SEPA deadline is non-negotiable
Procrastination now will lead to difficulties with processing
One thing about the introduction of SEPA is certain. The deadline of February 1st is a non-negotiable one.
On that date, Ireland’s traditional payment clearing system will cease to function. Those businesses that have not prepared will find that their credit transfers and direct debits will not be processed. The deadline for the euro area is February 1st while that for non euro member states is October 30th.
While preparing for the new payments system is within the scope of most businesses, and significant help is available from financial institutions, businesses are being urged to prioritise their migration efforts as soon as possible.
Banks have led the process in Ireland. BIC and IBAN information has been appearing on bank statements for some time and the various institutions have been cranking up their awareness campaigns in this area over the past 12 months.
Some companies, including major utility providers, have already completed the process while others have been slow to adapt. There are two main strands to the SEPA migration, one relating to credit transfers and the other relating to direct debits. Credit transfers is the more straightforward part of the transformation and includes payroll and bill payment.
Migration to SEPA direct debit is more complex, with experts acknowledging that a timeframe of around three months is generally required to execute this project properly.
The direct debit includes a number of important new elements including new file submission timeframes, new customer file formats and a new automated process for rejected and returned transactions. Enhanced consumer protection rights such as a “no quibble” refund right will also have significant implications for direct debit originators as well as financial institutions.
High transaction volumes
Sentenial is a specialist SEPA solutions provider that has been working in this area since 2003. Its sales manager for Ireland, Brendan Sweeney, says that for larger companies with high transaction volumes the migration project can be complex and those companies that have not started their migration planning may already be running the risk of missing the deadline.
“There is an element of ‘leave it to the last minute’ and a perception that banks will sort this out for them. There is a need to take ownership of this issue. If I was [managing] a business that had not migrated, I would be on to my bank asking them what I needed to deliver and by when,” he observes.
While the scale of the project will vary, depending on whether you manage a utility company with several hundred thousand direct debits or a sports club with a mere 100 transactions, all require a response. Transactions should be seamless, however, for consumers who already have direct debit arrangements in place with their banks for regular payments such as utility bills or mortgage payments. Existing direct debit mandates will remain valid .
The move to this new payments regime will create a more competitive environment for payment processing and this represents both a threat and an opportunity for Irish banks, with a levelling of the playing field and a common market through the 33 country zone.
Danske Bank’s Barry Manning sees it as a potentially positive development in terms of Ireland’s foreign direct investment attractiveness.
“An Irish-based bank will be able to process all transactions throughout Europe for a multinational located here. There will be no need to have additional bank facilities in another part of the continent just because you are doing business there,” he says.