A new Era has begun: The Single Euro Payments Area

Transcription

1 Deutsche Bank Global Transaction Banking db transaction solutions A new Era has begun: The Single Euro Payments Area A Guide to SEPA

2 Introduction SEPA, the Single Euro Payments Area, has been a reality since January 28 th, The new SEPA Credit Transfers are now effective in 32 European countries. A second milestone was the launch of the SEPA direct debit in November As a result of the soon-to-be-announced end date for SEPA migration, corporate migration to the new instruments is required. A pre-requisite for migration requires that Corporates be fully informed of the strategic importance of the initiative as well as the features, processes and infrastructures. Only then can Corporates take full advantage of the benefits of using the new SEPA instruments. Deutsche Bank is pleased to assist with the migration to the new payment schemes; therefore, we have developed this guide to cover the main issues that require consideration. We wish you every success and a smooth transition! Michael Spiegel Global Head of Trade Finance and Cash Management Corporates Michael Spiegel 2

3 What, When, Where? An Overview of SEPA In just a few years, the European payments landscape will be borderless. Cashless payments such as credit transfers, direct debits and card payments made in and to foreign countries will be just as simple, quick and cost-effective as domestic payments. For credit transfers, this has started to become a reality since Whereas national payment schemes differed considerably before, with the SEPA Credit Transfer, a harmonized instrument is now in use, allowing companies and consumers to make euro credit transfers across Europe under the same terms and conditions. Payments Environment pre-sepa Paris French Credit Transfer & Direct Debit Lyon Payments Environment with SEPA EU Crossborder Payment X-Border Direct Debits not possible Frankfurt German Credit Transfer & Direct Debit Munich A similar simplification has been realized for direct debit payments in November The SEPA direct debit is truly new, as a cross-border direct debit instrument has not existed in the past. During the next few years, legacy national payment instruments and SEPA schemes will co-exist. The end date for this dual phase, after which existing legacy national schemes will be discontinued, is currently being fixed. (For more on this topic, please refer to page seven). Therefore, companies with operations in several European countries are advised to prepare for the migration in a timely manner. Paris Lyon SEPA Credit Transfer and Direct Debits Map of Europe Countries encompassed in the SEPA Initiative Members of the Eurozone Members of the EU Members of the EEA Other SEPA members Frankfurt Munich Canary Islands 3

4 Strategic Importance for Companies: What are the Benefits? Reducing costs and minimizing risks in transaction processing are issues of growing importance for companies. Therefore, the trend towards standardization, automation and centralization continues unabated. An integrated payments landscape in Europe will help achieve these objectives in a number of ways. Immediate benefits of SEPA are: A Standard pan-european Payment Format Through the use of the XML standard, SEPA will eliminate the current multitude of national payment formats. Companies doing business in several countries can significantly reduce their expenses related to format maintenance and system administration. Deutsche Bank also accepts the XML format for all other global payment transactions, allowing companies to settle all global payments through a single format. SEPA Project Manager Cross-divisional SEPA Project Team Accounting (SEPA payments, booking, collection and maintenance of IBAN/BIC) Treasury (banking relationships/liquidity management) Invoicing (provision of IBAN and BIC terms of payment) Information Technology (System/Interface Adjustments) Human Resources (migration of payroll processing) Sales/Purchasing (notification of business partners, if applicable use of new agreements or forms) Customer Service (SEPA-related customer inquiries) Legal (in particular for direct debits due to mandate changes) External Partners (e.g. system manufacturers; Call Centers) Standardization of Processes Uniform settlement periods and exception processes (e.g. returns) for all European countries will significantly reduce complexities. In addition, the EU Payment Services Directive has improved legal certainty in payments. Possibilities for Process Optimization New data elements have been introduced for SEPA to facilitate account reconciliation. These include a special originator reference and a standard length of the remittance information that banks will be required to pass on to their clients. Opportunity to Reduce Costs Companies maintaining accounts abroad to handle local payments can centralize such accounts and the associated liquidity more easily. Current differences between domestic and international payments are minimized. Lower Fees As a result of SEPA, the fees for credit transfers and direct debits are expected to converge in Europe, resulting in lower fees in high-priced markets as well as for crossborder credit transfers. Payment Factories The benefits are most pronounced for companies that have centralized their payments processing or plan to centralize their payments in payment factories. For example, SEPA credit transfers and direct debits contain a special field used for communicating the name of the ultimate creditor or debtor (i.e. on whose behalf the transaction is being completed). Practical Preparations: What Needs to be Done? Some preparation is needed before the benefits of the single payment schemes in Europe can be realized. Preparation efforts vary depending on the complexity of the payment process. Key aspects to be considered are shown below. Project Scope The following steps should be taken to identify the project scope: Identify the group companies concerned and the accounting/erp systems used Determine in which SEPA countries accounts are maintained Transaction analysis (which payment methods are used on the accounts concerned and size of volumes) This provides a general overview of how your company is affected by SEPA and allows a rough estimate of the anticipated project scope and costs. Project Team The SEPA project team may include different company divisions depending on the structure of the company and the scope of the SEPA project. It is important to include not only divisions directly involved with payments or accounting, but also to consider other areas that may be impacted as well. The table above shows company divisions that may be affected by the project. Next comes a brief overview of the specific changes related to the SEPA credit transfer and direct debit as well as what concrete steps should be taken to prepare for these changes. The Changes in Detail: SEPA Credit Transfers (SCT) The SEPA credit transfer involves the following changes compared to current methods. SEPA XML Format This format is binding for the exchange of payments between banks. However, banks may continue to accept other formats from customers for the instruction of SEPA payments. Deutsche Bank also supports other global formats (EDIFACT, csv, IDOC) and certain local formats (e.g. German DTAZV) for SEPA payments. IBAN and BIC International Bank Account Number (IBAN) and Bank Identifier Code (BIC) are the only permissible account identifiers for SEPA transactions. Whereas until now they have been used only for cross-border payments in most countries, with SEPA this applies to domestic payments as well. New/Changed Data Elements An optional originator identification code was added in the SEPA formats. It allows the originator of a payment to automatically reconcile returns. In such cases, the bank returns the information to the customer with the return booking. Also, a list of Category Purpose Codes (e.g. SALA for salary payments) has been established, allowing the orderer to initiate special processing by its bank (e.g. individual instead of bulk booking). Such special processing services are optional and will have to be agreed upon with each bank individually. 4

