SEPA Meeting the Deadline and Looking Ahead to the New Era

Transcription

1 Treasury and Trade Solutions September 25 th, 2013 SEPA Meeting the Deadline and Looking Ahead to the New Era Today s Speakers: John Murray EMEA Head, Corporate and Public Sector, Cash Management Sales, Treasury and Trade Solutions, Citi Jonathan Jordan EMEA Market Manager, Payments and Receivables, Treasury and Trade Solutions, Citi

2 Agenda 1. The Corporate Environment and SEPA 2. Market Update 3. Meeting the deadline 4. Leveraging SEPA the agenda for Q&A 2

3 The corporate environment and SEPA Working Capital Optimisation Fewer Bank accounts Harmonised timescales Simpler Cash flow forecasting Pay / Collect across 32 countries from a single location Operational Efficiency Cost Reduction Standardised formats and content Standardised remittance information Catalyst for rationalising banks, connectivity, formats Streamlining of Payables & Receivables processes Supporting reconciliation and centralisation efforts Reduced bank fees Strengthen controls Citi is committed to a 4-pillar approach to help our clients unlock the benefits of SEPA Information & guidance Smooth Transition Maximum Flexibility Advisory & Support Helping our clients understand the value and impact of SEPA Regulatory updates Guidance to assess SEPA Bi-weekly SEPA checklist ( on key SEPA project actions) SEPA and Centralisation Experience Regulatory involvement XML Leadership and format flexibility Leading Connectivity options Maximum flexibility for your account location(s) IBAN Validation and Conversion Services Mandate Management Services XML conversion service Dedicated Teams of SEPA implementation managers and technical experts Proactive engagement to discuss migration planning Options, recommendations and project planning Rules & Country guidance 3

4 SEPA Market Development Timeline Jan: SCT launch Feb: SEPA regulation passed in European Parliament end dates set 1 February 2014 Feb: Migration end-date (SCT and SDD in euro Member States) Nov: SDD launch Mar- ongoing: Niche scheme announcements Feb: Migration end-date (niche schemes) Oct: Migration end-date (SCT and SDD in non-euro Member States) Corporate approaches to SEPA Early Adopters Adoption of SCT SDD and Process reengineering Further automation / rationalisation Majority of the market Wait and See SCT/SDD adoption/compliance Process reengineering 4 SCT SEPA Credit Transfer SDD SEPA direct debit

5 2. Market Update

6 Single Euro Payments Area (SEPA) SEPA is the payments integration initiative of the European Union, removing the cross border barriers and driving simplification and harmonization of Euro ACH and Direct Debits. The Context of SEPA 33 Countries Euro currency only Euro ACH and Direct Debits within this geographical area (Payments to/from SEPA countries not impacted) IBAN and BIC Single Legal Framework Standardized Schemes on basis of ISO XML 33SEPA Countries Austria France Liechtenstein Portugal Belgium Germany Lithuania Romania Bulgaria Greece Luxembourg Slovakia Cyprus Hungary Malta Slovenia Czech Republic Iceland Monaco Spain Denmark Ireland Netherlands Sweden Estonia Italy Norway Switzerland Finland Latvia Poland UK & Croatia Objectives of SEPA Eliminate the distinction between national and cross border payment transactions bring standardised payment practices for EUR payments reduce the cost of sending EUR overall standardisation, efficiency and strengthening European integration Highlight denotes EUR zone countries 6

7 SEPA Current Uptake across the market SEPA Credit Transfers July - 50% % SEPA Credit Transfer is steadily increasing month-on-month and stands at 50% at the end of July. We expect to see accelerated adoption during Sept-Dec as organisations across Europe switch over to SEPA. There is a lower level of SEPA awareness in Middle Market organisations. The European Commission are aware of this and asking countries SEPA bodies to push banks and market participants to inform this group. Main reasons in the market for reject/returns are: Account identifier invalid (i.e. invalid IBAN or account number does not exist or wrong BIC) Account closed SEPA Direct Debits July 4.8% % SEPA Direct Debit adoption is still lagging well behind, however momentum is building. During the period Aug 2012 to May 2013 adoption remained between 2 2.7%, however in July we have seen an increase to 4.8%, Movement in countries is being driven by movement of Big Billers. In June we have seen a major national electricity provider in Ireland move to SEPA. Also increases in Netherlands SEPA Direct Debits. Slower adoptions can be attributed to the complexity of adopting SEPA Direct Debits - technical changes, additional information requirements, changes to mandate processes and internal decision making. Main reasons for reject/returns are: Insufficient funds Not specified reason (by debtor bank) 7 Source: European Central Bank, Citi assessment

