B2B Payments

The B2B Impact of SEPA

SEPA has dominated the headlines in Europe for years, and as the 2016 deadline approaches, more and more questions are being raised about its impact on B2B payments. Here’s the latest on what’s happening and what it means for businesses across the globe?

As everyone knows, SEPA was designed by the European Union to improve cross-border payments and make the entire process more efficient. The goal is to make it possible for European consumers to make cashless euro payments to anyone located anywhere in the area through a single bank account and a single set of payment instruments.

SEPA’s Direct Debit (DD) B2B Scheme is designed to help businesses gain those same efficiencies by automating payment processing and giving businesses the ability to optimize the cash management process.

By October 31, 2016, non-Eurozone countries will be required to have made the switch to SEPA for euro payments and direct deposits. Eurozone countries needed to integrate SEPA by February 1 of this year. According to Banking Technology, SEPA is set to affect 500 million citizens and 71.5 billion electronic payments per year. Not only will this reduce bank charges for euro payments, organizations can standardize euro payment and DD processes, which will in turn result in further cost cutting opportunities.

However, while many agree that SEPA is a good first step toward greater payments efficiency in the Eurozone, it is not the only step.

For example, according to a separate Banking Technology article, virtual accounting can split a single account into separate streams that can correspond to clients’ existing account structures or be tailored in different logic, following clients’ demands. This innovative method splits the single account into separate streams which can correspond to clients’ existing accounts structures or tailored in different logic, following clients’ demand. This can provide more visibility and improve the matching of account payables and account receivables. From there, full transparency is given to group treasury to examine each virtual account’s activity individually, while every transaction takes place through one “physical” account only.

“As such, the new streamlined system can maintain local reporting functions, including statements for each virtual account,” the news source stated. “These are the kind of developments that will define the next phase of treasury management. What’s more, virtual accounting lays the foundations for expansion outside the SEPA-zone by accepting foreign currency payments before automatically reconciling to the single euro account.”

The European Commission explained on its website that businesses that are in the euro area will experience many benefits by using SEPA. Organizations can use direct debits from anywhere in the euro area, handle all euro payments from a single bank account and use only one terminal for payment cards.

“With SEPA, you will only need one card terminal to accept all SEPA-compliant cards,” the European Commission explained. “This will stimulate sales and reduce your costs, especially considering that the fees you pay banks to accept national debit cards tend to be much lower than for other cards.”

Additionally, companies will no longer be required to set up bank accounts in the different euro area countries where they conduct business, according to the European Commission. SEPA can help organizations improve money management by organizing all euro payments from a single euro account in the country of their choice.

Changes for SEPA

On May 19, 2014, the European Payments Council (EPC) launched a three-month public consultation on possible modifications to the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) rulebooks. Any feedback or suggestions for potential changes by stakeholders must be submitted by August 14 of this year. The finalized SCT and SDD rulebooks will then be published in November and should be fully implemented by November 2015.

EPC Chair Javier Santamaría explained in a statement that any proposed changes that receive broad acceptance in the entire stakeholder community – and are technically and legally feasible – are taken forward.

“Proposed changes that lack such broad support are not – regardless of whether such a change is proposed by a PSP or by a user representative,” Santamaría said. “This ensures that the SCT and SDD Schemes evolve in line with the requirements of the majority of all market participants.”

Looking Forward

The EPC stated that SEPA can give businesses an opportunity to implement new, more efficient treasury management processes worldwide.

“Innovative end-to-end SEPA solutions, based on global standards developed by the International Organization for Standardization (ISO), will also lead to decreased IT costs, streamlined back office functions and simplified reconciliation,” explained an EPC posting on its website. “The economy as a whole will also benefit if invoices are paid when they are due. The business community depends on reliable cash flow and the SDD Schemes enable the biller to collect payments on the exact due date.”

