With less than seven months to go until the Sepa migration end-date, there is little sign of a tidal wave of corporate adoption.
As of April, Sepa credit transfers (SCT) accounted for almost 42% of total transactions, but for Sepa direct debit (SDD) the figure was a dismal 2.45%.
Meanwhile, surveys continue to show that a substantial percentage of companies in Europe have not yet begun their migration projects. JPMorgan, for example, carried out a survey earlier this year and found that, of around 160 respondents, almost 40% had not yet set their objectives for their Sepa migration.
“One of the reasons for the slow start is that the end-date was announced in 2012, after budgets for that year had been set,” says Wilco Dado, head of cash management for EMEA in JPMorgan’s treasury services division. “As a result, many companies did not take any action last year and only started in 2013.”
For these companies, migrating before February 2014 will be challenging – especially as, in reality, the time companies have left to migrate might be less seven months.
“The concern I have – and a lot of colleagues in other banks may share – is that some of the IT infrastructure may scale down for December at year-end,” says Ray Fattell, HSBC’s payments and cash management global head of product. “Companies may only have six months left at this point.”
While it is looking likely that a sizeable portion of companies will not be Sepa ready by February, there has been no indication that the migration end-date will be moved. Neither is it clear what the consequences or penalties will be for any companies that are not ready on time.
Paul Taylor, head of regional sales, GTS EMEA at Bank of America Merrill Lynch, says the way in which companies have approached Sepa varies considerably.
“For some companies, Sepa was never something they were going to be able to put off,” he says. “Those are the ones that have accounts in multiple countries, legal environments and jurisdictions, or which have to pay people in a number of different markets. For these companies, Sepa has been looming for some time.”
The companies that might be facing a greater challenge at this point are what Taylor calls the silent majority: the companies for which the majority of payments do not fall within the scope of Sepa, and for which Sepa migration might not be life changing.
“While these companies may have previously focused on whether or not they can send and receive Sepa-compliant payment instruments, they are only now beginning to understand the full brunt of the impact on their supply chain, such as the impact on payroll and whether their suppliers, banks and systems are Sepa compliant,” he says.
Taylor adds that many of these companies are becoming concerned they might not be Sepa compliant by February 2014.
With the deadline rapidly approaching, companies that have not yet begun migration are focusing on achieving compliance rather than on leveraging Sepa to achieve benefits for their companies.
JPMorgan’s Dado points out that most companies would prefer to adopt XML themselves, although they might hire a consultant to help with the conversion process. “But right now the timing issue might make more companies ask a bank or third party to undertake the conversion as a temporary measure, or as a contingency in case the company is not ready by February 2014,” he says.
The problem is that by undertaking Sepa migration as a compliance exercise, companies might not only miss the opportunity to benefit from the exercise but might end up with processes that are less efficient than the existing ones.
 |
| Jens Mikolajczak, co-head of cash management corporates, EMEA at Deutsche |
Where credit transfers are concerned, it is likely the majority of corporates will be Sepa compliant by February – but that does not mean they will be able to operate at the same level of efficiency as they do today, says Jens Mikolajczak, co-head of cash management corporates, EMEA at Deutsche Bank. “It might take manual intervention on their side,” he says. “There might also be broken interfaces within the company, when they look at end-to-end processing.”
In some cases, inefficiencies might arise when companies have left their migration plans to the last minute and are finding themselves in a position of having to migrate as quickly as possible, without necessarily benefiting from the efficiency gains that Sepa has to offer.
“If I have a straight-through processing level of 95% on my systems, I might be forced to give that up temporarily to get the basics right and produce Sepa-compliant credit transfers,” says Mikolajczak. “It’s a form of risk mitigation.”
Taking action
In light of a possible avalanche of Sepa migration towards the end of this year, banks are taking more action to ease their clients through the transition. Deutsche has run a number of corporate workshops, enabling clients who have undertaken their Sepa migration to share their experiences with others.
JPMorgan this week launched an interactive Sepa checklist, which provides advice for the bank’s corporate and insurance clients, and is designed to help them identify the resources and time they will need to complete the project.
HSBC, meanwhile, has set up four dedicated Sepa migration centres to engage clients about their migration projects and has also created a questionnaire to help them gauge their readiness.
However, while the bank is staffing up in preparation for a deluge of corporate migration towards the end of the year, HSBC’s Fattell points out this has its limitations.
“If everybody starts calling us in December, it might get quite complicated because of the capacity issues – we can’t just hire unlimited resources,” he says. “This is one reason why we’re taking a proactive approach, rather than waiting for clients to come to us.”