SEPA Handbook 2012 | Corporates must prepare for SEPA deadline

SEPA Handbook 2012 | 1
Fifth edition, 2012
Hands-on SEPA What you need to know from
a corporate perspective

End-date for
SEPA – time
for action!
We live in challenging times. Economic development
remains weak in many countries and as a result, markets
are being depressed. Several countries in southern Europe
are exposed as interest rates are too high for governments
in need of finance.
But this is exactly when we need to focus on the future and take
the necessary steps to stay competitive in the digitalworld.SEPA is
part of the ‘Digital Agenda for Europe’,identified by the European
Commission as one of the most important areas for Europe over
the next 5–10 years.
A fully digital Europe will deliver many benefits. More businesses
and consumers will use the internet for buying and selling.These
safe, efficient transactions will lead to growing confidence within
corporates and public authorities to further explore the benefits
that the internet offers.
When the final steps are taken towards full SEPA, it is important
to understand the value of the Single Market and the enormous
potential that will follow once SEPA has been realised. We will
have credit transfers and direct debits in euro based on a single
standard that will work in all countries and also for cross-border
transactions.
These benefits will provide a strong foundation for banks and
businesses to change and adopt more cost-efficient procedures.
The need for manual work in payment processing will be greatly
reduced. As a result, our customers can achieve huge savings.
At SEB,we are committed to all these changes and are convinced
of the long-term benefits.The challenge lies ahead in the next 20
months, until the end-date of 1 February 2014. But this end-date
also marks the beginning of an exciting new dawn.
From the very beginning,we have worked hard to deliver SEPA and
are ready to offer our support to all customers for the migration.
Lars Millberg
Head of Global Transaction Services

Table of contents
SEPA is no longer a vision – it is a reality ..................................................... 5
Case study ................................................................................................................... 6
Outlining the key challenges prior to SEPA end-date .......................... 8
SDD to evolve into a strong and widely used product ....................... 11
The critical points for corporate SEPA implementation ................... 12
SEPA: The ERP perspective .............................................................................. 14
How regulation continues to drive change .............................................. 18
ISO 20022 XML extends possibilities ......................................................... 20
Market will benefit from the experiences of the earlyadopters ....... 22
Case study ................................................................................................................. 24
Baltics face up to challenges and opportunities .................................. 26
Germany geared up for SEPA challenge .................................................... 28
Centralisation gathers pace in Finland ...................................................... 31
The hot topics – questions and answers .................................................. 32
Meet SEB’s SEPA experts ................................................................................... 34

4 | SEPA Handbook 2012
The extensive euro crisis has not affected the political aims for a single
euro payment area.The vision stands strong and additional legislation
to support European harmonisation of new efficient electronic
payment means e- and m-payments can be expected. Nothing but
market adoption at full speed to the new standards is an option.

A payment is a payment. They are not normally that
interesting for those who are driving the core business
or in charge of company investments. SEPA has been
communicated for many years as a vision of fundamental
importance for the euro payment market,but the response
from users has been indifferent.This is not surprising as the
incentives for corporates to invest in payment processing
infrastructural changes have been low in a severe economic
climate. In addition, a couple of well known theories on
difficulties for launches of new infrastructure have been
highly relevant – complex transition,immature early versions
of the SEPA rulebooks and lack of critical mass have led to a
first mover disadvantage state.Market acceptance of a new
standard is normally a lengthy process.In this perspective,
a decade or more for implementing SEPA fully in all euro
countries would not have been an unreasonable timeframe
although this is ineffective with parallel standards,systems
and processes over such a long time. With this in mind,
politicians responsible for the single market vision of
increased efficiency through the harmonisation of euro
payments across Europe weren’t prepared to wait any longer.
Using legislation as their catalyst,they set a sharp end-date
for the migration from legacy euro payments to SEPA credit
transfers and direct debits in regulation.The extensive euro
crisis has not affected the political aims for a single euro
payment area. The vision stands strong and additional
legislation to support European harmonisation of new
efficient electronic payment means e- and m-payments
can be expected.Nothing but market adoption at full speed
to the new standards is an option.
For corporates and other payment service users,the new
SEPA regulation means that changes in the euro payment
processing will definitely take place. This must now be
considered seriously and carefully planned for.In all euro
countries, the full migration of national legacy payments
to SEPA compliant payments before February 2014 is a
requirement.To explore the possible cash management
advantages that may come from the standardised euro
payment functionality – domestically and cross-border
– and reap the full benefit of it is an additional opportunity.
Furthermore,an analysis of the effects that SEPA brings to
non-euro countries should not be forgotten.
The main ingredients in SEPA are the euro currency,new
standards – IBAN as account identifier and ISO 20022 XML
as message and reporting format – and harmonised
payment rules. Euro payments within SEPA not following
these standards and rules will be rejected.This means that
the new requirements will not only affect the banks but also
payment service users.A major question over ISO 20022
XML adaptation is how far corporates and their ERP-
providers need to go as this format standard is not only
mandatory between payment service providers according
to the SEPA regulation but also for end users initiating
payments via bulked files.The question is more accurately
how far a corporate wants to go with such adaptation as
conversion services to and from some formats will be
allowed. The fact is that international and non-euro
domestic payments will still have to be handled beside the
SEPA rules.However,it is important to evaluate and see the
full potential in ISO 20022 XML. Migration to this standard
mayover time give benefits to corporate payment processing
that goes far beyond SEPA. Banks and ERP-providers in
the frontline of the development can already offer many
different solutions based on this format for international
and non-euro domestic payments.
There will now be a strong focus on each country’s migration
of legacy payments to SEPA compliant instruments.This
means that the continuous and rather extensive updates
of the SEPA payment rulebooks – SEPA Credit Transfer
and SEPA Direct Debit – will slow down for a while. Fully
functioning SEPA payment schemes ready to replace
current domestic schemes are in place as a base for
payment services that can meet all possible demands
from users. Any specific national needs identified during
the migration may be solved by introducing a community
specific AOS (additional optional service) rather than as
a change affecting the common schemes.
In summary; no matter how unstable the euro is,
investments in time and resources to handle the SEPA
migration is now a necessity for all corporates making
payments to,from and within euro countries.
Henrik Bergman
SEPA is no longer a vision
– it is a reality

