Germany started its internal adoptionproject that will cover all the requirements both of SEPArulebooks and Germany’s specific needs. Getting all thenecessary aspects implemented in time will be a challenge– even more so since future versions (2012 and 2013) ofthe rulebook have to be taken into consideration now, soin many cases, solutions need to be flexible.Some project tasks, to name just a few:• Process for direct debits processing under considerationof cut-off times and settlement cycles• Implementing black and white list for SEPA direct debits• Standard order functionality for SEPA products• Return process• Training material for SEB employees• Information material for customersThe results will be implemented step by step up toFebruary 2014.Martin GrätzGermany geared upfor SEPA challenge
  • SEPA Handbook 2012 |  29 With 17.3 bn payments a year, the German payment market is huge, representingapproximately 20 per cent of the entire European market. Nearly all of thesepayments are electronic, with credit transfers amounting to 33.9 per cent, directdebits to 50.2 per cent. Therefore, using SEPA direct debits does not meanventuring into uncharted territory.
  • 30  |  SEPA Handbook 2012
  • SEPA Handbook 2012 |  31In a short space of time, we have seen the evolution ofchanging information between corporates from differentEDI messages to the ISO 20022 XML standard.The finalstep was the realisation of SEPA and this evolutioncontinues. When a corporate is making changes or updateson their ERP systems, the check is made that the system isISO 20022 XML compliant. This is where SEPA imple-mentation has led; the standard has become an importantfeature in financial projects. The standard is also likely tocarry other transaction information in future. And yet, itremains to be seen when other financial transactions willreally be combined in the ISO standard.After implementing SEPA in Finland,we have seen discus-sions on AOS space where there is a need to have moreservices that has generally been agreed.These rising needsof local features might create risks for harmonisation orstandardisation.Furthermore,the local direct debit isprobably staying; it will just be named differently.Thefuture will tell the kind of implications these will bring.However, SEPA has already brought many benefits tothe corporate table. We have seen rationalisation ofbank relationships through operating with less banksand fewer bank accounts. Standardisation and harmoni-sation has had its impact on ERP system developmentand evolution in using bank connections – for exampleSWIFT. The ISO 20022 XML standard has even impactedon the development of the local e-invoicing format based onXML.The XML standard will definitely open new possibilitiesand channels to transfer other payment-related information.And the banking industry as a channel is a very securepartner to transfer the data. System integrators have alsoseen new opportunities when offering SEPA and ISOrelated services to corporates. It has opened up a newmarket for innovation within the transaction business,which has traditionally been quite conservative.So what is the next step? We will see the trend ofcentralisation continuing. This will bring large savingsto corporates. When the benefits of the European leveldirect debit are seen, this represents the next jackpot.In the globalising business the e-invoice will be anecessity in the near future in order to enhancebusiness processes. And utilising the ISO 20022 XMLstandard for new areas can be calculated as a benefitfrom SEPA.Jari EkCentralisation gatherspace in Finland SEPA has already brought many benefits to the corporate table.We have seen rationalisation of bank relationships throughoperating with less banks and fewer bank accounts.
