August 1st 2014 marked the passing of the final (and extended) deadline for the implementation of SEPA across the Eurozone countries.
Despite some challenges with regards to adoption rates, leading to the extension of the compliance deadline from February 1st 2014 to various dates up to August 1st 2014 across different Eurozone jurisdictions, it should be remembered that what has been achieved through the implementation of SEPA is nothing short of remarkable.
The implementation of a common regulatory and technical framework for domestic and international interbank and same bank transfers across 17 countries with a wide variety of pre-existing regulations and standards is a huge step forward in enabling a common market for payments where customers are not penalised based on geography and will be a huge support to international trade.
This is not to say that there have not been some teething problems with regards to everything from adoption rates, and some delayed payments due to certain users failing to understand revised processes and timings required under the regulation. However the fact that SEPA is now recognised as a business as usual function is testament to the fact that the heavy lifting in terms of implementation is now done and the work can now begin on refining the solution.
So now that the final European level deadline has passed what are the 6 things that you should know as a business about SEPA,
1. There are now 17 Eurozone countries now using the same currency and the same payments framework. This means
a. BIC and IBAN are now common and recognised simplify business payment instructions
b. No additional costs for “international” payments between SEPA countries over what is paid domestically
c. A common set of customer rights and business obligations in terms of payment clearing times.
2. Historically Irish Banks have adhered to a system where they would attempt to clear all domestic interbank payments overnight so that transfers between issuer and recipient were almost always credited to bank accounts by first thing in the morning on the day that they are due. This was an exceptionally high standard of service by European standards with only Finnish banks replicating this level within the SEPA area. While their aim is to continue to adhere to this standard, the SEPA regulation only dictates that payments should be credited to accounts the following day (meaning that it is now possible that payments would be credited to accounts later in the day).
While the domestic banks will continue to strive for overnight clearing, as previously, it does mean that payments being received from non Irish banks may take a little longer to clear on the same day and also Irish banks do have some flexibility within the regulations to do the same. Most importantly, what should be made clear is that where SEPA credits and debits fall due on an account in the same day the holder of the bank account will not be negatively impacted as the banks are obliged to clear money into accounts before taking any payments due.
3. Banks are no longer obliged to accept historic (pre-SEPA) format payment files from customers. We are aware that certain banks have been facilitating these via translation systems that they are running in the background, however, they will begin to shut these down over the coming months and are no longer obliged to accept the older formats. The challenge for businesses now that have not moved over to SEPA format payment instructions is to do so now while the timelines are in your control as opposed being forced to do so at a perhaps inconvenient time because your bank is removing the older facility.
4. Make yourself aware of the new timelines for issuing of payment instructions required under SEPA to ensure that your payments land when they are expected to (it may be easy to explain a day’s delayed payment to a supplier but you may be sure that staff will not be happy with any delay to the payment of their wages / salaries!). You should also be aware that there are no exceptions possible where payment files are processed late, bearing in mind that even the government’s tax receipts were down in January because the payment file was not published on time leading to the payments not clearing until February!
5. The next tranche of countries to join the SEPA area will be the non-Eurozone members of the EU (including the UK) in October 2016. Given the scale of Irish trade with the UK this may open up some significant cost saving opportunities but it also may be worthwhile speaking to your UK customers and suppliers to see if they can make and receive SEPA format payments already. For example we have seen that the French fashion retailer Printemps has already indicated to its UK supplier base that it will only continue to use them if they can pay them in SEPA format so that they can continue to maximise the benefits of single payment types in their accounts payable function.
6. Finally, eDay is coming on September 19th. This is the date on which government, its departments and agencies will cease accepting and issuing cheques from business. For businesses this will impact some significant payments such as VAT and commercial rates that may have previously been paid by cheque (which, by its nature, carries longer clearing times) so it is important that as a business you are setup to process these payments electronically, and in a SEPA compliant fashion, (cogniscent of point 4 above so that you don’t become liable for late payment charges!)