Migrating all SEPA payments across
12 euro countries represented a
significant investment in time and
resources for one particular company’s
Swiss-based Global Treasury team.
Progress has been good,with SEPA
payments now implemented for all
euro payments within the group.
The group had already centralised
supplier payments and converted
them to SCT (SEPA credit transfer) at
a Payment Factory in 2008.With SEPA
as the driver, other types of payments,
such as services and local operational
costs, also became centralised.
Over a two year period – from
September 2010 to July 2012,
domestic payments in 12 euro
countries were moved from local
banks to the centralised Payment
Factory. This saw the development
of what would become a tried and
tested three month implementation
plan per country which included
preparation, conversion to BIC and
IBAN, implementation in the Payment
Factory and follow up. Progress is
very much on-target, though with
any project of this nature, additional
targets are set when they become
apparent: SEPA Direct Debit is the
next challenge looming.
Harmonisation proved a major
challenge, but was overcome when
sufficient IT resources were secured
for the project. The Global Treasury
team also had to face varying
approaches by different banks,not all
of whom follow the SEPA rulebook,
specifically with regard to SCT
payment information. One lesson
learned is that payment information is
not always forwarded in full to the
beneficiary by his bank.This area needs
to be improved so that beneficiaries
get full payment information, which
helps reconciliation. Information on
returned payments must also be
improved.
The aim is to work with CGI (common
global implementation) standards on
PAIN (payment initiation) and CAMT
(cash management) messages so as
to have only one common imple-
mentation of the standard.
Looking ahead, the biggest challenge
for SEPA Direct Debit will be the cut
off times.A D-1 cut off time would
be preferable but is not yet offered.
The EPC rulebook only gives rules on
payment initiation without providing
clear instruction on the customer
reporting side. In this instance,
SEPA does not really improve STP
reconciliation processes with
beneficiaries and is not fully deliver-
ing as intended with clear room for
improvement.
Global Treasury has always remained
focused on the end benefits of SEPA
throughout, so all participants were
motivated for the preparations.The
team took the lead in the project and
offered central support for BIC/IBAN
conversion and the whole payment
structure with only two banks. In terms
of resources, this involved up to 3
people in each country, supported by
a team of 3 from Global Treasury.
Clear benefits have already emerged
– a central payment solution for local
payments was much smoother to
implement with SCT than working
with local standards specific to each
country. From one single account, the
team is now able to perform payments
on behalf of all Group companies in
euroland to all euro suppliers at a
low cost.This has enabled a global
cost-efficient payment set up.
For Global Treasury, it was very
important to get a clear message
from the European Union (EU) about
future SEPA end-dates. As a compli-
ance matter, it was easier to have the
project prioritised. This ensured the
necessary focus and resource
allocation. The new SEPA regulation
has immediately impacted suppliers
positively thanks to new equal pricing
rule of national and cross-border
payment in eurozone and removal
of euro 50,000 threshold.
The Global Treasury team revealed
that the support from SEB was good
from the outset. As one of the first
corporates to start a global project
on SCT with IBAN/BIC conversion and
XML format, Global Treasury and SEB
worked as a team with professional
input from both sides in order to reach
an efficient set up. SEB demonstrated
great flexibility and was extremely
supportive throughout the whole
project. Of particular importance was
the specialist knowledge it was able
to offer on the different SEPA products
such as SCT, XML and SEPA Direct
Debit and its involvements in key
standardisation initiatives like ISO
20022 XML and CGI.
When a global company with activities right across the eurozone decided
to make the migration to SEPA, it was a massive undertaking. This article
examines some of the challenges involved, understands how they were
overcome and looks at the role played by SEB in the process.
SEPA CASE STUDY

SEB demonstrated great
flexibility and was
extremely supportive
throughout the whole
project. Of particular
importance was the
specialist knowledge it was
able to offer on the different
SEPA products such as SCT,
XML and SEPA Direct Debit
and its involvements in key
standardisation initiatives
like ISO 20022 XML and CGI.

It seems that the extreme – or at least the unusual – has
become the new normal. We live with sovereign debt
crises, bank crises, euro crises, peak oil and climate crises.
To top it all, the Mayan calendar predicts we will witness
the end of time by December 21 2012. In this rather
extreme context, the closedown and replacement of
dozens of euro payment systems within a rather short
period, the SEPA end-date in February, 2014, may not
appear as headline news.
However, we believe it is a very significant event and we
devote this article to various aspects of the SEPA end-date,
which perhaps more accurately should be called the SEPA
start-date. Here, we present a brief inventory of migration
challenges.
Incentives and mindset
Change often creates incentives and disincentives that
make people act in certain ways. For SEPA, it has been
obvious that the benefits of inexpensive and speedier
cross-border SEPA payments rapidly caused payers to
change behaviour and switch to SEPA credit transfers.
Conversely, the take-up of SEPA for domestic use has,
with some exceptions, been slow as incentives are few
and people generally act rationally. In particular, for
purely national businesses or public sector organisations,
replacement of one payment type with another has no
obvious benefit but a very certain cost. Therefore, even if
everyone agrees that a common union-wide payment
standard is a good thing, the willingness to sacrifice for
the greater good is not always a priority. This is, of course,
the reason why SEPA needs to be enforced by legislation.
The transformation of current eurozone payment systems
will therefore be more driven by the stick than the carrot.
The major threat is a tendency to focus on meeting legal
requirements rather than to actually make things work.
Therefore it can be tempting to take shortcuts in order to
meet legal requirements even if this is counterproductive
to overall harmonisation. In practice, it is a significant risk
that individual countries implement their own versions of
SEPA, as Finland has already done. The major losers are
international companies that would otherwise benefit the
most from a standardised eurozone payment area. For
users with purely domestic requirements, it is hard to see
any direct upside except for the indirect benefits from a
more efficient economy in the union.
National migration plans
Each eurozone country has some kind of SEPA migration
committee. These groups are expected to manage the
national migration plan for SEPA implementation and
phase-out of legacy payment systems. A quick comparison
of the different country plans gives the strong impression
that national planning is not conducted at the same levels
or with the same ambitions. Considering the rather limited
time before 2014, these inconsistencies in national
preparation should cause some alarm.
Payment instrument scoping
SEPA is designed to replace existing national payments
in the eurozone, but there are quite a few exceptions.
SEPA does not deal with cash payments, nor is it intended
to replace paper instruments like cheques.Other exceptions
include high value and mobile payments. It is not entirely
Outlining the key challenges
prior to SEPA end-date
In practice, it is a significant risk that individual countries implement
their own versions of SEPA.The major losers are international companies
that would otherwise benefit the most from a standardised eurozone
payment area.

clear what will happen to bills of exchange type products
commonly found in Latin countries, such as the Italian
RIBA, but there a fair chance they will remain for quite
some time. Card payments and foreign currency payments
are also excluded from the SEPA migration. In summary,
this means that euro payments via credit transfer and
direct debit are covered by SEPA, but a number of other
commonly used payment instruments are not. From a
corporate perspective this means that the impact of SEPA
could be very different depending on payment behaviour.
A retailer, for example, can be expected to face different
issues to a manufacturer. The often mentioned SEPA
benefit of needing only a single European euro account
will of course be an option for some companies, but the
majority will need to retain their national accounts as they
also use non-SEPA instruments.
Reference handling and automatic reconciliation
Using SEPA direct debits, companies can achieve full
automation of accounts receivables matching but for
payments received as a SEPA credit transfer, SCT, the
situation is much worse. The SCT provides for either 140
characters of free text or a single XML-encoded structured
reference such as an invoice number. This means that
business customers who want to settle more than one
invoice using a single payment will do so using the free
text format which is difficult to use for automatic
reconciliation. Consumers may not pay multiple invoices
from the same vendor but are unlikely to be fluent in XML
encoding and their payment details will be in free text
format unless guided otherwise by their internet bank,
payment slip or any other method. It is exactly for these
reasons that Finnish banks decided that the basic SCT
could not maintain the automation levels and why they
enhanced the SCT with additional structured references
for domestic purposes, the so called AOS 2. The Finns
also developed a check digit based structured creditor
reference that has become international standard as ISO
11649. Using the structured reference one can circumvent
the SCT limitation allowing only a single structured
reference and fill the 140 characters of free text with half
a dozen or more structured references. However, even if
these measures have provided a solution in Finland, there
is little certainty that these enhancements will become
eurozone market practice and is why reference handling
remains an unclear topic.
→

Regulatory reporting and tax implications
Representatives of the European Commission have over
the years been harassed as to why companies need to
report SEPA payments to the central bank as these are
payments made within what should be a ‘single payment
area’. The SEPA regulation has addressed this issue and
stipulates that balance of payment reporting shall be
abolished from 2016. When reading the fine print, it is
clear that member states can no longer require banks to
assist in this reporting but there is certainly no ban on
requiring companies to report directly to central banks
and tax authorities. In fact, the legislation even mentions
that direct reporting could be an alternative.
This is, of course, a blow to corporate initiatives to use a
central euro pool for subsidiaries in different countries as
these subsidiaries may be required to report even local
payments. In fact, both the subsidiary and its counterparty
may be required to report a transaction, that in reality is
purely domestic, in case a foreign euro account is used
for either origination or receipt of the payment.
Conclusions
The issues mentioned in this article may sound like gloom
and doom prophecies solely focusing on problems. Still, in
these difficult times for EU and the euro, it would be foolish
to neglect the risks that the continued SEPA migration
faces and after all, it is better to be safe than sorry.
That said, there are many opportunities with SEPA,
specifically so for international companies. A smart move
could be to tone down the SEPA focus and to think broader,
think business and think outside the SEPA box.This means
thinking about how to improve payments and collections
processes and the SEPA part will most certainly be resolved.
Another way of saying this is: Try to keep it simple!
Johan Waldemarsson