5 In addition, a field for Purpose Codes has been introduced, allowing the orderer to inform the recipient about the reason for the transaction (e.g. PHON for a telephone bill). Moreover, the length of the remittance information has been standardized across Europe at 140 characters, and banks are obliged to provide the full remittance information on account statements. Execution Time The maximum execution time for SEPA credit transfers from electronic ordering to beneficiary account credit is two business days (one from 2012). Experience shows that today the vast majority of SCTs is already received by the beneficiary within one day. Credit without Deduction SEPA credit transfers are credited in full without deduction of fees from the principal amount. Central Bank Reporting Duties for Cross-border Payments Unfortunately, efforts to abolish central bank reporting duties for foreign trade payments in the SEPA area were not yet successful in all countries. Reporting duties must consequently still be observed in accordance with the prevailing rules in each country. Checklist: SEPA Credit Transfers Automated Booking These steps are necessary for incoming payments to ensure that systems are still able to automatically process the changed account statements with the new SEPA data content Please note: Although the timing of migration to SEPA is flexible, there will be changes in the presentation of transactions on account statements (e.g. changed business transaction codes, IBAN/BIC, etc.) if business partners migrate. Check which account statement data are automatically reconciled Examine if databases are equally capable of handling SEPA and non-sepa data elements (one way to determine this may be by making individual SEPA test-payments to your own account) If this is not the case, identify necessary system adjustments and draft a timetable Define processes for account reconciliation during the transition phase IBAN/BIC Business partner data must be converted to IBAN and BIC before migrating outgoing credit transfers to SEPA Identify all systems that use account numbers and bank codes Opportunity: In the future, will it be possible to use centralized databases? Standardized processes for cross-border payments should be defined to add missing IBAN/BIC codes For domestic payments, check whether standardized country solutions are available for the conversion of account data (available in most countries) Opportunity: Cleaning-up of account databases Specify IBAN/BIC on own invoices and other documents Recommendation: Initially list IBAN/BIC in addition to the local account number/bank code to allow business partners to choose between SEPA and the current payment method during the transition phase Remittance Information Check length of the currently used remittance information field If necessary, shorten remittance information to a maximum of 140 characters Originator Identification Code (optional use) Determine whether the originator identification code field should be used Criterion: Significant manual effort in reconciling credit transfer returns Definition of the number to be used (field length: 35 characters) Plan and prepare the automatic generation of this reference number through the relevant system Define reconciliation processes based on the originator identification code Central Bank Reporting Where applicable, establish future Central Bank Reporting based on SEPA formats and processes System Adjustments Decide which SEPA should be used (options: SEPA XML or other global formats if supported by your bank) Ask your external systems (ERP, accounting) provider about availability of SEPA changes and conditions Please note: In some accounting systems SEPA functionalities are only available from a certain release, which may involve planning a release change Own systems: Define specifications and time schedules for system adjustments Bank applications: Determine when and how electronic banking systems or other access channels will be SEPAcompliant Interface analysis/change planning If necessary: Prepare test plans and test agreements with banks Banking Relationships Find out when your bank will be SEPA-ready and obtain information on migration support, accepted formats, value-added services, and SEPA terms and conditions Decide which banks are to be used for SEPA payments Opportunity: Examine cost benefits and efficiency gains achievable by reducing the number of transaction banks 5

