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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.

Friday, 20 April 2012

Wire Payments Maintain the Lead, as SEPA Gains Ground

07 Feb 2012

While wire transfers remain at the top of the list given their significant risk mitigation effect, automated clearing house (ACH) credits and single euro payments area (SEPA) instruments (both e-payments) will grow in importance in the near future.

Electronic payments (e-payments) are the vast majority used to make payments on a regular basis, given the large presence of wire transfers (87%). This is followed by cheques (62%), which are specific to some geographic areas, such as North America, Middle East and Asia-Pacific. The third and fourth placed most used payment methods are automated clearing house (ACH) credits (55%) and debits (47%), reinforcing the electronic nature of payment transactions today.

“When money must be sent fast, a bank wire transfer is often the best option,” says Enrico Camerinelli, contributing editor, gtnews. “In addition, payments made this way are more certain, as banks only send money if the sender has available funds. They are often used for important and high value transactions.”

Interestingly, purchasing cards represent a significant portion of regularly use methods of payments within North American companies (68%). Only companies between US$10m and US$500m remain ‘loyal’ to cheque payments, although presenting a dramatic reduction from 61% currently down to planned 43% over the next three years.

While wire transfers remain at the top of the list given their significant risk mitigation effect, ACH credits and single euro payments area (SEPA) instruments (both e-payments) will grow in importance over the next three at the expense of cheques, which is expected to experience an 18% drop from the current use of 62% down to a planned use of only 44%.

This is the first year that gtnews has questioned survey respondents specifically about their usage of SEPA Credit Transfer (SCT) and Direct Debit (SDD) instruments. SEPA-related payments are still a minority, with 34% of respondents using SCTs and 14% using SDDs. As expected, European companies are using more SEPA-related payments than companies in other regions.


When asked the reasons for not investing in SEPA, interestingly only 1% picked the certainty of the end date. Companies still lack a clear and agreed-upon understanding of the benefits SEPA can bring. It's not a question if SEPA brings benefits - the real issue is how to calculate the benefits and align them with each company's payments strategy. However, more than half (56%) said that SEPA was not applicable to their company.

Figure 1: What are Your Organisations Reasons for Not Investing in SEPA? (%)

Source: gtnews

Very large (>US$10bn) companies have a clear understanding of SEPA and its potential impact. Their denial to implement SEPA derives almost exclusively from the non-applicability of such payments standard to the company's processes.

When asked what percentage of the company’s total annual payment transactions will SEPA cover, 21% of respondents do/expect to use SEPA instruments to cover more than half of their payments transactions. Only less than a quarter (23%) keeps a low profile with an expected SEPA involvement of less than 10% of their payment transactions. Camerinelli says: “SEPA-enthusiasts will certainly appreciate the results to this question.”

As many Asia-Pacific companies trade with European counterparts, their expectation of SEPA payments is relatively high. Again, western European companies expect the highest impact of SEPA on their payments - 39% expect to/do use SEPA instruments to cover more than 50% of their total annual payment transactions.

Top reasons for already or planning to invest in SEPA services include: cost savings (66%); centralisation of payments, using one format (55%); and full SEPA adoption is inevitable, so I want to be prepared.

The survey results match the roles played today by banks, enterprise resource planning (ERP) suppliers and consultancy firms. “Banks are expected to focus more on providing information and services on SEPA to facilitate adoption, while consulting companies are rather involved to implementing and advising on the best services to run. Software modules are sourced from ERP suppliers,” says Camerinelli.

Treasury Control Over Payments

Treasury has a good control over payment initiation in 60% of the respondent population. However, 20% saying that more than 20 departments other than treasury can initiate payments independently shows a situation that can be interpreted in two ways: treasury has no control; or treasury has such a high level of control that it enables other departments to execute payments on their own, freeing up treasury to work on other more value-add activities.

Corporates in western Europe report a higher number of business units initiating payments on their own than other regions - with 34% reporting this. CEE corporates have the greatest control over payments - 67% report that no other business unit can initiate payments other than treasury.

Figure 2: Number of Business Units Independently Initiating Payments by Region (%)

Source: gtnews

Looking at the results in terms of company size, treasury appears to have good control over payments initiation across the board. The high percentage of ’20 or more’ business units is reported in organisations with revenue >US$1bn (26% for companies with revenue between US$1bn and US$10bn and 31% for those with revenue >US$10bn).

“Large corporations also likely have more structured governance for their treasury operations,” according to Camerinelli. “Hence, the distribution of business units able to operate payment initiations is consequent to treasury policy that centralises strategies and control allowing for decentralised decisions making, i.e. when to initiate payments.”

Use of SWIFT for Payments

The use of SWIFT services for payment processes is not prevalent, although they have a small edge (52% report using SWIFT, while 48% do not). The anecdotal evidence that North American companies are not as proactive in adopting SWIFT is confirmed by these survey results.
Fast-growing, emerging regions, such as Asia-Pacific, CEE and Middle East/Africa, are more actively adopting SWIFT because they don't have significant legacy systems to maintain and can leapfrog to new solutions. The attention to SWIFT in these countries is also a good proxy of the success of the SWIFT for Corporates initiative, which was launched in January 2007.

The results reflect the expectation that very large (>US$10bn) organisations use SWIFT as a channel for their payments transactions. The cost for the SWIFTNet connections and for the related operations services is still prohibitive for smaller companies.

However, there are still chances for an expansion of SWIFT: more than a quarter (27%) said they will move to SWIFT, while another 58% have said that there is a possibility. “These results suggest that SWIFT should plan a robust communication campaign to raise awareness and help companies evaluate the [ROI] return on investment of a SWIFT investment,” says Camerinelli.

The Annual Payments Survey was conducted by gtnews in October-November 2011. A total of 312 corporate level respondents participated in the 2011 Payments Survey, a large proportion of which operate on a global basis: 41% reported that their organisation operates in more than 20 countries.

First published on www.gtnews.com 

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