The SEPA benefit of reaching one large market with a
common framework allows companies to streamline
processes and individuals to be able to choose from a
greater base of products and companies to do business
with. Despite this, the migration from legacy direct debits
to SEPA direct debits (SDD) has been slow. The truth is
that fewer than 1% of total volumes of euro direct debit
transactions have migrated to SDD. With new legislation in
place and governmental agencies pressured to move from
legacy direct debit schemes to SDD, the migration will pick
up pace. There is no doubt that SDD is set for a dramatic
upswing in numbers of transactions.
Despite the likely scenario of rapidly growing volumes the
question remains whether SDD will be as successful as its
local predecessors. As the migration end-date approaches,
the answer lies in the near future and will depend on how
adaptable both collectors and payers are to the benefits
and rules that make up the new direct debit system.
SDD is the result of negotiations and compromises which
have led to a product that no country’s residents will feel
completely at home with. At the same time, similar
competing products, like e-invoicing, are providing
alternatives with similar functionality. One clear example
of the move to other products is in Finland, where market
participants decided to migrate legacy direct debits to
e-invoicing rather than SDD. Similar discussions are taking
place in several countries that are more familiar with
debtor driven mandate flows.
Same day value, high security of payment and the tight
relationship created between buyer and supplier in the
mandate process are some of the reasons strongly
supporting the SDD. As collections are migrated, both
debtors and creditors will discover the benefits and
improved reach that SDD has. Therefore, we believe that
SDD will evolve into a strong and well used product filling
an important function in Europe.
Jonas Palm
SDD to evolve into a strong
and widely used product
With new legislation in place and governmental agencies pressured
to move from legacy direct debit schemes to SDD, the migration will
pick up pace. There is no doubt that SDD is set for a dramatic
upswing in numbers of transactions.

The critical points for corporate
SEPA implementation
There are many different aspects for a corporate to analyse before deciding how to
best handle the new requirements and opportunities in its euro cash management.
Our strong belief is that SEPA is beneficial for corporates
and will give long term benefits as it:
• Provides overall standardisation within the eurozone
and all SEPA countries on euro transaction processing
• Improves corporate processes as the driver for
streamlining processes within treasuries
• Standardises the behaviour of counterparties and
their banks (for example, day of crediting account,
how charges are applied etc.)
This article outlines some aspects that have proved critical
for successful SEPA implementation and – looking at
things from a wider perspective – improving corporate
cash management processes. As a bank, we have been
involved in SEPA transition on both a market and
customer level and we are often asked our opinion of
the work required for SEPA transition. With this in mind,
we would like to pinpoint some of the key areas when
planning and realising SEPA transition.
1
Current state – establishing the
starting point (pre-study activities)
An important first step is the analysis of
background data, which includes payment type
and volumes and bank set-up.Collecting all the necessary
details in the current set-up can be time-consuming and
cumbersome, but it is essential not only for a proper
business case but also for establishing the correct
processes and for correct estimates of the work involved.
The as-is analysis summary should include all geographies
including structure and type of bank accounts, cash-pool
set-ups and whether other liquidity concentration
arrangements are used.On the positive side,this improves
communication within the corporation making it more
aware of the upcoming transition.
2
Setting the scope and objectives
for SEPA transition (project)
Set the vision and ambition level both in the
short- and long-term. Our experience is that a
clear vision broken down to tangible goals and deliveries
makes it possible to monitor progress and ensures that
the journey is much smoother, both for management and
for those driving the project.
Practical aspects to take into consideration when setting
the scope, objectives and priorities include:
Use of SEPA products and product features – the natural
starting point is the SEPAcredit transfer for regular payments
both for supplier payments and also for HR needs such as
salary payments. SEPA direct debit now gives mass-billers
a new and powerful tool with the same process for both
domestic and cross-border collections. It also presents the
opportunity of handling the corporate bank accounts in
different locations for liquidity management.
Internal structure and organisation – centralised or
decentralised organisation? Centralising accounts is an
area that should be considered in order to improve
efficiency, reduce costs and also to align account structure
with centralisation of processes and concentrating cash.
But there are also other aspects to consider for the early
movers. If local sales companies’ accounts are closed and
the flows are moved to a central location, this has
practical implications. The local company would have to
instruct their customers to make SEPA payments to
another account possibly having also changed other
practical aspects of when payment needs to be initiated.

Local considerations – There are still differences within
SEPA when it comes to practicalities. These include local
reporting in areas like balance of payment and statistical
returns where authorities are asking clients to provide
additional reporting when the euro account is located in
another country. The SEPA regulation makes it clear
when it comes to reducing the burden of reporting for
payment service providers but it is not clear if and when
transaction reporting will be completely abolished for
payment service users.
3
Background research
– ERP vendor and capabilities
Establish a clear position and understanding
on all internal systems related to payment
transaction processing and reporting: ERP systems
including accounts payable and accounts receivable
(possibly treasury management systems) and how these
are interfacing with your bank. The capability of your
internal system environment is the natural starting point
for your vendor discussion. How your vendor can help you
adapt to the SEPA realities ISO 20022 XML standard is now
mandatory according to the legal regulation and can make
a big difference for your project. Other key areas to analyse
further with your vendor: ISO 20022 XML capabilities, and
master data conversion capabilities such as the capabilities
of updating your ledgers according to the ISO standard,
from BBAN to IBAN are important.
Understand your partners’ and vendors’ commitment and
experience and your expectations of what the journey
looks like for the future.This does not stop in 2014 or 2016
and they must be with you for several years.When setting
the business requirements there is also an important task
of securing the service levels needed internally to fit your
business needs, for example from your IT organisation.
4
Project and implementation
If the ambition is to standardise processes and
reduce the number of processing units by
applying the structure of a shared service centre,
then a lot of work and co-ordination activities need to be
planned. This means communication and dialogue with
customers and suppliers who will be affected by the
centralisation of processes and accounts and also in
defining and agreeing the interfaces between the different
entities, for example sales companies and the shared
service centre (SSC). In the roll-out per country, per
currency and per unit it will be of key importance to break
up the old national procedures where possible in order to
standardise the work of the SSC.
The ambition level and scope should be set in order to
make the most of a centralised payment process and this
should ideally also include other local and international
payments.
In the delivery phase, focus on harmonising the mass
transaction processing. Exceptions should be monitored
carefully. 100 % harmonisation is very rarely feasible or
optimal. But be cautious with the exceptions as these can
be large cost drivers and could for that reason have other
type of priorities or improvements needed in order to
reach overall business goals.
In the delivery phase it is beneficial to benchmark against
other corporates and local municipalities running similar
implementation projects. Your bank or your ERP vendor
can help you to find relevant examples. Good luck on your
SEPA journey!
Daniel Lexander
Our experience is that a clear vision broken down to tangible goals and
deliveries makes it possible to monitor progress and ensures the SEPA
journey is much smoother, both for management and for those driving
the project.

