Guest Blog: SEPA for corporates – a three-step migration strategy

By Steve Hawkes, Product Manager, Experian Payments

The European Central Bank’s Gertrude Tumpel-Gugerell recently reiterated her desire for European lawmakers to mandate migration to SEPA Credit Transfers by the end of 2012 and to SEPA Direct Debits by the end of 2013. The adoption of SEPA to date has been slower than anticipated and Tumpel-Gugerell cites three main reasons for this lethargy: “market uncertainty, a difficult economic environment, and resistance to migrate to the new system as long as there is no binding and definitive end point.”

Meanwhile, the European Payments Council (EPC) has warned the European Commission not to abuse its executive powers and take on a standards-setting role in the push to create SEPA, arguing that banks must retain their primacy in the development of payment systems. In its Annual Activity Report 2010, the EPC delivers a clear message: "Self-regulation by banks provides the most efficient means to create innovative, effective, secure and stress-resistant payment systems."

While industry bodies fight out the detail, what does SEPA mean for the corporate community? What do corporates need to do to make the migration process as painless as possible and how should banks be supporting their corporate customers through this process?

In our view, there are three main aspects that corporates need to consider in their SEPA strategy.

1.       Corporates need to assess their existing operations against the new regulatory requirements to create the scope of their SEPA planning. So, they need to consider questions such as: In which countries do operate? Which countries do I make payments into and within? It’s also important to be fully aware of when each domestic euro clearing system will migrate to IBAN and BIC and the requirements for compliance. By understanding local migration plans, corporates can determine how and when SEPA will impact their payments processes and address this in their plans.

2. Having embarked on the migration process, it is important to complete it as quickly as possible to avoid maintaining two separate sets of data in parallel. Usually, payment details originate from a number of systems, so the location and quality of bank account information needs to be examined and the relationship between data held in separate systems established. This will define the number of records that need to be converted, and how many of these are likely to need correction or enhancement to avoid errors.

3. Corporates need to convert and validate IBAN information and identify errors in their existing data. Some banks help their customers by fixing problems with domestic transactions without their knowledge. This means that the actual data error rate may be higher than the percentage of rejected transactions experienced.

What’s more, while many banks are happy to provide BIC and IBAN details for their own customer accounts, some are reluctant to contact other banks in various countries to obtain and generate the details.

The good news is that the most proactive European banks are already helping their corporate customers by familiarising them with the upcoming changes. They are supporting them throughout the migration process, in order to minimise correction and rejection charges of failed payments. Hopefully, such a collaborative approach will help both banks and their corporate customers make the most out of the long-anticipated Single Euro Payments Area.