Ahead of the Compliance Curve

Learn more about with the impact of the Single Euro Payments Area (SEPA) initiative:

Case Study: Commerzbank Powers Payments Growth with a Pan-European PTS/SEPA Solution

CSC Whitepaper: SEPA – Reaping the Benefits of Strategic Payments Management

CSC Payment Technology Helps European Banks Compete

Introducing the Euro in 1999 gave Europe a common currency and money policy. However, non-cash payments between the countries — mainly credit transfers, direct debits, and credit and debit cards — have been expensive and complicated to transact, and a barrier to European monetary integration. The Single Euro Payments Area (SEPA) project is designed to eliminate national differences in payment instruments and processing infrastructures in Europe, and harmonize fees for cross-border and domestic Euro transactions. SEPA aims to transform individual national retail payment markets into one pan-European market.

Significant Milestones Met and New Phase Starts

Every bank offering payment services in the Euro currency must comply with new operating frameworks for SEPA, whose importance is underpinned by a legal measure, the Payments Services Directive. The SEPA project ended its implementation phase in January 2008 with the scheduled launches of three major deliverables. The industry is currently in the migration phase, as organizations cross from old transaction instruments into new.

SEPA must be fully implemented in 29 European countries by December 2010. The ultimate goal is to deliver harmony in all financial transactions across Europe and create the conditions for much greater standardization in the movement of money across the world.

The potential cost savings from SEPA for corporate and public sector customers is huge. For banks, however, there have been fears that SEPA represents a punitive compliance cost and could lead to a serious threat from new competitors. Lost revenue from pure payments offerings will have to be recouped elsewhere as mandates will restrict the rates that can be charged for cross-border payments.

A New Vision of SEPA Compliance

“CSC focuses on the positive view of payments harmonization,” said Roger Ward, principal consultant with the London office of CSC’s Financial Services Sector. “Leveraging SEPA requires a new vision of payments as a cost lever. Without a basic shift in perceptions about how cutting banking transaction costs and speeding funds flow can affect performance, banks and their corporate customers will not be willing to invest time and resources in honing strategies to exploit SEPA.” Above all, he stated, they will not be motivated to work together to overcome operational challenges and ensure that SEPA delivers its full potential.

The most commercially focused banks will automate the payment process to create new business opportunities. Technology developments will enable the banks to leverage, for example, the new business potential of e-invoicing and e-reconciliation, and improved receivables management. Major players in the payments space have the opportunity to reposition themselves from utility money suppliers, with little apparent added value for corporate customers, to true business partners.

Germany’s Commerzbank Leverages SEPA Compliance for Business Expansion

Some banks are acting now to gain competitive advantage from SEPA today and tomorrow. When Europe’s financial industry committed to SEPA and standardized processes, Commerzbank, based in Hamburg and with more than 8 million customers worldwide, saw an opportunity. The bank already offered services to promote effective payments and transaction management relying on up-to-date information, reliable planning tools and efficient control instruments. To grow that business outside Germany, however, the bank needed new hardware, better functionality and a business partner who really understood global payments.

As it built a SEPA-compliant system based on CSC’s Payments Transaction System (PTS), Commerzbank also created a platform to develop and expand its corporate payments business. CSC’s PTS/SEPA is standard yet customizable Web-based software that enables banks to get ready for SEPA without huge investment. It delivers efficient and cost-effective straight through processing of global electronic payment transactions.

With PTS/SEPA online in January 2008, Commerzbank can now offer its corporate customers personal consultations on the effects of uniform processing across Europe. It also offers SEPA direct-debit support, the bank’s first transnational debit procedure, to customers who access Commerzbank’s own sophisticated technical interface. As well as SEPA credit transfers, the bank will also offer SEPA conformance for cards frameworks.

“Our payments management specialists are very pleased with CSC’s PTS/SEPA system,” said Horst Rinkenberger, Commerzbank’s vice president of IT. “They believe it gives Commerzbank the platform to exploit SEPA opportunities — not just in the ‘mature’ branches, but in the fast-growing Eastern Europe units too.”

A Blueprint for Global Payments

The execution of SEPA across Europe has enormous opportunities and challenges for corporate business, the public sector, and the banking and associated financial services industry that serves them. Some observers view SEPA as more than a uniquely European initiative. It could be the blueprint for future global payment transactions, affecting processes, technology standards and industry structure, and driving major business efficiencies worldwide.

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