The recently passed SEPA regulation is unusual in the sense
that it explicitly stipulates the technical standard to use for
payments files,i.e.ISO 20022 XML.The legislation states
that banks must be able to accept the ISO 20022 XML
standard from customers but also requires that their
business clients use ISO 20022 XML standard for bulk
handling of payments.
However, although the file format is stipulated by
legislation it does not mean that ERP vendors can use
the legislation as a specification for programming their
banking interfaces. In fact, they cannot even use the ISO
20022 XML specification for this purpose as it does not
specify details about individual payment types. Instead,
they have to turn to the various national or supranational
groups that interpret the standards and decide upon the
finer details. One such notable group is CGI, short for
‘Common Global Implementation’, which consists of
participants from leading banks and global corporations.
CGI is working on standardisation of the ISO 20022 XML
standard from a global perspective, and is not only
focused on SEPA. National standards organisations may
also issue their recommendations and individual banks
and companies may choose to adhere to standards, or
take a proprietary route, as long as it does not deviate
too far from ISO 20022 XML.
The differences between different ISO 20022 XML
implementations of SEPApayments should perhaps not be
exaggerated as in most cases only small details will differ.
The problem though is that computer systems aren’t that
flexible when it comes to minor deviations in details and this
is why there is a significant risk that ERPvendors will need to
provide different national or even bank specific versions of
the ISO standard.
Still,it may not be format issues that will become the major
concern but rather timing,scoping considerations and lack
of co-ordination between national migration plans as
previously described.
This timing issue relates to the period between the
publication of the final version of the format for a certain
country or bank until the ERP vendor or consultant has
implemented this specification in the company’s ERP
system and tested it with the bank. With thousands or
even millions of business entities migrating at the same
time this could turn into a nightmare.
The scoping issue has been touched upon before,namely
that quite a few payment instruments will live on and are
not replaced by SEPA.It is therefore quite unclear if bills of
exchange,drafts and money orders should be initiated in the
ISO 20022 XML format or using other standards and
whose responsibility it is to determine these standards.
Here, CGI may play an important role as national SEPA
committees may scope out anything that is not a SEPA
instrument.
It is difficult to generalise SEPA impact on ERP as it may
differ significantly between systems, countries and
companies, but a common factor for many companies
may be that requirements will come as a surprise, with
little time to implement and no budget set aside – unless
you read this section on ERP challenges of course.
SEPA: The ERP perspective
Migration to SEPA involves a huge challenge for any company in terms of time and resources.
Perhaps the heaviest burden falls on Enterprise Resource Planning (ERP) systems, which
impact across multiple areas of an organisation. This section looks at some of the challenges
and attitudes of the corporates facing SEPA involved as well as some of the technical detail
that will have to be overcome. SEB is working with a range of ERP providers across many
European markets, including SAP, Logica, Tieto and Visma. After this introductory article you
can read about their views on SEPA challenges and opportunities.

Tieto
Markus Hautala, Director
How do you feel corporates are handling
SEPA Migration? Are they planning sufficiently?
Tieto is a large international company with more than 18,000
employees. We only tend to work with large global organisations
and I would say that from my point of view, these types of
companies are well prepared for SEPA. They were very well
educated about the changes at the outset and as a result have
made the necessary preparations and as a rule, have planned
fairly meticulously.
What is your view on the end-date?
For large corporations, I don’t see that there will be an end-date
problem. They have done the planning and have the resources
and know-how to be thoroughly prepared. I can say with some
certainty that there will be a huge demand for conversion
services in the market and I can see many companies facing
difficulty, but I see this being limited to the SME sector where
there will be organisations that respond too close to the
deadline.
How are you meeting the corporations’ needs?
We have a practice area of 200 experts working in this area and
have already successfully delivered a number of migration projects,
including in Finland which is generally seen as being some way
ahead of the curve in terms of SEPA readiness. It’s also worth
remembering that the majority of our customers have been
involved in centralising processes and establishing shared
service centres for some time, so they are ell equipped to meet
the further challenge that SEPA brings.
Do you see any spin-off benefits with implementing SEPA?
From my point of view, I do see SEPA as something of an
accelerator, especially where projects can impact an organisation
globally. I do believe, for example, that ISO 20022 XML has
potential to become a standard that is used globally. Thus, a
company with operations in the Americas, across Europe and
throughout the Far East, could use ISO 20022 XML as the
springboard to drive change through a single standard. This
would be a real game-changer and is potentially very exciting.
What additional challenges lie ahead?
I think that there are additional challenges ahead, particularly
in bringing bank statements in line with the ISO 20022 XML
standard, as well as aligning e-invoicing with payments to
provide a complete end-to-end picture. Process standardisation
is not yet as it should be and there is more work that needs to
be done.
Visma
Ulf Björnvold,
Product Management Executive
How do you feel corporates are handling
I think that corporates are handling SEPA migration well. They
are prepared and they have engaged with the process. As a
Nordic wide ERP vendor, Visma has been helped by the fact
that Finland effectively made SEPA standards mandatory in
October 2011, much earlier than the formal deadline. As such,
there have been very high levels of awareness over SEPA.
I don’t personally see an end-date problem. Most corporations are
well on track or have already completed and there is now a huge
amount of expertise in the market to be able to meet client needs
where required. I do, however, think we will see a demand for
services rise towards the end date.
We have been well prepared and have been working with all
major banks for more than two years. We have around 500,000
customers across the Nordics and have developed a Cloud
approach to SEPA. This means that we can offer a centralised
service that enables clients to standardise their payments –
and we can deploy this without a need for a protracted on site
ERP project. This currently supports 5 currencies, rising to 15 by
the end of the year. Now, in the Nordics for example, our clients
can centralise their payment handling services from one point of
entry across all four markets. As our coverage grows to other
markets, you can see just how powerful a proposition this is for
large international companies.
SEPA has been the driver from a regulatory perspective but clients
are alive to the benefits. They welcome faster payments over
borders, savings in transaction costs, using just one bank account,
reliability and common standards and rules. Large corporates know
that common standards enable the construction of one standard
platform for payments in SEPA resulting in major savings. And
corporates understand that SEPA is just the first step towards
ongoing change.
What additional challenges lie ahead?
We are looking at SEPA as just the beginning of a journey
towards centralisation and harmonisation. We see Common
Global Implementation (CGI) as the next major challenge and
have just completed – in partnership with SEB – the first cross
Nordic implementation.
→

Logicanow part of CGI
Garry Young, Director
SaaS Corporate Services
How doyou feel corporates are handling the SEPA Migration?
Are they planning sufficiently?
Since the European Parliament voted through the end-date
earlier this year, we have seen a marked hike in corporate activity
around SEPA. Large multi-nationals are always seeking further
opportunities for payments standardisation and centralisation.
They are looking at how they can get the most out of SEPA and
generally have well established SEPA readiness programmes.
Those companies yet to start such programmes, or who see it as
a question of compliance, need to be aware of the potential risks
of approaching SEPA haphazardly.
The end-date has been essential to kick start SEPA. However,
many corporates have been caught by surprise and may not
therefore have budgeted. Some corporates will struggle to meet
the end-date. The challenges they face are significant and there
are not many working days until February 2014. There are some
corporates who still believe it won’t happen or who believe that
somehow banks will fix the problem. But leaving SEPA to the last
minute is a major risk. There will be a spike in demand for services
up to 2014 and competition for SEPA resources.
Logica, now part of CGI, has a strategic focus on SEPA. Our SEPA
business includes consultancy, implementation, testing, and
market and solution validation. We have delivered technology,
services and advice across multiple countries and accounts as
the SEPA vision has become reality.
We provide a comprehensive Mandate Management and SEPA
Credit Transfer platform as a full SEPA compliant end-to-end
service for corporates (and banks). Mandate Management is
designed to enable corporates to easily migrate from legacy
direct debit and credit transfers to SEPA. Paper mandates can
be uploaded using our European scanning service, and mandate
packs easily printed and sent cost effectively to end customers
for signature.
We provide a one stop shop for SEPA from technology solutions
and services to business consulting and advice.
Yes; SEPA is much more than a compliance issue for corporates.
As a European corporate you cannot afford to discuss payments
centralisation without considering the impact of SEPA. SEPA
supports the corporate drivers of cash visibility,reduced risk and
cost reduction.
Those companies
yet to start SEPA
readiness
programmes, or
who see it as a
question of
compliance, need
to be aware of the
potential risks of
approaching SEPA
haphazardly.

