SEPA plan of approach. A phased approach towards. 2a successful SEPA

Financial Supply Chain SEPA SEPA plan of approach A phased approach towards 2a successful SEPA migration @

Every individual and organisation will be impacted by SEPA. System changes will be required and internal processes need to be re-organised. By 1 February 2014, existing national credit transfers and direct debits will be replaced by SEPA equivalents;sepa Credit Transfer and SEPA Direct Debit. The migration to these new variants has a wide scope. It affects your company, your stakeholders, your systems and will require considerable effort and time. The preparations needed will vary depending on the complexity of your payment processes. However, experience shows migration to SEPA can take at least 6 months. To help identify the activities that need to take place in order for your company to become SEPA proof, we have created this brochure to help you. It can be used in conjunction with your standard project guidelines and it can also be used to make a project plan. The Single Euro Payments Area (SEPA) is an initiative to create an integrated payments market across Europe for any organisation or individual making or receiving payments in euros. SEPA currently comprises 33 countries, including the 28 member states of the European Union, (euro zone and non-eurozone members). This also includes European Economic Area (EEA) members Iceland, Liechtenstein, and Norway, as well as Monaco and Switzerland. We suggest you approach the migration in the following 4 phases: 1. Awareness and inventory The main purpose of this phase is to determine the scope of the switchover to SEPA. 2. Impact analysis This phase aims to create a clear project plan, based on the scope determined in phase 1. This is done through an impact analysis, which includes possible benefits and a description of all changes. 3. Realisation In this phase you execute all changes in your organisation as defined in the project plan. This includes changes to processes and systems. 4. Migration and implementation In this phase you migrate to SEPA using the implemented changes realised in phase 3. The exact number of phases may vary depending on the needs of your organisation. SEPA plan of approach 2

Phase 1. Awareness and inventory Phase 1 Awareness and inventory Awareness about SEPA Sponsor and a project team Benefit areas in the financial supply chain Scope, including IT Preparation at all levels Administrative processes & procedures scope Documentation Impact analysis Realisation Migration and implementation First step is to define the scope of switching over to SEPA for your organisation. It will help you to make your organisation aware of SEPA and what it entails. Secondly you create an initial inventory of the changes required. Want to know more about SEPA? European Union: http://ec.europa. eu/internal_market/payments European Payments Council: www.europeanpaymentscouncil. eu/index.cfm ING SEPA information: www.ingsepa.com. Contact your ING relationship manager. We are happy to assist. This phase includes the following steps: Generate awareness of SEPA Before you can determine what has to be changed in your organisation, it is necessary to make sure you have all the relevant information. Appoint a sponsor and a project team Make sure designated individuals in your organisation are made fully responsible for executing the project. Appoint a sponsor, set up a project team and create a clear mandate that includes budget, timeline and reporting mechanisms for all the phases. Identify benefit areas in your financial supply chain The aim of this step is to get an overview in terms of possible benefits to your financial supply chain. Look for opportunities to become more efficient, such as the centralisation of the collections function and the use of one or more creditor ID`s for the organisation. Possible benefit areas of SEPA in your financial supply chain Uniformity One uniform transaction and reporting format Efficiency Simplification of account structure (In theory, you can manage all your payments & collections in euros in the eurozone with one account) Improved reconciliation due to improved reporting data quality More insight in returned and rejected transactions Remittance information passed on through the whole payment chain Use of ultimate originator and beneficiary field for shared service centres Improved short-term cash flow planning (transparency, predictability, legally embedded) Lower operational costs. SEPA can also be a trigger to centralise infrastructures. Define scope Determine which SEPA changes are relevant for your organisation, where does SEPA impact your organisation? The result of this step is an overview of the main SEPA changes in your organisation, the scope of your SEPA project. SEPA plan of approach 3