  • 32  |  SEPA Handbook 2012How will the current European financial problems affectthe development of SEPA? When do you believe corporateinvestment in SEPA implementation is best made withoutrisk of major surprises or setbacks?It is true that the present climate is very challenging. SEPAdevelopment is important in development in this context sincehuge savings is realised through SEPA efficiencies. Politicianshave ensured that SEPA regulation is in effect from March 2012.This legislation clearly signals that the move to SEPA continuesand is now mandatory for banks and for their clients making europayments.The deadlines for the migration are tight and thereforepostponing planning for the necessary investments is no longeran option.Why should my corporate change its EUR paymentsto SEPA Credit Transfers now?From a business perspective you can streamline your processesfor both local and crossborder EUR payments. The price isgenerally lower than traditional crossborder EUR.The earlier yourcompany migrates, the more time your bank will have to supportyou in the process. The closer we get to the mandatory SEPAmigration end-date, the higher the migration tempo will be.What are the main differences betweenSEPA Direct Debits CORE and B2B schemes?The main differences are closer cut off time (D-1) for B2Btransactions,no refund right and the fact that B2B is an optionalscheme so not all banks offer the service.The B2B scheme is aimedat professional payment users onlywhile the CORE scheme canalso be used for mass collection purposes as it fulfils the regulatoryrequirements on consumer protection.It has been said that SEPA relies on, or even may mandate,the use of the ISO 20022 XML standard. However, theredoes not seem to be a single version of the standard asdifferent banks provide different documentation. Is thereany organisation responsible for the endorsement of aversion of the standard that can be supported by themajority of banks and ERP vendors?The end-date regulation has made ISO 20022 XML standardmandatory for banks and clearing organisations. This standardshould also be used in the customer to bank space, since banksmust ensure that the standard is used for sending and receivingtransactions via bulked files. There is no single organisationresponsible for creating a standard. But the end-date regulationalso makes interoperability mandatory,which will mean that allparties must make sure that files can be exchanged smoothlywithout the need to change anything. SEB and other banks areworking in co-operation with corporate users and ERP vendorswithin the Common Global Implementation (CGI) group in orderto establish and publish commonly agreed guidelines for ISO20022 XML usage.Do we as a corporate have to change our fileformats to XML?The regulation says that ISO 20022 XML is the format to use forpayments via bulked files.Many banks and other service providersare, however, expected to try to offer some conversion servicesof formats where the old format is able to be converted to XMLand SEPA payments with good quality.How will SEPA affect my payments in othercurrencies than the euro?The scope for SEPA is limited to euro payments (includingpayments from accounts in other currencies exchanged to euro)within EU, Norway, Iceland, Liechtenstein, Switzerland andMonaco. This means that domestic payments and cross-borderpayments in non-euro currencies within SEPA and all paymentsoutside SEPA will still be processed according to current routines.However, in the longer term, SEPA standards will be adopted byindividual banks and even national communities for purposesbeyond SEPA. This will give opportunities to leverage even moreon these standards by cost efficient payment processing andimproved cash management offerings.The hot topics– questions and answers
  • SEPA Handbook 2012 |  33Is it true that only IBAN, and not the BIC,will be neededin SEPA CT and DD initiations?Yes, from 1st of February 2014 it will only be necessary to supply theIBAN and not the BIC in the payment instruction for national SEPApayments according to the SEPA end-date legislation. From 1stFebruary 2016 this rule applies also to cross border SEPA payments.Please follow your bank’s instructions of the changes in procedurein the channel you are using.What is an international creditor’s reference?An international creditor’s reference is an enhanced version of thecommon national creditors’ references. It enables end-to-end STPand automated reconciliation of receivables and expands thebenefits of the standardised creditor reference currently used indomestic to cross-border invoicing.•  The Creditor (Beneficiary of the payment) sends a creditorreference on an invoice or on a form for credit transfer to theDebtor (Originator of the payment)•  The creditor reference is delivered without alteration from theOriginator to the Beneficiary in a credit transfer transaction.•  For identification “RF” is attached as the first two characters ofthe Creditor Reference.The RF is followed by 2 check digits andthereafter by a maximum of 21 characters (total of 25 characters).•  The check digit algorithm is the same which is used in IBANformatted account numbers.