SAP
Márton Lupták, Product Manager
How do you feel corporates are handling the
We put out a lot of information about SEPA from the very beginning,
but since SEPA became mandatory there has been a significantly
increased level of interest and lots more enquiries at a local level.
We have always pushed the view that SEPA should be approached
as more than just a compliance issue because of the opportunities
it affords large corporations to achieve significant business benefits.
While the end-date is now not far off,we don’t see an issue for the
large corporations in terms of SEPA readiness.We do suspect that
there will be an increase in demand as the end date approaches,
particularly in the SME sector,but the ERP market now has a good
deal of collective knowledge around SEPA and has learnt much from
the early adopters. For everyone except those who really do leave
their planning to the very last minute,there shouldn’t be a problem
meeting the end-date.
SAP has, for a long time, communicated with our clients and
made them aware of both the legal requirement for SEPA, but
more importantly of the strategic opportunity.
We have now completed a large significant number of SEPA
implementations across Europe and expect to get busier in the
run up to the end-date itself.
Our now well established SEPA offering enables customers who
are running SAP ERP Financials to quickly adapt to SEPA through
applications including the SAP Bank Communication Management,
SAP Integration Package for SWIFT, and the SAP In-House Cash
application. Our technical offer is supported by SAP Consulting,
who can help companies successfully manage the migration to
SEPA. SAP Consulting has established a SEPA centre of excellence
to provide a variety of specialised consulting services.
We also have a very active user group around SEPA and corporates
can clearly understand their SEPA journey through this and through
various e-learning resources that are available.
Corporates do understand the range of benefits that come with
implementation, including reduction of costs and improved
efficiency. But SEPA is the just the beginning of a journey that will
see an overhaul of centralised processing standards.The common
global implementation (CGI) initiative is an area that we are
particularly excited about as it has the potential to change the
landscape for the big global operators. SEPA as a subset of the
ISO20022 XML messages is one of the major topics within CGI
and we are already compliant with that as well.
SAP has, for a
long time,
communicated
with our clients
and made them
aware of both the
legal requirement
for SEPA, but
more importantly
of the strategic
opportunity.

Since the adoption of the SEPA regulation1)
in March 2012,
the migration to SEPA compliant credit transfers and direct
debits is required by regulation.Legacy euro payments must
be replaced, or adapted, to be compliant with the require-
ments on formats and data set in the regulation.This will,
of course, mean a major undertaking for payment service
providers and payment service users in euro countries and
also have an impact in non-euro countries.The deadline
for migration to SEPA compliant payment instruments is as
soon as 1 February 2014 for euro countries. Read more
about the scope in ‘Brief facts about the SEPA regulation’
on the facing page.
The SEPA vision is not changed with the introduction
of the new legislation. Before this was introduced, the
realisation of a harmonised euro payment infrastructure
was supposed to occur through self-regulation among
payment service providers. An extensive initiative for
standardisation has been driven for many years by the
major banks collaborating through the European Payments
Council (EPC). Major deliverables from this organisa-
tion have been rulebooks for credit transfers which
were introduced in 2008 and direct debits which were
launched two years later. Updated versions of these
rulebooks are published each year. The regulation
requirements for credit transfers and direct debits have
to a large extent been based on these rulebooks. EPC
will publish updated rulebook versions before the end
of 2012 that will be in force from 1 February 2014 and be
fully compliant with the SEPA regulation.
The Payment Services Directive (PSD) was adopted in
2007 and implemented as national law in all EU/EEA
countries during 2009. The main objective of this act is to
regulate the relation between payment service providers
and payment service users with a strong focus on
consumer protection. Payment services in all EU/EEA
member currencies are in scope but there are also certain
paragraphs with specific purpose to support SEPA. One
example regarding payment execution times is that since
1 January 2012, a euro payment or a payment in another
member state currency must be credited to the beneficiary’s
account no later than the business day after it was
initiated. During 2012, the European Commission is
investigating the effects of the PSD implementations
and a revision of the directive may follow.
In 2002, a regulation was introduced with the purpose
of creating harmonised conditions for cross-border euro
payments within EU/EEA. The portal paragraph of this
legislation says that a cross-border euro payment within
EU/EEA must not be priced higher than a corresponding
national euro payment. This regulation was updated and
renamed 20092)
and extended to include direct debits.
It was further revised in 2012 with the introduction of the
SEPA regulation.
With the ’Digital agenda for Europe‘ as a major objective
– meaning that services should go digital for increased
efficiency and competitiveness – the European Commission
have expressed their ambitions to further push the
development of payment services.A white paper on cards,
e- and m-payments has been published for comments
and is expected to soon result in more regulation.
As described above, there is already a range of payment
legislation with the objective to support SEPA and further
development of effective payment services is expected to
be within the scope of new regulations or additions to
existing ones.
Henrik Bergman
How regulation continues
to drive change
1)
Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro
2)
Regulation (EC) No 924/2009 on cross-border payments in the Community
The SEPA vision is not changed with the introduction of the
new legislation. Before this was introduced, the realisation of a
harmonised euro payment infrastructure was supposed to occur
through self-regulation among payment service providers.

Main content
Euro credit transfers and direct debits within
EU/EEA in scope
End-date for current national credit transfers
and direct debits
Transitional period for niche products
IBAN compulsory. BIC does not have to be
provided by payer after end-date
ISO 20022 XML-format mandatory between
payment service providers. Also imposed
for customer-to-bank bulked files
Key dates and impact
From entry into force
31 March 2012 – reachability
From 1 Feb 2014 – end legacy products
From 1 Feb 2016 – end niche products
From 31 Oct 2016 – end legacy euro CT
and DD in non-euro countries*
* Domestic CT and DD in national currencies
in non-EUR countries are not impacted
Brief facts on the SEPA regulation

But what does this mean in practice? For the first time
in the history of money transfers, the whole money
transaction chain and related information delivery uses
the same standard. From the debtor to its bank, through
to the creditor’s bank and finally to the creditor, the data
is passed without tampering, stripping or converting the
end-corporate critical reconciliation data. This means –
finally – true 100 % Straight Through Processing (STP).
Following the SEPA-transition period, this ISO 20022 XML
based infrastructure will be available in all euro countries
locally and for all euro transactions in other SEPA coun-
tries. It will replace euro-countries’ local clearing systems
and open up all the benefits to end customers adapting the
new standards.The transition enables corporates to start
using the same accurate reconciliation processes to a vast
amount of originally cross-border transactions that are
run under SEPA schemes.
Finland has already successfully migrated all its file-based
payment initiation customers to the ISO 20022 XML
standard instead of local well-standardised formats and
local non direct debit payment schemes.This was done not
only for normal local credit transactions but also for salaries
and tax payments.Additionally,initiations of local express
payments and cross-border payments are now run with
ISO 20022 XML messages too. Finnish migration was
small in scale compared to the challenges that the big
Central-European euro countries face in the next two years,
yet the scope of migration was larger than specified in the
end-date regulation text. Good progress has been made
among the ERP- and middle-ware vendors that have
implemented their applications to be more easily adjustable
to ISO 20022 XML initiation and reporting file exchange
and processing between end-customers and their banks.
ISO 20022 XML
extends possibilities
SEPA is based on the ISO 20022 XML standard, which is the universal financial industry
scheme. Under ISO 20022 XML, Bank-to-Bank messages in SEPA become mandatory. This
means that the SEPA clearing and settlement mechanisms use this standard by default and
without option. The SEPA regulation mandates that banks ensure that end-corporate users
use ISO 20022 XML when sending and receiving SEPA instrument bulk files.