Some key questions to consider are: Which local payment products and reporting products do you use? How do you initiate your payments and/or collections (manually/upload)? Have you started collecting International Bank Account Numbers (IBAN) and Bank Identifier Codes 1 (BIC) of your customers? Are you able to automatically reconcile SEPA payments in your Enterprise Resource Planning (ERP)? Do you use off-the-shelf software components developed by third parties such as ERP vendors? Prepare your organisation at all levels It is important to involve the departments within your organisation where the changes are going to take place. Determine which departments in your organisation are impacted and/or should be involved in the project. Which departments can be affected? Departments Sales Marketing Communications Accounts payables and receivables Treasury and Accounting Customer care Procurement Legal IT Operations Areas with possible impact Sales policies and conditions Internal and external information Invoices with IBAN and BIC, debtors ledger in combination with mandate management Cash and liquidity management Customer questions Purchase conditions and supplier contracting Contract changes like the SEPA Direct Debit contract Systems, databases, interfaces Processes and procedures Determine IT scope The aim of this step is to get an overview of your IT landscape that should be adapted. Identify all the IT elements (systems, databases, data models, computer screens or computer monitoring, system interfaces, reports, system documentation etc.) that need to be changed to meet the requirements of SEPA Credit Transfers and 1 The SEPA regulation states that as from 1 February 2014, BIC can no longer be requested by banks as a mandatory field for domestic SEPA transactions and for cross-border SEPA transactions from 1 February 2016. ING will implement these rules by no longer requiring the BIC when initiating SEPA payments as from the beginning of 2013. The exact date will depend on the payment channel you are using. Please consult your ING contact person for more detailed information. SEPA plan of approach 4

SEPA Direct Debit. We advise you to consider both systems developed by your own organisation and systems developed by third parties such as Enterprise Resource Planning (ERP) vendors. Furthermore, we advise you to check if your ERP vendors are ready for SEPA. Determine the scope of administrative processes & procedures The aim of this step is to determine what needs to be changed in the administrative processes of your organisation in terms of processes and procedures. This includes: Payments processes Other impacted processes (including financial processes like reconciliation) We advise you to take into account the processes which take place between you and your customers. For example the process around delivering mandates for the SEPA Direct Debit Procedures and working instructions possibly impacted by SEPA. Determine documentation scope The aim of this step is to get an overview of documentation materials for internal and external use that need to be adapted and/or created. A few examples are: letters, invoices, brochures, folders, advertisement material, websites, terms & conditions or contracts. Already ready to receive SEPA payments? Even though you are in the process of becoming SEPA proof and not yet ready to start initiating SEPA payments, your customers and/or suppliers may be. Your customers and/or suppliers can already start sending you SEPA payments. It is important for you to be able to process and reconcile these incoming SEPA payments automatically. If this is not the case we would advise you to adapt your reconciliation process for SEPA transactions in order to be able to process the content delivered in transaction details. The biggest difference here is the IBAN and BIC are reported instead of the domestic account number. Important attributes for reconciliation of incoming payments are: Structured remittance information Unstructured remittance information Payment reference IBAN and BIC payer Name payer. SEPA plan of approach 5