6 The Changes in Detail: SEPA Direct Debits (SDD) The SEPA direct debit is a collections process based on a mandate signed by the debtor and presented to the creditor. This mandate is standardized in content and must be issued in the language of the debtor s country of residence. As with the credit transfer, national account identifiers will be replaced by IBAN and BIC codes. There will also be an originator identification code field a significant advantage for creditors submitting large numbers of direct debits, as it greatly simplifies the automatic reconciliation of returned direct debits. In addition, there will be new data elements, such as: A unique mandate number to be assigned by the creditor A centrally assigned (in most countries by the Central Bank or your Bank) creditor identifier Changed codes and identifiers for returned direct debits There is a core scheme and a businessto-business scheme. The fundamental difference between the two schemes relates to the finality of the payments. Whereas the core direct debit can be returned by the debtor up until 8 weeks after the debit, the business-to-business direct debit is non-refundable by the debtor. To ensure protection of Corporates against unauthorized debits, the business-tobusiness scheme provides for a mandatory control of the debit authorization by the debtor bank. This is not the case for the core direct debit, where a mandate check by the debtor bank is optional (as the debtor himself has the possibility to claim a refund). In a collection process between Corporates, the parties are free to agree on using either the core direct debit or the business-tobusiness direct debit. For consumer protection reasons, however, it is not possible to use the business-to-business scheme when collecting from consumers. For very small companies (so-called microenterprises), some EU Member States have excluded the use of the businessto-business scheme this differs across countries in Europe. Changes in the process flow of companies will arise in particular from the change in submission and other deadlines for direct debits, which are listed below for the core scheme: Direct debits will have a due date to be assigned by the creditor. This is the date on which the debtor is debited The date and amount of the direct debit is communicated to the debtor no later than 14 calendar days prior to the due date (shorter notification deadlines can be agreed upon) Initial direct debits under a mandate or oneoff direct debits are sent to the clearing five business days prior to the due date Subsequent direct debits under a mandate must be sent to clearing two business days prior to the due date Any returns by the debtor bank (e.g. if the account has been closed) must be effected no later than five business days after the due date The debtor can return the direct debit up to eight weeks after the due date Unauthorized direct debits (for which the creditor cannot produce a mandate) can be returned up to 13 months after the due date The mandate expires 36 months after the last initiated direct debit Different deadlines apply to the businessto-business scheme: Direct debits are sent to the clearing one business day prior to the due date Banks can return the direct debit until two business days after the due date Returns by the debtor are not possible Below is a checklist that provides an initial overview of preparations required for direct debits. Checklist: SEPA Direct Debits IBAN/BIC System Adjustments Banking Relationships Mandate Number The creditor must assign a unique mandate number (max. 35 characters) to each mandate Creditor Identifier Originator Identification Code (optional use) Direct Debit Mandates The content of the mandate is standardized, but the form can be freely designed Direct Debit Initiation, Returns and Booking The steps for these points are identical to those in the Checklist for SEPA Credit Transfers Decide which number should be used as the mandate number (e.g. contract number, customer number) Determine how numbers should be assigned, planning of processes and possible system changes Obtain creditor identifier Make sure to automatically include the creditor identifier in each direct debit mandate/each direct debit Determine whether the originator identification code should be used Criterion: High efforts for the manual reconcilement of returned direct debits Definition of number to be used (max. 35 characters) Plan and prepare automatic generation of the originator reference through appropriate system Define reconciliation processes for returned direct debits based on originator reference Determine mandate form (e.g. part of client contract/agreement or a separate form) Initiate appropriate changes Define process for setting due dates Define submission processes taking into account the deadlines of Five days for first/one-off direct debits Two days for subsequent direct debits New codes and processes for returns Definition of corresponding internal processes Check how your bank books direct debits and returns (e.g. on submission date/due date/ return date) and take this into account when designing your processes Check whether the due date and new return deadlines have any impact on the collection of outstanding debts 6