Corporates and banks now have incredible development
and business tools at their disposal. Using ISO 20022 XML
for SEPA offers a financial interchange platform that can
be easily expanded for other purposes. Finnish customers
have already taken advantage of this. By default, there was
an obligation to start using cross-border initiations with
the ISO 20022 XML pain.001 payment initiation message.
This opened the eyes of some companies that are active
in non euro countries. With banking partners like SEB, it is
now possible to make all local featured payments with the
ISO 20022 XML in Sweden, Norway, Denmark, Latvia,
Lithuania and the UK. Poland will join shortly.
SEB supports the Scandinavian local schemes with ISO
20022 XML initiations corresponding to creditor services
for SEPA Direct Debit schemes. This offers huge potential
for corporates to harmonise their Accounts Payable and
Accounts Receivable processes. This extends not just to
the standard output and input with their partner banks,
but also the actual payment and collection processes
especially when these are centralised.
ISO 20022 XML integrity and harmonised development
among banks, ERP vendors and corporate end-users is
ensured through the Common Global Implementation
(CGI) group where SEB has worked actively alongside
the large international banks since its creation in 2009.
CGI group’s mission is to simplify the ISO 20022 XML
implementation for corporate users and,thereby,to
promote wider acceptance of ISO 20022 XML as the
common XML standard used between corporates and
banks. The CGI group’s mission is achieved through
consultation, collaboration and agreement on common
implementation templates for relevant ISO 20022 XML
financial messages that are published and promoted in
order to attain widespread recognition and adoption.
Under CGI guidelines, ERP vendors can develop tools
that ensure end-corporate implementations with ISO
20022 XML easier. There are now around 60 contributing
members in the group and the documentation is widely
used in ISO 20022 XML Payments Domain integration
work among the market players. The CGI group just
released its new home site under the SWIFT corporates
internet page area with this web link www.swift.com/cgi.
Setting a proper and solid ISO 20022 XML standard usage
guideline is finally a benefit for all market stakeholders.
ISO 20022 XML has already started to spread to the
development of other local clearing mechanisms in
several countries. As corporate end users expect
reliable and common use from their partner banks,
infrastructure changes are required to ensure flawless
information flow from debtor to creditor. ISO 20022
XML is a much bigger entity than just SEPA. That is why
I have jokingly said that whatever happens to SEPA or
euro, ISO 20022 XML will prosper in any event.
Harri Rantanen
For the first time in the
history of money transfers,
the whole money transaction
chain and related information
delivery uses the same
standard… This means
– finally – true 100 %
Straight Through
Processing (STP).

Luxembourg was the first country to migrate, beginning in
2006, a few years before SEPA. The background to this
was a desire to move from the local clearing house (ACH)
to the central STEP2 platform provided by EBA Clearing,
so this change was not primarily SEPA driven.
The second country to take the step towards SEPA was
Finland. This migration was very carefully planned and
driven by a national SEPA Forum with representatives
from all important stakeholders. The Finnish banks got
together in a group called SEEBACH to work together on
all the changes that were needed, including,
• Designing two Additional Optional Services (AOS).
AOS 1 specifies Acceptance date and AOS 2 is used
for bundling several invoices and credit notes into
one payment.
• Selecting the STEP 2 platform for SEPA processing.
• Informing all customers, in particular corporates and
public entities, that the migration to SEPA would also
require a move to the ISO 20022 XML standard and
to IBAN.
A number of other countries, including Belgium, Spain,
Cyprus and France have also made good migration
progress. The big picture is that around 25 % of credit
transfers and 0.01 % of direct debits have been migrated.
So a lot of work remains ahead, as a few countries have
barely begun migration.
SEPA regulation now makes it mandatory for everybody,
with a few exceptions, to move to SEPA by 1st February
2014. Some important lessons can be learnt from early
adopters and lessons can be learnt to avoid pitfalls.
The key points are:
Information about the migration must be communicated
early to all stakeholders. The move to SEPA will often
mean that corporates and public entities must imple-
ment IT changes and the lead-time is often long.
So an early alert is essential.
Corporate customers and public authorities will be
affected since all their domestic payments and direct
debits will have to change and can only be processed
in accordance with the rules of the SEPA regulation.
This will have a significant impact since the domestic
volumes, often making up 99 % of all payments and
direct debits, must move to the new SEPA standard.
Does the new system have the capacity to handle the
new volume? It is also important to ensure that the
system has the same very high level of straight
through processing to avoid manual intervention.
Market will benefit from
the experiences of the
early adopters
SEPA started in 2008 with the introduction of the credit transfer followed two years
later by the launch of the direct debit. But only in a very few cases did countries
take an early decision to move to SEPA.
Over the coming months, member states will review their migration
plans and take all the provisions in the regulation into account. In
particular, decisions must be taken in relation to national payment
products with special features.

ISO 20022 XML should be used for all payment transac-
tions covered by the Regulation. This requirement is
mandatory in the interbank space.The banks also have
to ensure that customers use the ISO 20022 XML format.
For customers that do not process in this format, it will
be necessary to utilise some sort of conversion service
in order to deliver Regulation-compliant files.
Payments that are processed through Large Value Payment
Systems, like Target2 and EURO1 are not covered by the
Regulation. This means that these payments will be
processed using the legacy format and they will not be
covered by the requirement for ISO 20022 XML.
The Regulation introduces an end-date of 1 February 2014.
This date marks the end for all domestic euro payments
processing in the eurozone and only Regulation- compliant
credit transfers and direct debits will be processed after
this date.
Over the coming months,Member states will review their
migration plans and take all the provisions in the Regulation
into account. In particular, decisions must be taken in
relation to national payment products with special
features, called niche products in the Regulation. Most
of these will probably be phased out before 1 February
2016. In some cases they will be replaced by regulation
compliant payment types supported by an AOS.
There are a number of exceptions in the Regulation which
allow Member states to delay a number of the provisions
until 1 February 2016. These relate to the obligation to use
ISO 2002 XML for corporates and to countries that have
yet not adopted the euro. Member states must notify the
Commission by early 2013 of any exception that they
would like to exercise.
It will take some time before full clarity is reached on all
these complex questions. The banking industry will need
to follow these developments closely.
Björn Flismark

The Volvo Car Group is ready to meet
the initial requirements for SEPA
thanks to a cash management project
which began in mid 2011.Working in
conjunction with SEB, this project
involves currency cash pools in
Sweden in addition to an automatic
cash concentration solution with daily
sweep arrangements in markets
across Euroland, Sweden, the United
Kingdom, Norway, Denmark, Hungary,
the Czech Republic and Switzerland.
To ensure a true Europe-wide solution,
Volvo Car Group also engaged ING to
work in partnership with SEB.
The cash management project was
an enabler to implement SEPA, and a
subproject was established with Volvo
Car Group’s Treasury as sponsor.
Volvo Car Group initially concentrated
its efforts on the two markets where it
had the largest operations – Sweden
and Belgium. Both of these major
manufacturing plants generate large
amounts of invoicing for supplier
payments and it was decided to
implement SEPA compliant payment
data (ISO 20022 XML standard) in
these two countries first.These two
plants account for the major share of
Volvo Car Group’s outgoing payments.
Volvo Car Group managed the
migration through a dedicated project
team – though it should be stressed
that this team took on responsibility
for SEPA in addition to their normal
day-to-day activities. The SEPA
Project ownership was shared
between a project leader from
accounting and one from IT – the two
areas of the business most significantly
impacted by the migration.
In terms of benefits from the changes,
the company is pragmatic.The changes
were made first and foremost because
there was a requirement to do so.
One immediate benefit, therefore, is
that the legal requirement has been
met. But there have been others.
SEPA has increased security and
minimised operational risk using a
much more secure communication in
replacing old banking technology
and also reducing the number of
bank interfaces. Another major plus
has been the harmonisation of bank
payments and the reconciliation of
accounts and incoming and outgoing
payments. Whereas this previously
required Volvo Car Group to move
cash to different banks to effect
payments, the new process is much
smoother, giving greater efficiency of
supplier payments. The company
also reveals that information is much
more available and accessible than
previously, giving a more effective
basis upon which to act. Information
is now sent directly to the ERP
system – a huge step forward from
previously where payment details
had to be scanned and forwarded on.
For Volvo Car Group, SEB has been
a reliable working partner. As well as
exceptional project management,
SEB has been able to deliver market
knowledge and technical expertise.
Naturally, as with any project this
size, there have been challenges to
overcome and lessons to be learnt,
but when these have arisen, there
has been a clear willingness on both
sides to correct these as soon as
possible.
Founded in Sweden in 1927 and acquired by Zhejiang Geely Holding Group
in 2010,the Volvo Car Group is one of the world’s most respected and trusted
car brands. In 2011, some 2,283 Volvo dealers sold 449,255 cars in more
than 100 countries around the world.Volvo designs and manufactures cars
in Gothenburg, Sweden, and also has a plant in Ghent, Belgium. It currently
employs around 21,500 people. This article explores how this major global
player is gearing up for SEPA.
SEPA CASE STUDY

SEPA has increased
security and minimised
operational risk
using a much more secure
communication in
replacing old banking
technology and also
reducing the number of
bank interfaces.