Phase 2. Impact analysis and project plan Phase 2 Impact analysis Migration scenario and migration plan IBAN and BIC implementation Mandate management solutions IT changes Changes to administrative processes & procedures Changes to documentation Budget Implementation date Integral project planning Awareness and inventory Realisation Migration and implementation The impact analysis phase should result in a detailed project plan which will guide you through the realisation and migration phase. This phase includes the following steps: Develop migration scenario and migration plan The aim of this step is to determine how you want to migrate to SEPA. The following migration options can be considered: Implement all the changes in a big bang or migrate through a phased approach Implement SEPA Direct Debit and SEPA Credit Transfers at the same time or separately Implement SEPA in all the countries in which you do business at once or gradually by doing it country by country. You should keep in mind the regulatory end dates of euro countries and non euro countries when planning for this activity. Implement a dual period (in which you can handle and reconcile the present payment products and SEPA Direct Debit and SEPA Credit Transfers) Migration of bank accounts. There are several options: - Ask all clients to send their IBAN and BIC 2 - Use IBAN and BIC migration tools offered per country. See www.ingsepa.com for an overview. Decide on IBAN and BIC implementation In this step you will decide how you would like to store and use IBAN and BIC. The following choices are relevant in this aspect: When an IBAN is imported into your systems or database(s) it must be validated. A valid IBAN must comply with a 97 proof validation system. We therefore advise you to consider using this validation system or check IBANs in another way, for example by using specific software Implement IBAN and BIC next to your present bank account numbers in your databases or choose for just one set of bank accounts in your database The length of IBAN in your databases: the IBAN comprises maximum 34 characters. The length of an IBAN differs per country. Will you use the maximum length or if you are doing business in just one country, the number of characters used in that specific country? The length of a BIC in your databases: will you always use the maximum of 11 characters or fewer characters? How to display IBAN on your client output: including spaces or without? How to display BIC on your client output? 2 The SEPA regulation states that as from 1 February 2014,BIC can no longer be requested by banks as a mandatory field for domestic SEPA transactions and for cross-border SEPA transactions from 1 February 2016. ING will implement these rules by no longer requiring the BIC when initiating SEPA payments as from the beginning of 2013. The exact date will depend on the payment channel you are using. Please consult your ING contact person for more detailed information. SEPA plan of approach 6

IBAN structure Country Check Bank indentifier Domestic account code (ISO) Digit * number Calculation of the country code and check-digit : uniform Bank identifier and domestic account number : country specific * Modulus 97 check on IBAN Example of a French IBAN: Example Length Description FR 2 Country code 76 2 Check digits 30004 5 Bank code 00801 5 Branch code 00009305416 11 Account number 31 2 Key control FR7630004008010000930541631 Current mandate management models differ across Europe. For SEPA Direct Debit it is required that mandates are managed by the creditor and that information like a mandate reference is stored with the mandate and sent with the collection instructions. The transition to SEPA Direct Debit therefore requires changes to existing mandate management implementations and an extension of current data. Decide on mandate management solutions This step is only relevant when planning to use SEPA Direct Debit. When using this product as a creditor, it is relevant to manage the mandates of your debtors. Mandate management is needed to be able to deliver Mandate Related Information with your collection instructions. Investigate your current mandate management administration and investigate what the rules are regarding mandate management in the national migration plan of a specific country. The situation differs per country. Decide, depending on the national migration plan, how you must convert your existing mandates and how to design the new mandate management administration. Decide on a solution for mandate management. Solutions can range from a selfbuilt mandate management solution to the usage of external vendors. Mandate Manager is an ING solution powered by Sentenial that allows you to adapt to SEPA Direct Debit without making large-scale changes to your existing data and processes. For more information about the Mandate Manager, please visit www.ingsepa.com. SEPA plan of approach 7

Decide on IT changes The aim of this step is to determine in detail where your IT landscape is impacted. Solutions need to be designed for those changes. IT systems can either be developed in house by your own company, or external systems like ERP that can be bought and implemented. Systems developed by your own company To make a long list of impacted systems we advise you to use software that scans your systems on terms like bank account number or the name of a domestic payment or reporting format. This will help you determine where you need to apply changes. Execute the scan on programmes, databases, data models, computer screens or computer monitoring, system interfaces, reports, system documentation, websites et cetera. Ensure that you cover a broad area of systems, since changes may need to be applied to client facing systems and back-office systems. Design solutions for the changes needed and plan accordingly. Software developed by third parties, such as Enterprise Resource Planning (ERP) systems You should ask your vendors what aspects of the software will change and when they expect to be SEPA proof. Identify where you need to make changes to be able to comply with the changes needed in the ERP system. Pay specific attention to the version of your ERP system. You should ensure that you have the correct version installed which can handle all SEPA requirements. Your ERP vendor should be able to answer the following questions: Does the software/ ERP support the use of IBANs and BIC? Does the software/ ERP support conversion from local and or foreign bank accounts to IBANs? Does the software/ ERP support multiple bank accounts in multiple (SEPA-) countries and with multiple banks? Does the software/erp produce SEPA-compliant PAIN001 XML files for SEPA Credit Transfers? Does the ERP produce SEPA-compliant PAIN008 XML files for SEPA Direct Debits? For more information about the PAIN XML messages. please see: www.ingsepa.com Does the software/ ERP support SEPA-specific transaction reporting that contains SEPA attributes? Is the software/ ERP able to automatically manage the ISO-codes mentioned in your reporting (for example, handling of error messages)? Does the software / ERP have a mandate administration option, for instance to upload local files to migrate current mandates? SEPA plan of approach 8