According to Banking Technology, the European Commission estimates that SEPA can lead to faster transfers and reduced bank charges, which will generate EUR123 billion of savings over the next six years. Businesses that begin to integrate before the required deadline will be able to take advantage of these opportunities sooner, reported the news source, and work toward simplifying their short- and long-term processes.

SEPA’s Direct Debit (DD) B2B Scheme is designed to help businesses gain those same efficiencies by automating payment processing and giving businesses the ability to optimize the cash management process.

By October 31, 2016, non-Eurozone countries will be required to have made the switch to SEPA for euro payments and direct deposits. Eurozone countries needed to integrate SEPA by February 1 of this year. According to Banking Technology, SEPA is set to affect 500 million citizens and 71.5 billion electronic payments per year. Not only will this reduce bank charges for euro payments, organizations can standardize euro payment and DD processes, which will in turn result in further cost cutting opportunities.

However, while many agree that SEPA is a good first step toward greater payments efficiency in the Eurozone, it is not the only step.

For example, according to a separate Banking Technology article, virtual accounting can split  a single account into separate streams that can correspond to clients’ existing account structures or be tailored in different logic, following clients’ demands. This can provide more visibility and improve the matching of account payables and account receivables. From there, full transparency is given to group treasury to examine each virtual account’s activity individually, while every transaction takes place through one “physical” account only.

“As such, the new streamlined system can maintain local reporting functions, including statements for each virtual account,” the news source stated. “These are the kind of developments that will define the next phase of treasury management. What’s more, virtual accounting lays the foundations for expansion outside the SEPA-zone by accepting foreign currency payments before automatically reconciling to the single euro account.”

The European Commission explained on its website that businesses that are in the euro area will experience many benefits by using SEPA. Organizations can use direct debits from anywhere in the euro area, handle all euro payments from a single bank account and use only one terminal for payment cards.

“With SEPA, you will only need one card terminal to accept all SEPA-compliant cards,” the European Commission explained. “This will stimulate sales and reduce your costs, especially considering that the fees you pay banks to accept national debit cards tend to be much lower than for other cards.”

Additionally, companies will no longer be required to set up bank accounts in the different euro area countries where they conduct business, according to the European Commission. SEPA can help organizations improve money management by organizing all euro payments from a single euro account in the country of their choice.

Changes for SEPA

On May 19, 2014, the European Payments Council (EPC) launched a three-month public consultation on possible modifications to the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) rulebooks. Any feedback or suggestions for potential changes by stakeholders must be submitted by August 14 of this year. The finalized SCT and SDD rulebooks will then be published in November and should be fully implemented by November 2015.

EPC Chair Javier Santamaría explained in a statement that any proposed changes that receive broad acceptance in the entire stakeholder community – and are technically and legally feasible – are taken forward.

“Proposed changes that lack such broad support are not – regardless of whether such a change is proposed by a PSP or by a user representative,” Santamaría said. “This ensures that the SCT and SDD Schemes evolve in line with the requirements of the majority of all market participants.”

Looking Forward

The EPC stated that SEPA can give businesses an opportunity to implement new, more efficient treasury management processes worldwide.

“Innovative end-to-end SEPA solutions, based on global standards developed by the International Organization for Standardization (ISO), will also lead to decreased IT costs, streamlined back office functions and simplified reconciliation,” explained an EPC posting on its website. “The economy as a whole will also benefit if invoices are paid when they are due. The business community depends on reliable cash flow and the SDD Schemes enable the biller to collect payments on the exact due date.”

According to Banking Technology, the European Commission estimates that SEPA can lead to faster transfers and reduced bank charges, which will generate EUR123 billion of savings over the next six years. Businesses that begin to integrate before the required deadline will be able to take advantage of these opportunities sooner, reported the news source, and work toward simplifying their short- and long-term processes.

 

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out the February 2019 PYMNTS Digital Fraud Tracker Report

Click to comment

TRENDING RIGHT NOW

To Top