8 Citi observations and discussions in the market End Date There is no talk of a change in the end date EC/ECB/EPC continue to reiterate that there is no official Plan B. Bank Readiness Many banks are making changes to their cash management infrastructures to become SEPA and ISO XML compliant. SEPA credit transfers - High market readiness. Sporadic issues with banks not yet recognising the Category Purpose Code (e.g. SALA for salary payments) contained within the SEPA messages. For SEPA Direct Debit Medium market readiness. Bank infrastructure adjustments for SDD are additionally complex. Citi understand that there are many banks still preparing automated processes to meet SDD requirements. Market Discussions SEPA DD R Reason Codes Reason code Not specified reason is commonly used. In a number of European countries, more accurate reason codes are not used because of legal restrictions (e.g. data protection laws) or local business practices. EBA working group has published further guidance on this to banks and the market. Ireland Market expected to adopt SEPA DD Core scheme. Irish electricity provider migrated in June. Discussions on usage of restricting refund rights in Core scheme. Italy Market expects the SEDA Direct Debit AOS to go live in October/November. Spain - Main Billers representing 80% of the SEPA DD volumes have announced migration for beginning of Q France - Main utility companies expected to move to SEPA DD in October. Belgium Large biller, Electrabel GDF Suez, migrated to SEPA DD in Nov Other big billers expected to migrate during October/November Sources: Citi assessment, European Payments Council

9 3. Meeting the Deadline

10 SEPA scheme fundamentals SEPA Credit Transfers SEPA Direct Debits Core Scheme B2B Scheme Standardised Scheme 140 characters of remittance information New Fields to identify purpose of transaction and facilitate POBO structures D+1 standard execution cycle Data gathering (BIC/IBAN) Consumer and Business collections Longer refund period for debtors Creditor mandate responsibilities Existing mandate valid D-2 standard execution cycle Choice of Scheme Business collections Irrevocability of collection Creditor & Debtor mandate responsibilities New mandates required D-1 standard execution cycle Technical and processing changes Existing Mandate reconciliation & New mandates Data Gathering (e.g. CSID) Technical and processing changes Send FRST transactions & manage R transactions 10

11 Challenges encountered Challenges Timeframe and year end freezes Internal Traction especially amongst clients operating decentralised models. Challenges also arise when there is no central point for the SEPA project, which impacts multiple stakeholders. Data gathering- Gathering BIC/IBAN directly from customers/vendors is intensive. Simple conversion algorithms to convert data introduce errors. Technology - assessment of changes, requirements definition and scheduling requiring time and budget. Market - local market guidelines and options causing confusion SEPA CT- Payroll - often managed differently to core payments - often domestically managed or via HR function. Some corporates assume payroll to be out of scope. External payroll providers can create a dependency / impact timelines. SEPA DD- SEPA DD has greater process change and technology implications. Approach to SEPA mandate processes can lead to internal discussions and decisions taking time. Some corporates managing SDD migration separately to SEPA CT. 11

12 Addressing challenges At a minimum, organisations need to ensure basic readiness for 1 Feb This means the ability to pay your suppliers/vendors/employees and the ability to receive payments from your customers on 1 Feb No disruption to cash flows. Project Traction Appoint a central SEPA project management team with authority to engage across internal stakeholders. Gaining full visibility over cash management footprint is key. Form a migration critical roadmap of essential activities Increase visibility (e.g. weekly reports to decision makers) Engage Citi for advise, including contingency options Data Gathering Consider use of third party provider e.g. Experian. BIC/IBAN gathered in a matter of days. SDD data via mandate management provider (e.g. CGI), Citi support Technology Consider services of mandate management provider e.g. CGI. Note lead times to implementation. Understand online banking options, e.g. CitiDirect Payroll Engage third party payroll providers. Push for immediate move to SEPA. Engage HR and other parties to clarify and ensure ownership. Wider Readiness Many corporates have multiple entities who are preparing for SEPA. Some more advanced than others. Consider how internal business units could support payment/collection for other internal entities. Consider the help of external project resources Discuss with Citi 12