Decide on changes to administrative processes & procedures The aim of this step is to determine in detail which administrative processes & procedures must be changed; identify what changes are needed and how these should be implemented. Input for this step is the result of the scope exercise conducted in phase 1. Payment related processes may be impacted by for example changes in cut-off times for payments or different timelines for processing. Furthermore, these may be impacted by any changes to your financial supply chain that you foresee. Pay specific attention to processes like reconciliation, as changes may be needed. We advise you to undertake a detailed impact analyses of all procedures impacted to ensure changes to processes can be designed and planned for. Please consider the processes which take place between you and your customers as well. For example the delivery of mandates for the SEPA Direct Debit. Decide on changes to documentation The aim of this step is to determine in detail which internal and external communication materials must be changed, identify what changes are needed and how these should be implemented. Input for this step is the result of the scope exercise conducted in phase 1. A second element of this step is found in the development of a communication plan for both internal and external customers. Determine what to communicate to whom, when and through what means and plan for this accordingly. Also consider in what way you wish to train and inform different departments within your organisation. Determine necessary budget The aim of this step is to clarify and calculate the costs of all the required changes in terms of man hours and out of pocket costs. This is necessary to determine and acquire the necessary budget. The input for these calculations is the result of the various steps described above and the chosen migration and implementation scenario. Determine implementation date The general rule is that it is necessary to implement all the changes before 1 February 2014. A few exceptions to this rule exist, therefore we advise you to contact both ING and your legal department for advice. The aim of this step is to determine the best date for the implementation. Choose a date by which you want to be SEPA compliant in the production environment. Fine-tune this date with external parties like your bank and any other vendors you depend on. Create integral project planning The aim of this step is to develop clear planning for all involved. Create, based on the results of the previous steps, a holistic and integral project and communication planning including dependencies and an impact statement in terms of resourcing costs and timeline. This planning will guide the developments for the next phases. SEPA plan of approach 9

Phase 3. Realisation Phase 3 Realisation Implementation of changes in; IT landscape, administrative processes & procedures, and documentation. Testing to ensure business continuity Partial execution of the communication plan Awareness and inventory Impact analysis Migration and implementation The purpose of this phase is to build and test all the solutions as designed in the second phase. Implement these solutions in your IT landscape, administrative processes and procedures and documentation. In this phase you will execute the project plan developed in the last step of the second phase. The main steps are: Implement the changes in your IT landscape, administrative processes and procedures, and documentation Test the changes to ensure business continuity Test the supply chain with external suppliers, vendors, your bank, etc. Execute parts of the communications plan. Parts related to the actual migration are executed in phase 4. SEPA plan of approach 10