7 Outlook Regulation on Cross-border Payments To help with the harmonization of payments in Europe, EU Regulation 2560/2001, which was originally adopted to introduce the principle of uniform charges for crossborder and local payments up to 50,000 EUR, was replaced on 1 st November 2009 by Regulation 924/2009. Amongst others, the scope of the regulation has been extended to direct debits, so that the principle of uniform charges now also applies to this payment method. Below are some other topics covered by the Regulation which are of particular relevance for SEPA. Temporary Rules on Multilateral Interchange Fees for Direct Debit Transactions are set as follows* For cross-border direct debit transactions executed before 1 st November 2012, a multilateral interchange fee of 8,8 cents is applicable if a lower interchange fee has not been agreed upon by the payment providers For national direct debit transactions executed before 1 st November 2012, existing multilateral interchange fee arrangements can continue to be applied During the transition period until November 2012, the industry should develop a common, long-term business model for the operation of SEPA direct debits which is in line with EC competition rules * These rules may change as part of the pending SEPA migration end date regulation. Provisions on the Reachability for SEPA Direct Debits Since 1 st November 2010, banks in the Euro-Zone that are reachable for national direct debits have to ensure that accounts of their clients are also reachable for the core SEPA direct debit By 1 st November 2014, EU-banks outside the Euro-zone that are reachable for national direct debits shall also be reachable for core SEPA direct debits Changes on the Balance-of-payments Reporting Obligations The threshold for payments-based statistical reporting obligations has been increased to 50,000 EUR on 1 st January 2010 By 31 st October 2011, the Commission shall present a report on the appropriateness of removing paymentbased reporting obligations End Dates for SEPA Migration Since the launch of the SCT and SDD, respectively, adoption rates by end-users have been rather low. Thus, European authorities have recognized that an end-date for legacy schemes is indispensable to bring the SEPA project to a successful conclusion. As a result, on December 16, 2010, the European Commission published a proposal for regulation governing the timeframe for fulfilling newly established technical requirements (e.g. by migration to SCT and SDD). The proposal will amend regulation 924/2009 and establishes that: 12 months, at the latest, after the regulation enters into force, credit transfers shall meet the requirements of the regulation For direct debits a 24-month period would apply The regulation will enter into force only after it has been accepted by the European Parliament and the European Council. Currently, the Commission, Parliament and Council are in tri-party discussions to agree on a final version. Depending on how quickly the regulation will enter into force, this could mean that existing domestic credit transfers could be decomissioned as early as year-end 2012 (direct debits 2013). Potential SEPA Ramp-up Scenarios With the described developments having set the stage for the introduction and takeup of the SEPA instruments, Deutsche Bank envision a potential scenario for the ramp-up of and migration to the SEPA instruments that is outlined in the chart below. The challenge for Corporates will be to plan their SEPA migration project in such a way that the project end date is no later than the (yet to be determined) end date for the legacy schemes. To achieve this, Deutsche Bank recommends completing the analysis phase as soon as possible so that the required timelines for each of the implementation project steps can be determined. In this way, it will be possible to estimate the full project duration and to easily determine the latest starting point once end dates are set. Milestones of SEPA Migration Since January 2008: SCT migration Since November 2009: SDD migration Since November 2010: Core SDD reachability of all banks in Euro Zone as per EU Regulation 924/2009 Mass migration expected in the months prior to the end date Corporate Preparation Analysis Budgeting Planning Implementation 2013 or 2014? End date for legacy schemes Project end date 7

8 This brochure is for information purposes only and is designed to serve as a general overview regarding the services of SEPA. The general description in this brochure relates to the SEPA services offered to customers as of September 2011, which may be subject to change in the future. This brochure and the general description of the services of SEPA are in their nature only illustrative and do not therefore contain or cannot result in any contractual or non-contractual obligation or liability of Deutsche Bank AG or any of its affiliates. Copyright September 2011 Deutsche Bank AG. All rights reserved.