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Use Your Time Wisely: Final Steps Towards SEPA How exactly should treasurers and finance managers be focusing their attention during the final few months before the SEPA migration end date in February 2014? The Editor interviews Simon Jones.

Use Your Time Wisely: Final Steps towards SEPA

An Executive Interview with Simon Jones, Head of Corporate Sales, EMEA at J.P. Morgan Treasury Services

In the Executive Interview this month, Simon Jones, Head of Corporate Sales, EMEA at J.P. Morgan Treasury Services, talks to Helen Sanders, Editor, about how treasurers and finance managers should be focusing their attention during the final few months before the SEPA migration end date in February 2014.

Based on your experiences, how far have corporate customers progressed in their SEPA migration plans so far?

By and large almost all the large corporations that we deal with have started their SEPA migration project. Although they are in different stages in their migration plans, the majority are aiming to achieve SEPA compliance by Oct-Nov 2013. This is also reflected in the ECB payment statistics which currently (ECB, May 2013) show that ~44% of EUR ACH Credit Transfers are SEPA payments.

However, progress on the SEPA Direct Debit front has been less promising so far and the corresponding statistics currently stand at only ~2.65%. We expect these volumes to go up later in the year when the consumer-facing companies that have large volumes of direct debits such as insurance, utilities and telecoms become SEPA compliant.

Payroll continues to be an area our clients are leaving to the latter stages to convert and this is a concern. One of the key criteria is that a number of payroll providers still need to convert their systems to support their customers on their SEPA projects. We believe much progress will be made in the industry in the next few months.

What is continuing to hinder their migration plans, and how might these be overcome?

SEPA migration projects are mainly involved with making changes to data formats and processes, so they are very technology and resource intensive. In addition, the SEPA migration project for a typical corporate involves multiple business units beyond treasury, such as sales, procurement, HR, accounts payable and accounts receivable. In our experience, many corporates have been challenged to identify and involve all the relevant stakeholders. Also, gaining the necessary internal approval for additional budgets and resources has been challenging for a few companies. Overall however, direct debit conversion has been the most challenging part of a SEPA migration project because the nature of the change is quite significant.

For example, existing Direct Debit mandates need to be digitised so that key information is exchanged with the bank for every transaction. Secondly, the mandate has to be updated with BIC/IBANs, a Creditor ID and a Unique Mandate Reference number.

For corporates who have still not migrated, time is very short and treasurers should be discussing their conversion options with their banks and IT service providers. Broadly speaking, companies now have two choices for direct debit migration: either keep mandate management in-house or outsource it to a bank or IT service provider. For example, major banks including J.P. Morgan have developed direct debit mandate conversion solutions fully integrated with a leading IT service platform. Alternatively, corporates can engage directly with these IT companies to access their conversion services.

What are the possible implications for companies that don’t manage to migrate by the February 2014 deadline?

Ideally, corporates should be planning their SEPA projects so that they are compliant in advance of the due date. However, if a company is not likely to be ready, it should have a back-up solution in place, such as using the SEPA conversion or repair services of its bank. As I mentioned, leading banks such as J.P. Morgan offer services to convert or repair SEPA non-compliant payment files into a compliant version. Again, banks require adequate lead time to offer these services, so companies should be discussing these options with their banks now.

In what ways is J.P. Morgan supporting customers through the migration process, and what do you think are the unique features of your approach?

The first thing we have done is to contact all customers and briefed them on the SEPA changes well in advance of the due date. We have been actively engaging with each customer on how to phase their migrations so that they are compliant in good time. In January 2013, we organised a webinar series to which we invited all our customers, to discuss best practices for SEPA migration.

One of the unique offerings from J.P. Morgan is our consultative approach to encourage customers to leverage SEPA to centralise their treasury processes in Europe. SEPA offers a great opportunity to rationalise banking relationships and bank accounts. A large number of customers are also implementing payment factories or simplifying their legal entity structure though a trading hub. J.P. Morgan has deep expertise in Europe for supporting such advanced treasury structures.

Finally we have invested significantly in our SEPA+ migration services with a leading IT services company. The SEPA conversion service is integrated with our internet platform, J.P. Morgan ACCESS, and our file transmission services so customers do not need to interface with another separate platform to manage these services.

Corporates have received our SEPA+ services very well, including both existing customers and new customers that are mandating J.P. Morgan for SEPA and pan-European banking. We have many significant implementations over the next few months.

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