Since Estonia became the 17th member of the eurozone
on 1 January 2011,attention has turned to the neighbouring
Baltic states of Latvia and Lithuania. Latvia is next in line
to join the eurozone in 2014 along with Lithuania, though
the latter still has to overcome some political challenges
to make this date a reality. If all three Baltic countries
do become members of the eurozone, it will create a
number of significant opportunities, especially as, with
harmonisation, all three countries could be treated as
one homogenous entity with customers not facing
significant differences between the three.
Estonia is a forerunner and is the gateway to the Baltics.
The country is well on course for SEPA compliance. Existing
domestic payment products are highly efficient with same
day settlement and 10 clearing cycles each day. In terms of
implementing standards within the other Baltic countries,
SEB believes that both Latvia and Lithuania can learn from
its neighbour, making eventual transition smoother.
Baltics face up to challenges
and opportunities
SEPA has wide ranging implications for countries both within and outside the
eurozone. Here we look at some of the challenges and opportunities of migrating
to SEPA facing the Baltic countries.

If all three Baltic countries do become members of the eurozone, it
will create a number of significant opportunities, as,with harmonisation,
all three could be treated as one homogenous entity.
Adoption of these standards has already brought tangible
benefits to Estonia, with a 30 % increase in its Nordic
customer base. It is hoped that this can be extended to
Lithuania and Latvia by adopting the same standards.
Additional and harmonised clearing cycles for fast and
well functioning euro credit transfers is one suggested
requirement. The SEPA Direct Debit (SDD) remains of great
interest and Estonia is fully focused on enhancing existing
products and further improving service levels in this area.
The SEB approach to SEPA has been underpinned through-
out by co-operation and shared using experiences. In the
Baltics, this will mean using experiences from Estonia but
also taking best practice from Finland and other countries.
As the second largest bank in Estonia and the market
leader in Latvia and Lithuania, SEB believes it is in a prime
position to push SEPA forward, but acknowledges a
responsibility to lead the market in implementation,
providing customers with service excellence wherever
their businesses are based. The vision is to centralise all
activities within the Baltics.
Jaana Otsasoo

Large and mid corporates have only partly discovered the
major advantages a Single European Payment Area offers:
They quickly adjusted their systems in order to enable
them to send euros as SEPA payments to other European
countries. But the majority of domestic payments are still
being transferred using the German payment platform.
The domestic mass-billers, such as the statutory health
insurance companies and other public bodies, still
struggle with the new system. Many of the tasks arising
from switching to SEPA standards, such as investigating
their software programs for compatibility, establishing a
mandate system or adjusting their processes call for
internal project groups.
German companies today rely on one of the best payment
systems in the European market, which ensures very low
fees and fast settlement – from as low as one day – for
electronic transactions.
With 17.3 bn payments a year, the German payment market
is huge, representing approximately 20 per cent of the
entire European market. Nearly all of these payments
are electronic, with credit transfers amounting to 33.9 per
cent, direct debits to 50.2 per cent. Therefore, using SEPA
direct debits does not mean venturing into uncharted
territory. In Germany, there are already two kinds of direct
debits, comparable to SEPA core and business to business
direct debits.
Under SEPA, prices will remain more or less the same,
whereas the transaction times for direct debits has initially
increased. This is due to the Sepa Direct Debit (SDD) core
time cycle, according to which the payer’s bank must
receive the request for a first direct debit collection or
one-off direct debit collection at least five business days
before the due date. From November 2012, an option will
be introduced in the SDD Rulebook so that collections
within one day prior to the due date are possible. Handling
of mandates will also be subject to change.
Last year, SEB Germany started its internal adoption
project that will cover all the requirements both of SEPA
rulebooks and Germany’s specific needs. Getting all the
necessary aspects implemented in time will be a challenge
– even more so since future versions (2012 and 2013) of
the rulebook have to be taken into consideration now, so
in many cases, solutions need to be flexible.
Some project tasks, to name just a few:
• Process for direct debits processing under consideration
of cut-off times and settlement cycles
• Implementing black and white list for SEPA direct debits
• Standard order functionality for SEPA products
• Return process
• Training material for SEB employees
• Information material for customers
The results will be implemented step by step up to
February 2014.
Martin Grätz
Germany geared up
for SEPA challenge

With 17.3 bn payments a year, the German payment market is huge, representing
approximately 20 per cent of the entire European market. Nearly all of these
payments are electronic, with credit transfers amounting to 33.9 per cent, direct
debits to 50.2 per cent. Therefore, using SEPA direct debits does not mean
venturing into uncharted territory.

In a short space of time, we have seen the evolution of
changing information between corporates from different
EDI messages to the ISO 20022 XML standard.The final
step was the realisation of SEPA and this evolution
continues. When a corporate is making changes or updates
on their ERP systems, the check is made that the system is
ISO 20022 XML compliant. This is where SEPA imple-
mentation has led; the standard has become an important
feature in financial projects. The standard is also likely to
carry other transaction information in future. And yet, it
remains to be seen when other financial transactions will
really be combined in the ISO standard.
After implementing SEPA in Finland,we have seen discus-
sions on AOS space where there is a need to have more
services that has generally been agreed.These rising needs
of local features might create risks for harmonisation or
standardisation.Furthermore,the local direct debit is
probably staying; it will just be named differently.The
future will tell the kind of implications these will bring.
However, SEPA has already brought many benefits to
the corporate table. We have seen rationalisation of
bank relationships through operating with less banks
and fewer bank accounts. Standardisation and harmoni-
sation has had its impact on ERP system development
and evolution in using bank connections – for example
SWIFT. The ISO 20022 XML standard has even impacted
on the development of the local e-invoicing format based on
XML.The XML standard will definitely open new possibilities
and channels to transfer other payment-related information.
And the banking industry as a channel is a very secure
partner to transfer the data. System integrators have also
seen new opportunities when offering SEPA and ISO
related services to corporates. It has opened up a new
market for innovation within the transaction business,
which has traditionally been quite conservative.
So what is the next step? We will see the trend of
centralisation continuing. This will bring large savings
to corporates. When the benefits of the European level
direct debit are seen, this represents the next jackpot.
In the globalising business the e-invoice will be a
necessity in the near future in order to enhance
business processes. And utilising the ISO 20022 XML
standard for new areas can be calculated as a benefit
from SEPA.
Jari Ek
Centralisation gathers
pace in Finland
SEPA has already brought many benefits to the corporate table.
We have seen rationalisation of bank relationships through
operating with less banks and fewer bank accounts.

