The February 2014 deadline for bringing all European Union area payments into compliance with the Single Euro Payments Area (SEPA) may mean a considerable amount of IT work for multinational companies that operate in Europe, a SunGard executive argues.
SEPA credit transfers and direct debits have been around since 2008. But Luc Belpaire, director of payments solutions for SunGard AvantGard, notes that European Central Bank statistics show that while 27.3% of credit transfers now comply with SEPA, just 0.4% of direct debit transfers currently are SEPA-compliant.
“Basically, we’re nowhere in terms of direct debit,” Belpaire says. “There’s no adoption, no one has invested in it, and it’s going to be a challenge to migrate these direct-debt transactions toward SEPA-compliant transactions.”
EU regulators responded to the glacial pace of adoption earlier this year by setting the Feb. 1, 2014, deadline. Now it’s up to corporations that operate in the 30 nations involved in SEPA to make that deadline, a task that could involve a range of technology systems involved in payments.
The work will start with companies’ ERP systems, where accounts payable and accounts receivable modules typically create payment files, Belpaire says. It’s not just a question of updating systems from, say, French payment instruments to SEPA instruments. SEPA also mandates that corporations use ISO 20022 XML messages by 2014. “So treasurers have to get rid of old formats and replace them with XML formats,” he says.
On the direct debt side, there is another challenge related to SEPA’s requirement that companies take responsibility for handling customers’ authorizations to debit their accounts. “It’s a new business process that’s being introduced,” Belpaire says. After collecting authorizations from customers, “a large multinational needs to dematerialize the mandate elements, put them into a dedicated database, have a system ready to manage the lifecycle of those mandates and have that integrated with the collection cycle.”
SunGard announced today that it is adding SEPA direct debt capabilities to its AvantGrad Trax payment solutions, capabilities that it developed with Sentenial, a SEPA solution provider.
Making the SEPA deadline won’t be cheap. Belpaire cites estimates that converting to SEPA could cost companies 6 euros ($7.50) per customer record. So a company with 100,000 customers could pay 600,000 euros ($750,000).
He adds, though, that the potential savings are great, as moving to a single set of payment instruments will eliminate cross-border payment fees and should make Europe more competitive. Once SEPA is adopted universally, Belpaire notes, companies in Europe will be able to simplify their cash management procedures and their banking relationships.
See SunGard's Ten IT Trends Created by the Approaching SEPA Deadline.
For earlier coverage of the Single Euro Payments Area, see SEPA’s Tight Deadline.