By Barry Manning, Head of Corporate Cash Management Sales at Danske Bank
There are clear benefits of SEPA for businesses. With the introduction of SEPA, specifically for the 17 Euro currency States, the existing domestic clearing will cease to exist and will migrate to this new pan-European system on 1st February, 2013. The standardization of Euro payments through the use of a single automated channel will advantage both Debtors and Creditors alike. Payment file formats will be standardised, pricing will be more transparent and aligned to domestic payments, and the reconciliation process will be simplified – something we at Danske Bank have already seen.
SEPA will create a harmonised payments system for sending standard Euro payments across 32 countries.
Ultimately there will be no difference in paying staff and suppliers in any of the 32 SEPA countries in terms of settlement time, account data required and remittance information. The introduction of the SEPA Direct Debit scheme in particular, heralds a new dawn in the processing of collections and represents a significant opportunity for Businesses and Corporates. They now have the potential to collect funds directly from debtors, in the 32 SEPA countries.
Ultimately SEPA will break down borders when making payments in Europe. However the February 2014 deadline is looming large. Migration needs to start now. Irish businesses of all sizes need a strong financial partner with not only the necessary systems to handle large scale SEPA transaction processing but also the skills and expertise to guide them through the process.
What businesses need to do to prepare for SEPA?
Small and medium sized businesses should be guided through the changes by their banks and software partners and it is important that they engage with them early to ensure they are compliant by the 1st February 2014 deadline. Large corporates and multi-nationals will have a bigger challenge. If you think back to the initial euro changeover or even the Y2K programme, this will give you an idea of the size and scale of the project for implementing SEPA across Europe.
The priority for any business that is a Direct Debit originator will be the migration from the existing Domestic scheme to the new SEPA Direct Debit scheme. It’s important to know the key features which will impact on a business’s existing processes and procedures.
Firstly, it is important to note that there are in fact two schemes – SEPA Core and SEPA Business to Business. Under the SEPA Direct Debit Core Scheme, which facilitates collections from both personal and business debtors and allows for the continued collection of Direct Debits through SEPA under existing domestic scheme mandates, there is a 13-month refund period for unauthorised collections and an eight-week refund period for authorised collections. Banks will be obligated to automatically honour refunds within the eight-week period after the due date of a disputed collection.
There is a second Direct Debit Scheme – the Business to Business Scheme under which the automatic eight-week refund right is removed. However, both the Creditor‘s bank and the Debtor’s bank must be members of the Business to Business Scheme, which does not facilitate collections from consumers. As the scheme is optional for banks, the service is not as widely available as the Core Scheme which is mandatory. A good example of this would be within Ireland where Danske Bank can offer this solution but most of the other clearing banks cannot.
The biggest initial hurdle for all businesses will be the implementation of the new XML format, which will be the standard for SEPA, for sending Euro and any other foreign payment type instructions to the bank. This affects any bulk file of credits that is transmitted for processing and for any Direct Debit originator – from large to small businesses – they may need to re-structure their collections processes. This is necessary in order to be ready to comply with this new legislation. Whilst this change may not be easy to achieve, it is imperative that businesses are set up to use the new single standard in terms of transaction type, file format and settlement. The new structure however, gives all businesses – large and small – access to a Europe-wide Direct Debit solution.
And let’s not forget staff – from accounting and finance staff to sales and customers service – this may affect them also and they need to be trained on what the impacts are to them and to the business.
What is Danske Bank doing to prepare for SEPA?
When it comes to expertise, Danske Bank is already working with our customers to guide them through their SEPA migration. Within Danske Bank we have a very simple strategy when it comes to making sure our customers are SEPA ready. When we look to our SME and business customers, it will be a case of doing it for them. But given the size and the complexity of our larger corporates – for those clients we’ll do it with them.
We’ve created a dedicated SEPA section on our website where up-to-date information on SEPA credit transfers and direct debits can be found. But importantly, leveraging off our sister Bank’s SEPA experiences in Finland (where SEPA was implemented in 2011) Danske Bank provides a range of SEPA related services to its business and corporate clients.
Danske Bank has a fully operational SEPA Direct Debit solution for both the SEPA Core and Business to Business schemes in place today.
We already have a number of clients collecting funds and making payments across Europe under SEPA. Files can be sent to Danske Bank via our Online Banking solution or directly through an EDI connection. Using both options, the status of individual collections will be displayed online. Danske Bank can also send status files on each collection directly to a customer’s Accounting or ERP system, removing the need for a business to manually update client records within their own systems.
How is Danske Bank working with Sage for SEPA?
Danske Bank has been working closely with Sage as we both strive to ensure our customers are ready for the implementation of SEPA on the 1st February, 2014.
We know that the biggest initial hurdle our customers need to overcome will be the implementation of the new XML format for sending Euro payment instructions to the bank. This affects any bulk file of credits that is transmitted for processing. On the Direct Debit side, the change necessitates the use of the ISO 20022 XML format for Direct Debit collections. This will require some changes to a business’s Accounting or ERP Systems as it is critical that the file is created in the correct file format.
With the implementation date of the 1st of February looming large, it is important that businesses are engaging with their bank and software vendors to ensure they are ready.
The Danske Bank SEPA team
As Head of Cash Management Sales Ireland at Danske Bank I with a full team that spans the main divisions within the Bank. The Danske Bank SEPA Migration team are leading the way by supporting their corporate and business customers through their migration to SEPA payments ahead of the industry deadline in February 2014.
The early phase of Danske Bank’s SEPA strategy involved raising awareness of the 1st February 2014 deadline and the magnitude of the migration process from a business customer’s perspective. Danske Bank continues to provide valuable insight and guidance for its customers through a variety of initiatives – from customer briefings to informative videos, introducing SEPA, Direct Debits and Credit Transfers in plain English – all of which can be found on the Danske Bank’s SEPA specific micro-site. This has been supported by direct contact with all business and corporate customers to help them prepare and execute robust migration plans well ahead of the go-live date. ESB recently successfully migrated all payments to SEPA under the expert guidance of Danske Bank – a process they were extremely pleased with.