13 Ensure IBAN/BIC readiness SEPA schemes require the provision of BIC and IBAN information. Thus clients must provide the BIC and IBAN information instead of national bank account numbers. Challenge Citi s Solution SEPA transactions require mandatory BIC and IBAN information. Many organizations do not hold complete BIC and IBAN for all impacted payment beneficiaries in their payment databases. Citi is working together with Experian, who offer data cleansing and conversion services to help clients convert their existing database so clients do not need to contact individual customers, suppliers and employees to obtain this information Data needed for an IBAN conversion Experian provide information on the layout of the files which can be used to submit account data Experian request a sample file from the client to see if there are areas in the export that can be improved before the conversion process Outputs from Experian At the end of the conversion, clients receive a cleansed and updated file containing beneficiaries relevant IBANs and BICs Clients will also be provided with a report detailing passed and failed records and recommendations to improve data quality Existing Payment Database / Records Working together with Citi Cleansed and Enriched Data base SEPA Ready Database 13

14 Mandate Management Services - CGI Should your organisation require assistance with mandate management and general adoption of SDD, CGI can provide short term and ongoing solutions. Option 1 Outsource Mandate Migration Only This option is for organisations who only require to partial assistance to gather required mandate data to become SEPA compliant. Option 2 - Outsource Mandate Migration & Ongoing Management Mandate Management Database to create, search, amend and cancel mandates Mandates history / Print mandates Mandate Migration The creditor provides existing domestic DD mandate information to Logica. BBAN to BIC/IBAN conversion Unique Mandate Reference generation Returns SEPA compliant mandate file back to corporate Mandate Migration Enrichment & Collection Handling BBAN to BIC/IBAN conversion Unique Mandate Reference generation Notification to debtors Bulk conversion of legacy mandate data Enrichment of legacy collections File based, screen upload & manual creation of collections DD transaction traced through its life cycle (successful, R-message) Display of collections on screen Optional Services Dematerialize mandates Notification to debtors Optional Services Mandate dematerialisation Mandate pack production and distribution E-archive and physical archive Multilanguage service helpdesk 14

15 4. Leveraging SEPA - the agenda for 2014

16 SEPA enabling standardisation, efficiency, rationalisation ~20% of Citi's corporate clients have already taken the opportunity to change their cash management structures in conjunction with SEPA. Centralization Path Opportunities through SEPA Account Rationalization Account rationalization possible with the ability to make and receive EUR payments Technology Infrastructure Harmonized process and account formats ease technology standardization and rationalization Bank Relationships Fewer processes and account requirements = bank rationalization Operating Structure Standardizing AP and AR processes Cash Management Strategy Centralization and efficiency agenda, enhancing visibility and reducing costs 16

17 Looking ahead Increased focus on Bank Rationalisation Location of accounts in centre of choice Centralise where possible, retain local where necessary Further Technology rationalisation Reduction in duplicate systems and connectivity and formats Adoption of SWIFT and ISO XML SEPA Credit Transfer Investigating Payment Structures (e.g. POBO) Centralisation of payroll payments SEPA Direct Debit standardise collections, mandate processes, remove duplicate efforts standardise collection cycles/liquidity management Leverage SEPA overall a means to standardise reconciliation Shared Service Centres adopting further responsibilities/ standardisation Corporate focus on standardisation beyond Euro zone UK, Nordics, Switzerland Central & Eastern Europe 17

18 Achieving these Objectives Assessment of Current Cash Management Structures and Processes Accounts, payment and collection instruments, systems, processes, legal entities, etc. Banking partners and configuration Treasury and operational strategies Process owners Visibility and Controls in place today Definition of Future State Future cash management strategy Bank strategy (e.g. rationalisation) Process vision (SSC, payment factory) Technology strategy SEPA changes to AP processes/reconciliation Scope of changes (vendor, payroll, T&E, treasury etc.) Engagement of parties to form this vision Clearly defined benefits Implementing Change Senior sponsorship for changes ahead Shared vision across Finance, AP, Technology, Treasury Budget Project management / Timing Alignment with other major projects, e.g. ERP upgrade (one instance of SAP) Benefits tracking to ensure continued traction 18

