by Corina Mihalache
Long time has the subject of creating a single payment area at the European level been debated. It took eight years for the largest project for European payments standardization to be prepared and launched in February 2008 and another eight years to be implemented. The deadline for non-Euro countries financial market’s players – banks, financial institutions, public administration and corporations – to be compliant with payments processing regulations is October 2016. It is when we’ll be finally able to say SEPA (Single Euro Payment Area) is real.
The question is: are the Romanian financial market’s players ready for October 2016? I’m not going to continue with the radiography of the initiative’s implementation status, but rather reiterate its importance.
For a long time, SEPA has been considered an initiative coming from the banking system, better said an initiative that had to be applied by the financial institutions. The end beneficiaries were, though, their clients – companies and individuals. If the benefits were rather obvious for the individual end customer (the possibility for the European consumer to perform payments with the same conditions, irrespective of his location), without any kind of personal involvement required, this is not the case for the companies.
The SEPA regulations refer to companies as well: it is mandatory for them to implement the SEPA schemes and rules by October 2016. Several questions arise as preparation is under way:
- Has the company started a SEPA implementation project?
- Has any analysis concerning SEPA’s impact on company’s internal processes and procedure been done?
- Are the internal applications ready to process congruent payment initiation / direct debit requests?
- Has any internal testing schedule been set?
- Has any testing with partner banks been scheduled?
Each of the above mentioned represents an important phase in companies’ getting ready for SEPA compliance. Regulating the way financial transactions are done, although implemented at the financial institutions level, is something new for the companies.
The “automatic” dialogue between companies and partner banks is performed in so different manners, as each financial institution has its own requirements. An important aspect of the SEPA initiative is enforcing a single method of communication between companies and the financial institutions, by using the ISO20022 standard for payment initiation / direct debit requests.
For financial institutions, far more accustomed with using various communication standards, at interbank level at least, implementing a standard – be it SEPA – at customer level as well is no news. Besides, many of them have already announced having completed the SEPA implementation project, at both interbank and customer-bank levels.
From companies’ perspective, a standard implementation process is a very arduous one, similar to learning a foreign language. It requires a thorough preparation and a lot of practice. To put it more technically: it requires impact analysis, defining requirements, updates/acquisition, implementation and testing.
Given the SEPA compliance deadline, October 2016, besides updating all internal applications for conformity, we would suggest two new alternatives:
- Using a converter to translate the current payment initiation requests into the new SEPA format – this would represent a temporary solution that ensures only the standard compliance, without benefiting from using a single format.
- Using a payment requests centralization solution, a solution compliant with the SEPA standards that works irrespective of the format/standard used by your current applications. The benefits of using such a solution do not confine to regulation compliance, but also include those coming with using a single window for all financial transactions performed in relation with partner banks: reporting, liquidity management, reconciliation, etc.
For both alternatives, I suggest a name: FinTP, the financial transactions processing solution developed by Allevo that ensures the compliance with SEPA standards, as well as the centralizing of all financial transactions.