Phase 4. Migration and implementation Phase 4 Awareness and inventory Impact analysis Realisation Migration and implementation Communication: internal and external communication Training staff Execution migration scenario The purpose of this phase is to migrate to SEPA by following the migration scenario chosen. The main steps are: Communication: internal and external communication of the impact of migration. This includes the change that will take place and the impact on defined stakeholders. Train your staff: the aim of this step is to train your staff about the changes that are relevant for them: helpdesk, employees that work with adapted software and administrative processes. Execute migration scenario: the migration scenario that was chosen in phase 2 needs to be executed in terms of data migration and process and payment product migration. This ensures a controlled migration to SEPA. How can ING be of help? As you prepare for the move to SEPA, ING can help you and advise on the migration plan. Furthermore ING offers various additional services that will ease the migration to SEPA: Mandate Manager ING can support you with Mandate Manager: an ING solution powered by Sentenial that allows you to adapt to SEPA Direct Debit without making large-scale changes to your existing data and processes. Format Validation Tool Businesses currently delivering bulk payments in various formats will have to use a standard XML ISO 20022 format. The Format Validation Tool is an online service that can be used to validate specific ING payment format files. ERP questionnaire We have created a questionnaire which you can use in order to determine whether your software supplier is SEPA compliant. Our cash management consultants have the knowledge and skills to assess the impact of SEPA and the PSD on your business. We have highly efficient payment processing and an extensive pan-european network. We have the payments and cash management expertise as well as the European presence and infrastructure needed to support you during your transition to the new European payments environment. We are ready to be your SEPA partner. For more information about our additional services and other SEPA topics, please visit our dedicated SEPA website: www.ingsepa.com. SEPA plan of approach 11

Appendix: Checklist summary for SEPA migration Question Yes No Phase 1. Awareness and inventory 1. Did you appoint a sponsor and a project team? 2. Does your project team have basic SEPA knowledge? 3. Have you determined the general scope of SEPA for your organisation? 4. Do you have an overview of the possible benefit areas in your financial supply chain? 5. Have you involved the necessary departments within your organisation? 6a. Do you have an overview of systems in scope and out of scope? 6b. Do you have an overview of ERP vendor systems in scope? 7. Do you have an overview of administrative processes and procedures in scope? 8. Do you have an overview of internal and external documentation in scope? Phase 2. Impact analysis and project plan 1. Have you made design choices about IBAN/BIC and mandate management? 2. Have you made a choice about migration scenarios and a migration plan? 3. Do you have a detailed overview of the changes needed for yourself built systems and/or the ERP systems? 4. Do you have a detailed overview of changes to be made in administrative processes and procedures? 5. Do you have a detailed overview of changes to be made in your documentation and communication? 6. Have you allocated a budget for all changes? 7. Have you made a choice about the implementation dates? 8. Have you made an integrated project plan? Phase 3. Realisation 1. Have you implemented all the changes in your IT landscape, administrative processes and procedures and documentation? 2. Have you tested all the changes in your IT landscape, administrative processes and procedures and documentation? 3. Have you tested your supply chain, including the interfaces with external suppliers and ERP vendors? Phase 4. Migration and implementation 1. Have you communicated the impact of the changes to your employees and external parties and customers? 2. Have your helpdesk users and software users been trained regarding new administrative procedures and communication materials? 3. Have you executed the data migration including IBAN and BIC and mandate administration? 4. Have you migrated all your payment flows and related processes to SEPA? SEPA plan of approach 12

More information For more information about SEPA please contact your Payments & Cash Management consultant or visit www.ingsepa.com The registered office of ING Bank N.V. is located at Bijlmerplein 888, 1102 MG Amsterdam, Trade Register number 33031431 in Amsterdam. ING Bank N.V. is registered with the Dutch central bank (DNB) and the Netherlands Authority for the Financial Markets (AFM) in the Credit Institutions and Financial Institutions Register. ING Bank N.V. is also subject to the supervision of the Netherlands Competition Authority (NMa). Information about the supervision of ING Bank N.V. can be obtained from the DNB (www.dnb.nl), the AFM (www.afm.nl) or the NMa (www.nmanet.nl). In the context of this publication ING and bank are understood to mean: ING Bank N.V. From this publication no rights can be derived. PCM211 0913 ING Bank N.V.