Jul 2013

BELLIN Behind the Scenes: Sepa and Treasury


by Martin Bellin,Karsten Kiefer and Rüdiger Schlecht, published in "Treasurer Magazine" (ATEL)

For European companies, 1February 2014 is going to be just as important as 1 January 2000 or 1January 2002. This time, SEPA is knocking at the door. In fact, the Single European Payment Area is governed by rules far more relevant to businesses than the millennium bug or the euro currency! Reason enough for consulting companies and system vendors to put payments on their agenda. What impact will SEPA have on the treasuries of our customers? How does it affect the companies in general? Martin Bellin, Managing Director of BEUIN GmbH, Karsten Kiefer, Head of Payment Solutions, and Rüdiger Schlecht, Head of Consulting & Implementation, discuss the influence of SEPA on treasury.

Martin Bellin: SEPA has long been a topic for many of our customers. The activities of our regional user groups, the questions asked on BELLIN Backstage, and numerous discussions at the Treasury Convention last year all show their interest in the changes after 1 February 2014 . Does this make SEPA a topic for consulting?

Rüdiger Schlecht: SEPA is no core topic of tm5, and our consulting approach does not focus directly on SEPA implementation. How ­ ever, we are consultants for all aspects of treasury, including payments. Naturally I we also deal with the topic of SEPA.

Karsten Kiefer: I think the rule books are a good example of the intersection of payments and consulting. SEPA is an opportunity for knowledge transfer between our different departments. Currently, we are training several “SEPA coaches” internally.

MB: Although SEPA is no topic specific to tm5, customers do need to license the appropriate SEPA format, alright?

RS: Yes, of course, we point that out to our customers. If their software is not SEPA-ready, they need to act now. Several companies will need to upgrade to tm5 and license the relevant SEPA formats to continue processing payments in 2014.

MB: Exactly, that is the crucial point. As a treasurer, I need a system that is multi-country and multi-bank -enabled, and capable of processing both domestic and cross-border payments. From my perspective , SEPA is just a stepping stone, a means of reaching a far greater goal - four-dimensional payments. The vital question is how to handle electronic banking in the future.

RS: Customers can use this reorganization to revolutionize their company's payment process. Then SEPA becomes an opportunity for achieving substantial improvements and unlocking unprecedented potential. That is the approach to consulting.

KK: lt is important to think beyond your own ERP environment and take into account other departments that make payments, e.g. payroll or purchasing. These are often forgotten. Furthermore, we are talking about all of Europe, not just one country. SEPA is accompanied by a spectrum of country -specific new formats. German formats differ from those in France, Switzerland and elsewhere. Many people are not even aware yet that such «local flavors» exist.

MB: For which countries do we already offer SEPA format?

KK: Germany, Austria, Switzerland and France, so far. We connect to banks in all other countries via host -to-host (H2H) connections. By the way, this is another trend I am witnessing, away from SEPA and towards H2H, i.e. direct connections to specific banks. After all, SEPA merely covers a subset of cross-border payments, the remaining foreign payments will still be processed in local formats.

MB: There will also be far-reaching changes for direct debits- what exactly is going to happen?

KK: In principle, the switch to SEPA changes the direct debit process and terms completely. In future, direct debit mandates will require mandate management, a task usually handled by the accounts payable department. lt is very complex and time-consuming, particularly for smaller companies.

RS: Right, mandates fall into the area of accounting, not of payments. I wonder whether mandates are required in all countries or only in Germany?

KK: SEPA Core Direct Debit format implementation is mandatory for all 32 countries participating in SEPA. Local payment formats discontinued on 1February 2014 will be replaced by a common framework for all countries, including the use of mandates, creditor IDs and pre-notifications. Switzerland is an exception - all existing formats will be maintained.

MB: Most of our customers are active internationally. lt all depends on which subsidiaries conduct transactions in euros and where their accounts are located. BACS continues to be the format for payments from the UK into the euro area. MT101 messages remain available for all currencies as well.

RS: Notification obligations set forth in German foreign trade regulations will also change. SEPA is going to render the good old Zl messages obsolete. Z4 messages generated by the ERP solution, not the treasury solution, will take their place. The system needs to be able to process both IBAN and BIC data, of course. l often notice that our customers are confused about the «IBAN -only» topic. Has all the trouble introducing IBAN and BIC been in vain?

MB: The IBAN already contains information for identifying payment service providers. That makes it difficult for businesses  and consumers to understand why a BIC needs to be specified as well. From 1 February 2014, domestic transactions will only require an IBAN, no BIC. «IBAN­ only» cross-border transactions will be possible from 1 February 2016.

RS: What do you think? How long will we deal with the transition to SEPA?

MB: Companies not SEPA- ready by 1 February 2014 will be in trouble. While there  might  be a  «gray market» initially, I would not advise anyone to count on it. lt makes sense to test SEPA Credit Transfers well in advance. We have been offering our customers trial payments for years. We are ready for SEPA!

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