FEATURE: SEPA Will Go Beyond Treasury and Payments Departments for Corporates

ABN AMRO's Boden says that corporate awareness of SEPA on the rise and the implications are broader than expected.With preparations for the single euro payments area (SEPA) well underway among financial institutions, many are left wondering just where their corporate clients stand at this point.

For too long, corporates have been criticized for a lack of awareness of SEPA, the guidance that will help simplify payments between countries in Europe. Financial institutions are often blamed in part for this perceived obliviousness for not having explained SEPA to business clients properly. Many tier 1 institutions, however, have been educating their clients on the effects SEPA will have on their businesses. ABN AMRO (Amsterdam) is one of these.

According to Anne Boden, head of transaction banking for Europe at the financial institution, ABN AMRO has spent some time educating corporate customers on SEPA, including offering them roundtables on the subject. The key, Boden says, for helping corporates to understand SEPA is making them realize just how much the new directive will assist them in simplifying their payments infrastructures and banking relationships since SEPA will bring cross-border payments to a standard. As a result of this standardization, businesses that operate in multiple countries will no longer have to maintain separate payments systems and banking relationships for each of those countries. "This is a real opportunity for corporates to consolidate their payments operations," states Boden. "They need to think about a plan for their ERP (enterprise resource planning) systems, their payments factories and work out when will be the most convenient time for them to upgrade their systems for SEPA."

Timing will be everything here, according to Boden. SEPA goes into effect Jan. 1, 2008 on the credit transfer side. That will be followed by direct debit capability in late 2009. Direct debit, says Boden, will require a bit more work since certain countries often require companies to ask customers for a signed mandate to perform this operation. With SEPA, this will become standardized, eliminating some confusion for corporates around which countries need the mandate and which do not. "Timing is key because corporates don't want to incur the same expense twice. They have to make sure they time their upgrades correctly," Boden warns.

She also notes that SEPA should not just be looked at as something affecting the corporate treasury division. "Corporates that deal with consumers must come up with new documents to send to their customers," Boden explains. "So they will have to explain SEPA to consumers as well. SEPA has relevance not just to treasury and payments departments, but to the marketing departments too." She adds that companies that do not do this so well run the risk of losing customers to those companies that are better prepared for SEPA.

Boden notes this added bit of complexity and notification will appear once SEPA direct debit is enacted in 2009. Things on the credit transfer side are "more transparent to consumers because the credit transfers have no mandate."

Despite the challenges and expenses to both banks and corporates, SEPA will make doing business in Europe much simpler than it is today, she says. "SEPA is rich in terms of the data elements around a payment. This data will help enhance processing. SEPA is not going to be easy to implement, but the end game will be more efficient since you won't need so many operations in so many countries. Payments are very complex today in Europe."