How will the current European financial problems affect
the development of SEPA? When do you believe corporate
investment in SEPA implementation is best made without
risk of major surprises or setbacks?
It is true that the present climate is very challenging. SEPA
development is important in development in this context since
huge savings is realised through SEPA efficiencies. Politicians
have ensured that SEPA regulation is in effect from March 2012.
This legislation clearly signals that the move to SEPA continues
and is now mandatory for banks and for their clients making euro
payments.The deadlines for the migration are tight and therefore
postponing planning for the necessary investments is no longer
an option.
Why should my corporate change its EUR payments
to SEPA Credit Transfers now?
From a business perspective you can streamline your processes
for both local and crossborder EUR payments. The price is
generally lower than traditional crossborder EUR.The earlier your
company migrates, the more time your bank will have to support
you in the process. The closer we get to the mandatory SEPA
migration end-date, the higher the migration tempo will be.
What are the main differences between
SEPA Direct Debits CORE and B2B schemes?
The main differences are closer cut off time (D-1) for B2B
transactions,no refund right and the fact that B2B is an optional
scheme so not all banks offer the service.The B2B scheme is aimed
at professional payment users onlywhile the CORE scheme can
also be used for mass collection purposes as it fulfils the regulatory
requirements on consumer protection.
It has been said that SEPA relies on, or even may mandate,
the use of the ISO 20022 XML standard. However, there
does not seem to be a single version of the standard as
different banks provide different documentation. Is there
any organisation responsible for the endorsement of a
version of the standard that can be supported by the
majority of banks and ERP vendors?
The end-date regulation has made ISO 20022 XML standard
mandatory for banks and clearing organisations. This standard
should also be used in the customer to bank space, since banks
must ensure that the standard is used for sending and receiving
transactions via bulked files. There is no single organisation
responsible for creating a standard. But the end-date regulation
also makes interoperability mandatory,which will mean that all
parties must make sure that files can be exchanged smoothly
without the need to change anything. SEB and other banks are
working in co-operation with corporate users and ERP vendors
within the Common Global Implementation (CGI) group in order
to establish and publish commonly agreed guidelines for ISO
20022 XML usage.
Do we as a corporate have to change our file
formats to XML?
The regulation says that ISO 20022 XML is the format to use for
payments via bulked files.Many banks and other service providers
are, however, expected to try to offer some conversion services
of formats where the old format is able to be converted to XML
and SEPA payments with good quality.
How will SEPA affect my payments in other
currencies than the euro?
The scope for SEPA is limited to euro payments (including
payments from accounts in other currencies exchanged to euro)
within EU, Norway, Iceland, Liechtenstein, Switzerland and
Monaco. This means that domestic payments and cross-border
payments in non-euro currencies within SEPA and all payments
outside SEPA will still be processed according to current routines.
However, in the longer term, SEPA standards will be adopted by
individual banks and even national communities for purposes
beyond SEPA. This will give opportunities to leverage even more
on these standards by cost efficient payment processing and
improved cash management offerings.
The hot topics
– questions and answers

Is it true that only IBAN, and not the BIC,will be needed
in SEPA CT and DD initiations?
Yes, from 1st of February 2014 it will only be necessary to supply the
IBAN and not the BIC in the payment instruction for national SEPA
payments according to the SEPA end-date legislation. From 1st
February 2016 this rule applies also to cross border SEPA payments.
Please follow your bank’s instructions of the changes in procedure
in the channel you are using.
What is an international creditor’s reference?
An international creditor’s reference is an enhanced version of the
common national creditors’ references. It enables end-to-end STP
and automated reconciliation of receivables and expands the
benefits of the standardised creditor reference currently used in
domestic to cross-border invoicing.
• The Creditor (Beneficiary of the payment) sends a creditor
reference on an invoice or on a form for credit transfer to the
Debtor (Originator of the payment)
• The creditor reference is delivered without alteration from the
Originator to the Beneficiary in a credit transfer transaction.
• For identification “RF” is attached as the first two characters of
the Creditor Reference.The RF is followed by 2 check digits and
thereafter by a maximum of 21 characters (total of 25 characters).
• The check digit algorithm is the same which is used in IBAN
formatted account numbers.
• Example: RF98 1234 5678 9012
• The standard is ISO11649 certified.
Will the RF international reference replace the
current domestic references?
The RF international reference delivery from one bank to another is
structurally supported in SEPA Rulebooks.This is only the first step.
The real penetration speed is dependant on financial software
application market adaptation.Invoicing (and Accounts Receivables)
systems should be able to add it to the invoices and all possible
payment system interfaces in ERP-systems and banks should be able to
provide a user interface (or file) field to enter it within the outgoing
payment.There is no and (most probably) will not be a strict “end-date”
for local, existing creditors’ references. As corporate end-customers
have welcomed this development,it will very likely succeed.The new
RF international reference cannot be reported structurally in the local,
existing reporting formats but in the upcoming ISO 20022 XML
standard reporting,both the new and old reference can be delivered
structurally and can also be separated in a structured way for possible
further differentiation processing of reconciliation.
What should a corporate do next to start up its SEPA
preparations?
1. Contact your ERP-system vendor(s) to ensure your
payment / receivable process readiness to SEPA
2. Contact your multibank system supplier to schedule your migration
in co-ordination with your bank(s)
3. If applicable, consider how the migration could serve your group as
a whole, not just locally.
4. Add IBAN BIC to your own invoices
5. Start collecting IBAN BIC information from your customers
6. Plan migration with your ERP vendor and update IBANs and BICs
into your Accounts Payable or other payment processing system
7. Plan migration with your HR system (salaries) vendor and update
IBANs and BICs into the salary processing system
8. Analyse your in-house payment and receivable flows
a. Plan migration for your express and international payments
b. Usage of ISO 20022 XML standard for all above mentioned
payment types
c. Possibility of using on behalf payments and receivables
(Ultimate Debtor / Ultimate Creditor)
9. Additional preparations for the future
a. SEPA Direct Debit as an international receivable optimiser
b. Optimising EUR-cash positioning and bank account structure
c. Use of references, for example creditor’s reference (ISO 11649)

Henrik Bergman
Senior Manager Market Infrastructure, Global Transaction Services Product
Management. Works with payment services, market and regulation issues. Wide
experience in SEPA and PSD, working with these initiatives on a European and
domestic level since inception. Currently a member of the European Payments
Council SPS WG and several payment committees and working groups in the
Swedish Bankers’ Association and EBA, and previously also in the EBF, ECBS and ISO.
Daniel Lexander
Global Product Manager SEPA Payment. Joined SEB 2011. 15 years of payment
experience from corporate treasury, consultancy and in previous position as
head of business development for the automated clearing house in Sweden.
Kerstin Abé
Product Manager of Cash Management Products in GTS Product Management in
Germany with responsibility for ensuring the high quality of SEB Germany’s
professional SEPA offering. Expert payment and liquidity background based
on almost 20 years of product experience.
Björn Flismark
Senior Vice President, Global Transaction Services Product Management. Member
of the European Payments Council Plenary 2002 – 2010. Deputy Chairman of
Euro Banking Association, EBA. Chairman of EBA’s SEPA and PSD Compliance
Working Group. The group published several handbooks, ’A Guide to the SEPA
Migration end-date Regulation‘, ’Banks preparing for SEPA‘ and ’Banks preparing
for PSD’.
Pasi Maahi
Product Manager, GTS Product Management Finland. Member of SEPA related
projects and working groups at Finnish Federation for Financial Services, including
Payment Service Working Committee and SEPA Migration.
Meet SEB’s SEPA experts

Jonas Palm
Global product manager for Direct Debit solutions (including SEPA Direct Debits)
within SEB’s Merchant Banking division.
Jaana Otsasoo
Business Development Manager, SEB Estonia. Has headed several development
projects related to payments and Cash Management, SEPA and the Payment Services
Directive since 2004 as well as the EURO Payment Sub-Project (migration to euro).
Has represented Estonia from 2004 until the end of 2011 in the STEP2 XCT User
Advisory Group. Represents Estonia at EBA SEPA working group. Part of Estonia
Business Development Working Group and represents SEB in the Estonian Banking
Association’s SEPA working Group and Estonian Payment Council. More than 19
years banking experience.
Harri Rantanen
Global Manager of Formats Standards, Head of Global Transaction Services
Product Management in Finland, Co-convenor of the ISO 20022 XML Common
Global Implementation guideline group and represents Finland in the ISO Techni-
cal Committee 68 for Financial Services.
Johan Waldemarsson
Senior Advisor in the Cash Management area with over 25 years experience in
international cash management and IT development. Expert on electronic banking,
EDI, security, liquidity management and payment systems.

SEMB00942012.09 BlomquistCo
Would you like to know
more about SEPA?
Get in touch with your local SEB representative
or send an e-mail to sepa@seb.se
seb.se/sepa

SEPA Handbook 2012 | Corporates must prepare for SEPA deadline

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