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I am deputy editor at The Banker, a Financial Times publication. I joined the magazine in August 2015 as transaction banking and technology editor, which remain the beats I cover. Previously I was features editor at Profit & Loss, an FX and derivatives publication and events company. Before that I was editorial director of Treasury Today following a period as editor of gtnews.com. I also worked on Banking Technology, Computer Weekly, and IBM Computer Today. I have a BSc from the University of Victoria, Canada.

Thursday, 5 January 2012

SEPA Gaining Ground with Corporates

05 Jan 2012

For the first time, the gtnews Payments Survey 2011 asked its global corporate readers to rank Single Euro Payments Area (SEPA) instruments among regularly used methods to make and receive payments. Although wire transfers* remain the most popular payment method across the board, just over a third of respondents said they regularly made payments via SEPA Credit Transfer (SCT), while 14 percent used SEPA Direct Debit (SDD). The results are almost identical for corporates receiving payments via SEPA instruments.

As expected, percentages were much higher in Western, Central and Eastern Europe (CEE) than in other regions. Interestingly, corporates operating in CEE reported the highest usage of SDDs, even greater than in Western Europe. Looking forward to plans within the next three years, the increase of SEPA instrument usage is expected to be substantial, with SDD usage increasing at a faster rate than that of SCT. Western Europe and CEE corporates are expected to see significant increase in usage, but even Middle East and African corporates estimate that SCT and SDD usage will increase by about 25 percent.

Almost 20 percent of corporate respondents already invested in SEPA compliance and more than 40 percent said that investment plans were already in the making, whether that is within a three-month timeline or just ‘at some point'. The majority of respondents cited ‘cost savings' as their reason for planning to or investing in SEPA, followed by ‘centralisation of payments' and ‘full SEPA adoption is inevitable, so I want to be prepared'. The reason least often cited was that ‘my bank encouraged me and helped me with the implementation of SEPA services'. Many asked for better communication about SEPA from their banking partners. SEPA is a great opportunity for banks to step up and help their corporate clients come to terms with how SEPA is going to affect their business. When asked which parties - bank, enterprise resource planning (ERP) supplier and consultancy firm - would the corporate ideally like to play a role in providing general information and services that facilitate the transition, banks come out on top. In Western Europe, 96 percent of corporates are looking to their banks to provide general information on the impact, how to prepare, what will change, etc. ERP suppliers, on the other hand, gain top spot when corporates are looking for software modules that allow SEPA transactions.

The 2011 Payments Survey results also show that some corporates are still hesitant to invest in SEPA services. When asked if their organisation planned to make that investment in the future, more than a third stated they had no plans; this translated into 20 percent of those corporates operating in Western Europe. On the plus side, these findings reflect a step forward in terms of SEPA uptake compared to the Payments Survey 2010, when almost 50 percent of corporates said that they were not planning a SEPA investment.

But what issues continue to hold corporates back? The top three reasons cited were:
• ‘SEPA is not applicable to my company'.
• ‘Need more insight on the impact of implementing SEPA in my company'.
• ‘Not convinced of the opportunities and benefits for me'.

‘Not applicable to my company' for not investing into SEPA compliance was the most cited reason regardless of geographical region. In my view, the most interesting result with regard to this question is that the reason least cited for not investing in SEPA was because ‘we are unwilling to commit without a firm end-date for existing domestic payments'. This is a conflicting result compared with a straw poll I conducted in September 2011 with European Treasurers Council members, which now numbers more than 150 members of senior level treasurers at the largest European corporates. When asked what could be done to increase the take up of SEPA, most responses mentioned the need for definite deadlines to make SEPA regulations mandatory. These findings demonstrate, in any case, that corporates must be educated - as a matter of urgency - on the fact that the forthcoming EU ‘Regulation Establishing Technical Requirements for Credit Transfers and Direct Debits in Euros' (the SEPA Regulation) will define an end date for compliance of euro credit transfers and direct debits with this legislative act. Effectively, this means that existing national euro credit transfer and direct debit schemes will have to be replaced by the SCT and SDD Schemes by 1 February 2014.

Over 300 corporate respondents participated in the gtnews Payments Survey 2011, conducted in October 2011. The full 2011 Payments Survey report, with extra analysis from gtnews' payments experts, will be available on gtnews (http://www.gtnews.com/) in January 2012.
*In the SEPA context, wire transfers are referred to as credit transfers.

First published on www.gtnews.com 

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