Commercial opportunities with SEPA

Your cash-management at a higher level

Intro SEPA

Commercial opportunities with SEPA

SEPA payment products will soon be the only standard for making payments in Euro-zone countries. SEPA, which stands for Single Euro Payment Area, offers companies opportunities to further optimise their cash management structures.

European Union

The European Union wants to develop a single uniform European payment platform to improve trade between consumers and companies in Europe. This will enable payments in European countries using a single account and a single set of payment options. All legal and technical barriers for pan-European money transfers have already been eliminated.

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European standard

The European Commission wants to use SEPA to bring an end to the inefficient patchwork of electronic payment standards in the EU, which currently increase the costs incurred by companies. SEPA rules represent uniform requirements and technical standards that can be used in payment products for Euro transactions in Europe. These rules have been formulated by the European Payment Council, where European banks are also represented.

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Mandatory modifications for companies

Companies are still not aware of the urgency, even though the migration deadline has now been set for 1 February 2014. SEPA will have many consequences for companies. Current business processes are no longer appropriate and systems and payment files are being upgraded. Payment processing is also being modified so payments can continue to be processed. Processes for managing payment collection contracts need to be expanded. Within the market, we see that such processes vary in time between 6 months and 2.5 years.

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Opportunities for companies

SEPA also offers opportunities for optimising cash management. People will need fewer bank accounts in the future and it will be possible to centralise money in one location. Payment transactions between clients and suppliers are completed faster. There has been an improvement in the visibility of cash and working capital. And all this is helping to reduce costs.

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SEPA obligations

At least implement mandatory changes for SEPA

A lot of changes need to be made to systems and processes in order to continue making and receiving payments in the future.

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BIC and IBAN

SEPA requires you to use the IBAN and BIC information if you want to pay suppliers. Your clients have to use the IBAN and BIC if they want to pay you. If you are not sufficiently prepared, this will cause a lot of problems after 1 February 2014, including liquidity problems.

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Direct debit

Do you use direct debit? Then you should bear in mind that details about direct debit mandates need to be stored. You are also expected to present the paper-based mandates to the bank if requested to do so. You must send mandate-related details to the bank, which means there will be major changes in your processes.

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Preparation

Organisations will have to prepare for SEPA. Depending on the size of your organisation and its (international) activities, this process can take anywhere between 6 months and 2.5 years. So it is important to start in good time.

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SEPA opportunities

Exploiting the opportunities offered by SEPA

SEPA is a European standard that allows international payments to be made for the same fee as local payments. This offers opportunities to optimise international cash management, for example, by centralising outgoing and incoming cash flows. You will thus be able to reduce a variety of costs, such as those associated with managing your banking relations. And you can manage with fewer bank accounts and facilities for electronic banking.

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Centralising outgoing cash flows

Outgoing payments can be executed from a central bank account in the Netherlands. This means outgoing payments can be sent later and from fewer bank accounts, which means fewer electronic banking systems are required. Because outgoing payments can be planned more efficiently throughout the company, cash forecasting will also become more accurate.

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Centralising incoming cash flows

The advantage of centralising incoming payments to a single bank account in the Netherlands is that available liquid assets become visible and accessible much sooner. This helps you to reduce interest-related costs because your debt will also be reduced.

By centralising outgoing and incoming cash flows, you may also be able to exploit economies of scale at banks, which means transaction fees will decrease and higher interest will be earned on your surplus cash.

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Transaction fees

SEPA has opened up the European payment market to competition between providers of payment services. Besides fee reductions, the fine details of the cost structure have also become more transparent. This means it is easier for you to compare banks and reduce your transaction costs. We will be pleased to help you to benchmark your transaction costs and offer you the solutions needed to reduce your transaction fees.

Research by PwC has shown that SEPA has not yet realised the desired level of cost transparency in every country. A lot of opportunities can still be exploited by looking beyond national borders when selecting your cash management bank.

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Cut-off times

Cut-off times have changed greatly since the arrival of SEPA. Previously, you could send your payments by 16:00 o’clock if you wanted them to be processed the same day. However, this will now have to be done a lot sooner. And this will have an impact on your processes and cash position. Because cut-off times can differ greatly from bank to bank, you will not only have to modify your business processes, but may also have to take them into account when negotiating with your bank. We can offer you advice about the best way to set up such processes.

In practice, it appears that banks deem SEPA standards to be the absolute minimum. Banks are already keeping a trick up their sleeves by implementing very broad cut-off times.

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Bank communication

SEPA will also have an impact on the communication with your bank, because you will be sending different payment files. Your current banking package probably won’t be able to meet requirements on this front yet.

Your business processes will determine which solution best meets your needs. In general, three versions are available:

SWIFT connectivity; for financial institutions and large corporations that want to perform a large number of complex payments with a high degree of certainty and security.

Online Banking; for financial institutions and corporates that want to implement a wide range of payment files and have a lot of requirements when it comes to payment flexibility, incl. limits and user profiles.

Direct banking; for financial institutions and corporates that want to implement bulk payment files and want to keep manual processing to a minimum for safety reasons.

What can PWC offer on this front? We can help you to modify your cash management infrastructure, so you can process your payments and receipts in the most effective manner.

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Support

How can we help you?

SEPA is not only about modifying systems and processes, but it also directly affects your cash management infrastructure and enables companies to organise their cash management in a more efficient manner. This approach can help to significantly reduce costs.

In order to work as efficiently as possible, it is essential to consider all aspects like treasury management (optimisation of cash management), technology (modification of information systems), payments (effective use of payment methods), legal affairs (modifications due to legislation) and tax. We can support you in all these matters, while maintaining a clear overview, so you don't encounter any surprises and can fully exploit the opportunities offered by SEPA.

Please feel free to contact us if you would like to talk further about SEPA and the opportunities it can offer you.

Contact us

Martijn Jansen

Partner, PwC Netherlands

Tel: +31 (0)88 792 51 75

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