Unsure of deadline dates and short-term benefits, many
companies are still taking a wait-and-see approach.
BY HILARY JOHNSON
They will have time to mull it over. The ex-
pectation is that once the regulation passes,
which is likely to happen by the end of this
year, it will require all credit transfers to oc-
cur using SEPA by the end of 2012, and direct
debits by the end of 2013. But that’s if the
regulation is passed by all the countries in
the European Union in a timely manner.
“Confidence in the draft at this point in
time is relatively low,” says Andreas Unterste,
director of financial operations, compliance
and technology at Dow Chemical in Michi-
gan. “To some extent, it’s a bit of a wait-and-
see attitude. It’s too early to get excited.”
Stakeholders say that much still has to
be debated and accomplished before SEPA
becomes truly useful across Europe as a re-
placement for existing payment instruments,
which have been working just fine for corpo-
rates and banks for years. SEPA covers the 27
eurozone countries as well as Iceland, Liech-
tenstein, Monaco, Norway and Switzerland.
The first issue regarding the draft regula-
tion, according to Ruth Wandhöfer, head of
regulatory and market strategy for Europe,
the Middle East and Africa at Citi Global
Transaction Services, is when existing instru-
ments will be phased out. The current draft is
not clear on that point, Wandhöfer says, and
“this is what is needed to ensure corporates
will be able to realize the full benefits on of-
fer.”
Another issue relates to the technical re-
quirements for SEPA payments, bank execu-
tives say. As the proposal stands, companies
must take on the burden of converting their
batch payment authorization files for direct
debits to an international standard, the ISO
20022 XML SEPA standard. This is a change
from the current way of doing things, where
banks handle any necessary conversion for
corporate customers.
Banks are firmly against any change to that
custom. And corporates may feel that it’s an
unreasonable burden to have to use the ISO
standards when initiating files of payment in-
structions, Wandhöfer suggests. “This would
be a significant additional cost burden, and
anyway is unnecessary as corporates are able
to take advantage of the benefits SEPA will
bring without needing to invest in these stan-
dards,” she says.
We strongly
believe that one
solution that
would be exactly
the same in all
countries
in Europe will be a
good thing.
—AVIVA INVES TORS’ BORNECQUE
Anthony Richter, head of business devel-
opment for payments and cash management
in Europe at HSBC, agrees. “I can see what
they’re trying to do, they’re trying to make
things standardized across the entire region,
and it’s very good to try and make everything
the same,” he says. “But to my mind, espe-
cially for the smaller companies, this will be
an additional cost to them to migrate.”
Richter says there’s also the issue of stick-
ing with paper-based payment mandates for
direct debits, which he calls “cumbersome.”
“Our customers, ideally, would be look-
ing to dematerialize the whole process,”
Richter says.
Olivier Bornecque, chairman of the French
Association of Corporate Treasurers and head
of SEPA implementation at his own company,
Aviva Investors, says there’s too much un-
certainty in the regulations, especially about
how direct debits will be implemented in
each country.
“The EC proposal is not a very good one
on that point,” Bornecque says. “There’s too
APRIL 2011 TREASURY & RISK 29
much room for interpretation.” He hopes the
final regulation will be more clearly worded
so that for direct debit payments, “everyone
will do it exactly the same way, with no pos-
sible change.”
At Dow Chemical, Unterste says SEPA’s
credit transfer provisions offer little value to
big companies, which have long had systems
in place in Europe to transform cross-border
payments into local ones by having local
subsidiaries make the payments. Moreover,
companies will still need local bank accounts
for some domestic payments, which limits
the amount of account consolidation that
companies can achieve, he says.
Unterste says SEPA’s value for big compa-
nies comes in the area of direct debit, where
there are far greater variations from country
to country in Europe. But he’s disappointed
the direct debit part of the proposal mandates
core payment compliance only for retail and
not for business-to-business payments.
“If the SEPA direct debit business-to-busi-
ness scheme were widely available, I could
use it across Europe today,” Unterste says.
“I’d do it tomorrow, and nobody needs to give
me an end date. Nobody would need to push
me off the cliff, I’d be jumping off the cliff
with a big smile. Except I can’t, so I’m going
to stand there and wait.”
So far, he says, Dow Chemical has taken no
steps to convert its existing robust payments
infrastructure across Europe, which involves
an intracompany plan to transfer funds to
subsidiaries when necessary and use their
existing banking relationships to make pay-
ments, so that each payment occurs domesti-
cally, and at the cost of a domestic payment.
“We’re not changing anything until we see
real dates,” Unterste says.
Of course, some companies are already
taking advantage of some of the benefits that
SEPA offers, in being able to use fewer banks,
potentially, and save on transaction costs.
For example, as detailed in the November
issue of Treasury & Risk, Google is saving
