8 May 2013
Finland: “Full SEPA benefits can only be gained when the migration has been fully completed” (part 2)
In a previous blog post Marianne Palva, Senior Advisor in the Financial Stability Department at the Bank of Finland, explained why Finland was an early SEPA adaptor. Since 2011 the nation is 100 per cent SEPA Credit Transfer (SCT) proof. In this post, Marianne Palva explains the role of the different stakeholders in the migration process and tells about the road ahead.
According to Marianne Palva the burden for consumers to migrate to SEPA wasn’t really high due to the help of the software providers. “The central Bank of Finland and the national forum on SEPA played an important role in the process.”
The central bank is chairing the core group of the SEPA Stakeholder Forum in Finland. In addition, central bank representatives have tried to promote SEPA by giving presentations and writing articles on SEPA. The Bank of Finland has been organising a yearly Payments Forum since 2007. From 2009 onwards a SEPA Forum has been organised in conjunction with the Payments Forum.
SEPA Stakeholder Forum
Palva: “The core group of the SEPA Stakeholder forum in Finland was and still is vital for the successful migration. It brought together representatives from all relevant stakeholder groups (banks, different kind of users, software companies and the public sector) to discuss issues and solve problems relevant to the migration.”
Although the software providers, banks and SEPA forum supports the nation during the migration, Marianne Palva reckons that the migration to SEPA requires a lot of extra work. Banks, public authorities, companies and software providers have to make considerable investments. “Many companies, especially larger ones, feel that the migration to SEPA is more demanding than the changeover to the Euro.”
A dangerous aspect
The SCT migration went fairly smoothly, but there are still some challenges due to different standards and processes.
In Finland there is a long-standing tradition with standardised interfaces to banks. In line with that, Finnish banks decided to implement EPC’s bank-to-bank standards also in the C2B and B2C interfaces, although this was only a recommendation by the EPC. Later on the end-date regulation made XML ISO20022 mandatory also in the C2B domain.
“The regulation leaves, however, leeway for the implementation and mentions only a few mandatory elements,” explains Palva. “This might hamper the creation of a true SEPA, and some of the advantages of SEPA will be lost. Migration is complicated; especially if companies cannot use the same software to link to several banks, but have to modify it for each bank individually. In addition, competition is hampered, if companies need to change their software when changing banks. Unfortunately, there are also rumours that, in some markets, banks have agreed on implementing the XML ISO20022 standards in the C2B domain in a way, which differs from the EPC B2B standards.”
Marianne Palva acknowledges that thorough discussion on the details related to the implementation of the XML ISO20022 messages could have helped to harmonise the implementation. “We could have avoided different interpretations and the additional work.”
Although Finland is almost 100 per cent SEPA-compliant, there is still a lot of work that needs to be done. “We are very busy with replacing the legacy direct debit. In addition, there is still work going on related to ISO20022 account statements and transaction reporting. Here the migration has only started in Finland.” There has not been much, or hardly any innovation in the payments market in Finland since the SEPA discussion started, except for e-invoicing. “Hopefully, there will be more innovation when the migration to SEPA has been completed in January next year.”
Extra work is also necessary when it comes to the Additional Optional Services (AOS) in Finland. “We have two AOS: inclusion of payment date and bundling several invoices and credit notes in one payment. Banks also support the use of letters å, ä and ö as well as the domestic creditor reference number in addition to the ISO reference number included in the rule book.”
Cooperation is crucial
In conclusion, the migration requires a lot of hard work and commitment. Strong cooperation between all involved stakeholders is also crucial. “You need to recognise potential problems and bottle-necks and find ways to solve them. Corporate customers should go through their internal processes and carefully consider what could or should be changed before they start the migration.”
With the new XML standards for the payments and the reporting, fully automated straight-through-processing along the entire payment chain can be achieved. This improves efficiency and reduces costs. “All benefits of SEPA can only be reaped when the migration has been fully completed,” Marianne Palva concludes.