With just more than two weeks until mandatory compliance with the Single Euro Payment Area (SEPA) system goes into effect, companies − particularly small businesses − are scrambling to ensure they upgrade their systems by the Feb. 1 deadline.
First conceived in 2000 and initially implemented in 2008 and 2009, SEPA aims to replace various disparate national payment systems within the European Union with a single, integrated payment processing system for all 33 of member states. Businesses that are not in compliance by the February deadline no longer will be able to make use of any credit transfers and direct debits with in the EU.
“Companies that do not get ready for SEPA won’t be able to pay their staff or suppliers; it is as simple as that,” says Sean Fitzgerald, CEO of financial software firm Sentinel.
Difficulties in Ireland
Difficulties with SEPA compliance are especially pronounced for small and midsize businesses (SMEs) within the EU, a fact highlighted in a recent study by the Irish Small and Medium Enterprises Association (ISME). Its survey found that only 22 percent of the association’s 980 members were in full compliance with SEPA regulations as of the fourth quarter of 2013. Moreover, 54 percent were only in the early planning and implementation phase of their upgrades, and less than 2 percent had actually tested their procedures with their bank, the research found.
The ISME report also highlighted the specific difficulties SMEs face when contemplating SEPA integration. Many, for example, lack both the technical personnel in-house to direct the necessary changes and the money to hire in specialists.
The Council of the European Union noted this concern in a June 2013 report on the importance of early adoption of SEPA, particularly among SMEs. The council noted that small and midsize enterprises are likely to be the least equipped to handle the transition, and it noted the severe operational difficulties businesses would face if unable to comply with SEPA by February.
Although the ISME report focused on concerns within the small-business community, it echoed concerns highlighted in a report from the German Finance Ministry on how the entire European business ecosystem will function after the deadline. According to the ministry’s survey, a majority of German customers and businessowners are unprepared for the changes, and they are underestimating the challenges of implementation. Understating of the difficulties of SEPA compliance seems particularly problematic among large companies, the survey found.
Time for action
Despite concerns about the potentially disastrous consequences for European businesses that fail to meet the SEPA deadline, the ISME report also pointed to some bright spots. For example, it noted that the number of SMEs aware of SEPA had doubled in the previous six months, as did the number of companies that were aware of the February compliance date.
Moreover, the number of SMEs that had started to work with their banks and/or software providers on implementation had quadrupled since May 2013, the survey found. ISME found overall that SMEs are steadily preparing for the implantation of SEPA and, though the progress is slow, there is still time for the vast majority of businesses to be fully compliant by the deadline.
ISME expressed disappointment in Irish banks for dragging their feet and urged them to step up their efforts at testing and implementation. The small-business group further recommended the immediate creation of a separate B2B SEPA system to further ease use.