A New Beginning for European Payments
by Helen Sanders, Editor
Now that the SEPA end date has passed, and the additional transition periods that were allowed in some countries have come to an end, many treasurers are now reflecting on their migration experience and looking ahead with the question ‘what next’? The introduction of standardised payment and collection instruments, based on common formats, is a major step forward in pan-European payments harmonisation. However, with considerable changes in technology and payments culture since the SEPA instruments were first conceived, the issue now is how to move forward quickly in optimising the new European payments and collections landscape.
Facing the SEPA Direct Debit challenge
One of the most challenging elements of SEPA has been the introduction and migration to SEPA Direct Debits (SDD). There are a variety of reasons for this. The instrument definition and formats were not confirmed until November 2011, giving relatively little time for migration. As SDD replaced a variety of quite different direct debit instruments, the result was a compromise that was often less attractive than the legacy instruments it replaced. Finally, technology and payments culture evolved significantly between the original conception of SDD and its final delivery, so expectations on issues such as eMandates have changed.
A collaborative approach at Arkadin
As speakers in the “SEPA: What’s up? What’s next?” workshop emphasised, however, leading users of SDD have not allowed these challenges to become barriers to a successful migration project. Arkadin is one of the world’s fastest growing collaboration service providers, offering a complete range of integrated audio, web, video and unified communications solutions across 32 countries globally. Tarik Momni, Head of Internal Audit and Project Finance, described how the organisation has more than 1,000 customers paying by direct debit, with over two million direct debit collections each year. Direct debits are used in five countries today, with two more to follow shortly. It was therefore essential that the migration to SDD was conducted without interruption to cash flow or inconvenience for customers. Arkadin recognised that SEPA migration was an opportunity to implement a new collection strategy and organisation, specifically centralising SDD collections into a European collections shared service centre (SSC) in France.
Arkadin recognised that SEPA migration was an opportunity to implement a new collection strategy and organisation
The biggest hurdle that Arkadin experienced in the project was the limited timescale for its completion. All five countries needed to be migrated to SDD and a central SSC between October 2013 and the SEPA deadline of 1 February 2014. Furthermore, Arkadin’s existing accounting system did not support XML (the format on which SDD messages are based) either for input or output. Arkadin approached its cash management bank, BNP Paribas, to seek its help in implementing the project in order to meet its business objectives within the required timeframe. BNP Paribas committed the necessary expert personnel to the project, including a project co-ordinator and representatives from both the SEPA onboarding and cash management teams who worked with Arkadin’s project manager, treasury and technology teams to implement the project.
In addition to supporting SDD collections in each country across Arkadin’s European footprint and expert resources, a key element of BNP Paribas’ value proposition was its partnership with Worldline, an Atos company, provider of EasyCollect. Arkadin was able to implement EasyCollect quickly and easily to provide mandate management and convert accounting formats used by its accounting system to/ from XML. Not only have collection processes now been refined to take advantage of the automation and control that EasyCollect offers, but implementing the solution enabled Arkadin to complete a timely migration.
With the migration to SDD now complete, Tarik explained that there are various developments and improvements that Arkadin is now looking to make. Firstly, SDD will be offered as a collection method in two further countries. Secondly, the company is keen to take advantage of additional functionality available in EasyCollect, such as electronic pre-notifications, and wide industry initiatives such as the development of eMandates.
For the second panellist, treasurer of a large European telecoms company with the large majority of collections via direct debit, any service interruption resulting from errors or omissions during the SDD migration process could have had a serious impact both financially and reputationally. Following rapid growth over a decade, automation is a key priority to reduce costs and enhance the customer experience, using tools such as online subscription, electronic billing and automated notification of unpaid bills or rejected debits. The company took a phased approach to migration to ensure that mandate conversion, customer communication and collection processes were handled correctly, resulting in a highly successful migration project. Due to the deep analysis and follow-up of the new error codes, the reject rate is now, after the project, even lower than before!
Despite the success of the migration project, large SDD billers in particular, such as utilities and telecoms companies, still face considerable challenges. For example, rejection codes are not yet handled uniformly by banks, which makes it difficult to qualify rejections and to implement an automated processes for dealing with rejected debits and unpaid bills. Use of manual mandates is very labour- and storage-intensive and the process of setting up mandates can be time-consuming. Consequently, a priority in the coming months will be to automate this process as far as possible, including the use of eMandates and enabling customers to authorise mandates via online or mobile banking.