•  Example: RF98 1234 5678 9012•  The standard is ISO11649 certified.Will the RF international reference replace thecurrent domestic references?The RF international reference delivery from one bank to another isstructurally supported in SEPA Rulebooks.This is only the first step.The real penetration speed is dependant on financial softwareapplication market adaptation.Invoicing (and Accounts Receivables)systems should be able to add it to the invoices and all possiblepayment system interfaces in ERP-systems and banks should be able toprovide a user interface (or file) field to enter it within the outgoingpayment.There is no and (most probably) will not be a strict “end-date”for local, existing creditors’ references. As corporate end-customershave welcomed this development,it will very likely succeed.The newRF international reference cannot be reported structurally in the local,existing reporting formats but in the upcoming ISO 20022 XMLstandard reporting,both the new and old reference can be deliveredstructurally and can also be separated in a structured way for possiblefurther differentiation processing of reconciliation.What should a corporate do next to start up its SEPApreparations?1. Contact your ERP-system vendor(s) to ensure yourpayment / receivable process readiness to SEPA2. Contact your multibank system supplier to schedule your migrationin co-ordination with your bank(s)3. If applicable, consider how the migration could serve your group asa whole, not just locally.4. Add IBAN & BIC to your own invoices5. Start collecting IBAN & BIC information from your customers6. Plan migration with your ERP vendor and update IBANs and BICsinto your Accounts Payable or other payment processing system7. Plan migration with your HR system (salaries) vendor and updateIBANs and BICs into the salary processing system8. Analyse your in-house payment and receivable flowsa. Plan migration for your express and international paymentsb. Usage of ISO 20022 XML standard for all above mentionedpayment typesc. Possibility of using on behalf payments and receivables(Ultimate Debtor / Ultimate Creditor)9. Additional preparations for the futurea. SEPA Direct Debit as an international receivable optimiserb. Optimising EUR-cash positioning and bank account structurec. Use of references, for example creditor’s reference (ISO 11649)
  • 34  |  SEPA Handbook 2012Henrik BergmanSenior Manager Market & Infrastructure, Global Transaction Services Product­Management. Works with payment services, market and regulation issues. Wideexperience in SEPA and PSD, working with these initiatives on a European anddomestic level since inception. Currently a member of the European PaymentsCouncil SPS WG and several payment committees and working groups in theSwedish Bankers’ Association and EBA, and previously also in the EBF, ECBS and ISO.Daniel LexanderGlobal Product Manager SEPA Payment. Joined SEB 2011. 15 years of paymentexperience from corporate treasury, consultancy and in previous position ashead of business development for the automated clearing house in Sweden.Kerstin AbéProduct Manager of Cash Management Products in GTS Product Management inGermany with responsibility for ensuring the high quality of SEB Germany’sprofessional SEPA offering. Expert payment and liquidity background based ­on almost 20 years of product experience.Björn FlismarkSenior Vice President, Global Transaction Services Product Management. Memberof the European Payments Council Plenary 2002 – 2010. Deputy Chairman ofEuro Banking Association, EBA. Chairman of EBA’s SEPA and PSD ComplianceWorking Group. The group published several handbooks, ’A Guide to the SEPAMigration end-date Regulation‘, ’Banks preparing for SEPA‘ and ’Banks preparingfor PSD’.Pasi MaahiProduct Manager, GTS Product Management Finland. Member of SEPA relatedprojects and working groups at Finnish Federation for Financial Services, includingPayment Service Working Committee and SEPA Migration.Meet SEB’s SEPA experts
  • SEPA Handbook 2012 |  35Jonas PalmGlobal product manager for Direct Debit solutions (including SEPA Direct Debits)within SEB’s Merchant Banking division.Jaana OtsasooBusiness Development Manager, SEB Estonia. Has headed several developmentprojects related to payments and Cash Management, SEPA and the Payment ServicesDirective since 2004 as well as the EURO Payment Sub-Project (migration to euro).Has represented Estonia from 2004 until the end of 2011 in the STEP2 XCT UserAdvisory Group. Represents Estonia at EBA SEPA working group. Part of EstoniaBusiness Development Working Group and represents SEB in the Estonian BankingAssociation’s SEPA working Group and Estonian Payment Council. More than 19years banking experience.Harri RantanenGlobal Manager of Formats & Standards, Head of Global Transaction ServicesProduct Management in Finland, Co-convenor of the ISO 20022 XML CommonGlobal Implementation guideline group and represents Finland in the ISO Techni-cal Committee 68 for Financial Services.Johan WaldemarssonSenior Advisor in the Cash Management area with over 25 years experience ininternational cash management and IT development. Expert on electronic banking,EDI, security, liquidity management and payment systems.
  • SEMB00942012.09 Blomquist&CoWould you like to knowmore about SEPA?Get in touch with your local SEB representativeor send an e-mail to sepa@seb.seseb.se/sepa