SEPA: keeping corporates interested
In a recent report entitled SEPA: Banks are building it, but will customers come?, Celent analyst Enrico Camarinelli writes that the level of Sepa attention by corporate users is “very little, almost nonexistent.” He adds that the mandatory requirements of IFRS and Sarbanes-Oxley have put Sepa low on the corporate “to-do list.”
Yet the crucial role corporates - or at least their treasury departments - will play in Sepa’s future is becoming increasingly obvious, as underlined by the French treasurers’ recent initiative to launch a European working group to look into value-added Sepa instruments.
But beyond the payment instruments themselves are the Sepa-related services to be provided by the banking community. And there again, conflicting interests are likely to surface. Camarinelli warns that each major constituent group - consumers; corporations; public sector; utilities - will have its own set of desired features.
The analyst reckons that banks should avoid positioning Sepa as a technology-based project or as a software issue, keeping IT impact to a minimum, or risk making Sepa a low priority for corporates. “Investments in corporate information technology have been significant […] and additional investments with undefined ROI are not welcome,” he writes, expecting banks “to develop their Additional Optional Services offering through Web services.”
Celent also expects Sepa to “surface on corporate executives’ agendas once its tight connection with the financial supply chain becomes evident.” Hence the importance - for banks - of connecting electronic invoicing concepts with Sepa standards and payment issues, in order to generate corporate interest.
Filed under: Payments, Technology, regulation
SEPA was first and foremost a product designed by banks for banks to offer standardised services to their corporate (and retail) customers. It is the banks who have specified and continue to define the detail behind the SEPA framework and therefore the cost associated with it. The banks that have already taken a more proactive stance and developed services for corporate customers are now in a position to capture additional market share.
However, while some multinational companies have already set out SEPA terms with their banks, most corporates are still questioning the virtues of investing in SEPA-compliant infrastructure due to the high cost involved and the lack of clear benefits from the banks and the EU. It should therefore come as no surprise that SEPA is low on the corporate priority list.
According to recent Experian Payments survey of 180 corporates, only 11 per cent of respondents regarded SEPA migration to be a major challenge for corporate treasurers in the next 12 months. This result can be interpreted in two ways. It could either be a lack of understanding of SEPA – the same survey found that 28 per cent of respondents consider a lack of relevant information to be a major concern regarding SEPA migration. Alternatively, it could be due to the fact that the responsibility for SEPA migration is not clearly allocated within the company. Celent analyst Enrico Camerinelli’s report backs this up, stating that 42 per cent said ‘don’t know’ when asked who was in charge of SEPA at their respective companies.
Once corporates take full advantage of the opportunities SEPA creates, such as reduced cost through efficiency savings and reduction of their number of bank accounts, they will be able to benefit from a more standardised approach to Europe’s payment systems and potentially grow their international customer base. This will truly be the arrival of SEPA.
As SEPA becomes a strategic tool for banks, AOS will be an essential part of their offerings. AOS will help banks to deliver additional revenue and ensure that the investment they have made in SEPA delivers the necessary returns, as well as helping convince corporate customers of the value that SEPA can provide.
However, AOS may actually be a threat to SEPA due to the potential to keep the national orientation of payment systems. If this happens then there is the risk that we will end up with a situation where corporates can receive one service in their own country, and another in the remaining SEPA countries – the so-called mini SEPA. The European payments industry should monitor AOS closely, to ensure that the competitive nature of the bank-to-corporate space does not result in the development of systems that aren’t fully interoperable. It is still early days so there is time for the necessary definitions to be established.