Suffering from SEPA aches? Diagnosis, treatment & prevention

With effect from 1st February 2014, the national payment scheme (Electronic Money Transfer System) will be retired and all electronic payments must be processed using the new European standard (SEPA).

Following the introduction of euro notes and coins in 2002, electronic means of payment, direct debit and credit transfer have significantly contributed to the efficiency of payments and helped drive higher economic growth. The European Central Bank and the EU believe it’s essential that these payment instruments now move to full SEPA compliance as quickly as possible.

 

What payment types are covered under SEPA?

There are three payment types involved in SEPA:

– SEPA Credit Transfer Scheme

– SEPA Direct Debit Scheme

– SEPA Cards Framework

This includes:

Integrating the multitude of existing national euro credit transfer and euro direct debit schemes into a single set of European payment schemes.  This is a natural step towards making the euro a truly single and fully operational currency.

Creating a SEPA for cards which aims to ensure a consistent customer experience when making or accepting payments with cards throughout the euro area.

Incentivizing the increased use of electronic payment instruments while reducing the costs of wholesale cash distribution.

Consumers can rely on a single set of euro payment instruments covering 33 countries: one bank account, one bank card, one SEPA Credit Transfer (SCT), and one SEPA Direct Debit (SDD).

 

Affecting Reach

33 individual countries (the 28 EU member states and Iceland, Monaco , Switzerland , Liechtenstein and Norway)

500 million citizens

87.5 billion electronic payment transactions annually

Based on the latest statistics from the European Central Bank (ECB), the National SEPA Committee is concerned about the slow pace at which French – and European – companies are migrating to the SEPA. In fact, SEPA Credit transfer volumes have barely reached the 37% mark. Migration to SEPA direct debit, for its part, nearly flatlines with flows of less than 2%

Regarding direct debits, SEPA Direct Debit CORE, a set of new requirements is necessary:  It is necessary to adapt the file formats, to complete data from these files and it is mandatory to collect the signed consent of the clients to place orders.

When we start talking about SEPA, we wanted to understand and made understandable what benefits this legislation was going to provide together with the requirements. And to be honest; our first impression was an overwhelming demand for requirements compared to the possible benefits. And this feeling is a universal one, especially when working around the clock.

However, we know adaptation is not likely to be a disaster, so we tried to do it nice and easy. We began with the consent, then we did our best to answer consent –related questions with our “YES, I do” claim. Thus, and thanks to the engagement on both businesses and customers, we offered a more friendly vision of the e-mandate.

The emandate is the registered electronic consent issued by a third trusted party. The Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures, states that an advanced electronic signature based on a qualified certificate created by a secure-signature-creation device satisfies the legal requirements of a signature in relation to data in electronic form in the same manner as a handwritten signature satisfies those requirements in relation to paper-based data

The handwritten signature requirement may be replaced by the side of cryptography, through numbers, alphanumeric keys and other attributes that ensure the validity and accuracy of its authorship and authenticity of its contents.”

A trusted third party (TTP) can be described as an entity trusted by other entities with respect to security-related services and activities. A TTP would be used to offer value added services to users wishing to enhance the trust and business confidence in the services they receive and to facilitate secure communications between business trading partners.

From 1 February 2014 using e-mandate not only new consents will be easier to get, but also renewing older ones when due to a, change of creditor, a document loss, an offer modification… emandates should be renewed. Nevertheless, migration requires the below mandatory data:

–              Header: SEPA Direct Debit Mandate

–              Unique mandate reference

–              Name and address of the debtor

–              Debtor’s account number IBAN

–              The BIC code of the debtor bank

–              Creditor name

–              Forms of payment

–              Location and date of the signature

–              Debtor’s signature

–              The standard heading ‘SEPA Direct Debit Mandate’ is mandatory

–              Please return to

The design of SEPA mandate is not set, only the content above mentioned

The point is to be adapted to the new legislation does not turn into a source of pains and aches. Therefore, our proposal is based on the creation, management and delivery of mandates using e-mail or Registered SMS. A quick and easy solution meeting both creditor and debtor needs.

The problems arising from non-implementation are certainly much more complex and less desirable: since the return receipt by customers, the rejection of consignments by missing or erroneous files formats. Trade relations can benefit from SEPA

 

Delayed SEPA migration: real risks

A distinction must be made between the risks inherent in credit transfers and those related to direct debits. For SEPA credit transfers, the risks include additional costs and security problems faced by the company related to possible file conversion operations. This implies potential financial risks tied to the failure to pay salaries, suppliers and taxes, which give rise to late fees. The risks related to non-compliance with SEPA direct debits may prove even more significant since its implementation goes well beyond a technological migration. The early stages of the project must include a comprehensive study of change management both internally and vis-à-vis a company’s customers.

In terms of SEPA direct debits, creditors are required to follow a number of new procedures to avoid the risk of objections by debtors. This includes in particular notification of debtors and the unique mandate reference, i.e. the documents that must be provided to new customers when mandates are signed. Between these new processes and a more complex interpretation of data, it is easy to understand why a project of this scope cannot be undertaken at the last minute   SEPA non-compliance, with failed electronic payments estimated at more than €20 billion per year.

Given the scope of the task, it is urgent that companies stop postponing SEPA migration in order to comply with European regulations

Summing up, the “ do nothing” solution or the sit back and watch is not the answer, since solutions , rather than carrying side effects, will relieve SEPA pains and aches.

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