19 Citi s capabilities to support your migration is committed helping clients meet the challenges of the regulatory deadline and to unlock the benefits of SEPA Migration Tools enabling a smooth SEPA transition with maximum flexibility Leading Connectivity options and ERP integration CitiDirect electronic banking access across web, mobile, and tablet XML Leadership and format flexibility XML Conversion service for non-xml formats 10 file formats Maximum flexibility for your account location(s) IBAN Validation and Conversion Services CitiDirect Pre-format Enrichment to store payment details including IBAN and BIC Mandate Management Services Enriched Statements to support Straight Through Reconcilement Real-time payment status reports Account protection to reject/return SEPA Direct Debits SEPA Credit Transfers from non-euro accounts Bookkeeping flexibility with choice of itemised or bulk statement reporting Electronic advises to payment beneficiaries Warehousing capabilities to drive operational efficiency and maintain DPO CitiDirect Recurring Payments Solution to automate repetitive payments 19

20 Comprehensive Advisory & Migration Support Complete Production Verifcation Test with Citibank with real vendors and/or customers as required. Agree cutover plan in terms of timing of migrating full production flows. Migrate required configuration and technical setups. Enable full process on SCT and SDD Agree a date where your ACH can be decommissioned. Production Migration Assess your current EUR ACH and Direct Debit flows Analyse your account usage, is there scope for consolidation? Solution re-engineering? Evaluate SEPA impact on current processes, costs, value dates, data requirements, etc. Impact Analysis and Planning Review technical capabilities with your bank, is your current solution SEPA capable? Is there scope for consolidation? Consider resourcing and any internal projects you have that may conflict with the SEPA rollout (e.g. ERP upgrade). Make required changes to connectivity, file format, data requirements as required. Conduct syntax (file format) and content testing in Citibank's designated Customer Test Environment. Perform volume testing to scrutinise any BIC and IBAN migration. Development and Testing Data Collection / Process Reengineering Examine existing vendor and customer master data for SEPA compatibility. Consider approach for making master data SEPA compatible, would a conversion service be of use to you? Update your master data based on your chosen data collection method. Implement new process for SDD based on choice of CORE and/or B2B schemes. Do you require any mandate management services? 20

21 Useful SEPA Resources Citi SEPA Countdown series a SEPA Migration Checklist bi-weekly - Addressing key questions Topics covered to date: 52 weeks to go - Are the following actions part of your organization's SEPA migration checklist? 50 weeks to go - What should I consider when choosing between SEPA Direct Debit Core and SEPA Direct Debit B2B schemes? 48 weeks to go - How do I assess my payment flows and account usage? 46 weeks to go - How do I convert legacy account data to IBAN & BIC? 44 weeks to go - Who should be engaged internally for our SEPA project? 42 weeks to go - I pay my vendors by direct debit, what do I need to do for SEPA? 40 weeks to go - Do I need to use ISO XML for SEPA transactions? 38 weeks to go - What are niche schemes and how do they impact your SEPA planning? 36 weeks to go - Where can you find guidance and country information for your migration to SEPA Direct Debit? 34 weeks to go - How does mandate management change with SEPA? 32 weeks to go - What do I need to consider for Payroll? 30 weeks to go - Ongoing gathering of bank account details & Informing your customers 28 weeks to go - Can I use the SEPA Direct Debit B2B scheme to collect from Micro-enterprises? 26 weeks to go - The importance of lodging SEPA Direct Debit B2B mandates with your bank 24 weeks to go - What is the current market adoption of SEPA? What is the readiness by Country? 22 weeks to go - What is a Creditor ID (CSID) and how can I obtain this information? 20 weeks to go - How does SEPA support reconciliation? 18 weeks to go - What are the different versions of ISO XML in relation to SEPA? Please contact your Citi representative if you are interested in receiving this series. 21

22 Additional Information Please visit our SEPA website at transactionservices.citi.com/sepa/ Regulatory information, niche schemes, case studies, further information SEPA Direct Debit Country Guide Market Commentary and insights on reengineering with SEPA Additionally EPC website provides helpful SEPA information (e.g. Mandate Templates) Bank SEPA Reachability can be checked on the EBA clearing website: 22

23 23 Q&A

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