11 February 2013
‘SEPA has become impossible to ignore’
“Banks need to take urgent measures to meet the February 2014 deadline for the establishment of the Single Euro Payments Area (SEPA).” This is the urgent message in a recent article written by Rebecca Brace on the website of Euromoney, an independent platform for financial markets across Europe. The article provides an overview of the views of different people across various banks in Europe.
Brace’s conclusion is that corporations and many banks have been reluctant to invest in SEPA, but with the deadline rapidly approaching, SEPA has become impossible to ignore.
Ruth Wandhöfer, head of regulatory and market strategy, global transaction services at Citi, states that some banks needed to change their perspectives on SEPA. “They (the banks) previously viewed SEPA as a nice-to-have rather than as a strategic project. Some thought there was a possibility the SEPA migration would never happen, but this perception changed early last year.” In an earlier blogpost on the Equens weblog she explained, why XML is the key ingredient for truly standardised SEPA data formats.
However, we only see a slight change in the perception of banks. According to the author Rebecca Brace, recent research showed that more than half of those in the SEPA zone have not yet begun migrating. This sentiment is reflected by the SEPA statistics published by the ECB in October. Less than a third of the credit transfers in the Eurozone are conducted using SEPA instruments. A mere 2% of direct debits are SEPA compliant.
This means that banks and corporations have a lot of work to do before February 2014. Dieter Stynen, head of cash management corporates Western Europe and head of global transaction banking, Belgium, at Deutsche Bank, warns that the official deadline is somewhat deceptive. He points out that the end of the year is typically characterized by IT freezes for banks, system vendors and corporations. “Companies should aim for project completion by November 2013 at the latest.”
If many companies wait for the transition, then the demand of SEPA payments will have a big peak at the end of 2013. Will banks be ready for the SEPA resources spike when and if it comes? Enrico Camerinelle, senior analyst at Aite Group, isn’t worried. “Banks have had enough time to prepare for the introduction of SEPA. They’re properly staffed for internal back-office operations. It will be more likely that corporations will suffer from a resource constraint, since banks have not been sufficiently active in sharing information regarding the effects of SEPA on their clients’ business. As a consequence, banks may suffer from resources constraints on the relationship side, as they will have to serve concurrent requests for help from their corporate clients.”
Will banks be ready to face the big spike? Ray Fattel, HSBC’s payments and cash management global head of product, claims that his bank has been looking at historical adoption patterns and has been working to ensure that both staffing levels and the technical infrastructure are sufficient for the projected demand over the course of the year. Fattel points out that while the requirements from existing clients can be predicted to a certain degree, the demand from potential new clients is less certain.
In conclusion, companies are aware that they need to act now to complete their SEPA migration, but banks should plan for a big spike in demand at the end of the year. Banks need to be ready for this spike. Measurements have been made, but there’s still a lot work to do.