A continent-spanning payments network is making headway in Europe amid growing concern by bankers and their corporate clients about whether anyone will be prepared to use the system next year when it is expected to be ready.
The global financial cooperative Swift
Swift said 20 banks with large cross-border operations in Europe have begun Sepa testing, including units of Bank of America Corp., Citigroup Inc., and JPMorgan Chase & Co.
Swift, formally the Society for Worldwide Interbank Financial Telecommunication, announced this month that six European automated clearing houses had signed on to the testing program and would process Sepa-compliant payments beginning Jan. 1. Swift said the six ACH operators process most of Europes retail payments and that more than 130 financial institutions have registered to participate in the testing.
But even if the messaging infrastructure is ready, observers question whether corporations and banks will have their internal processes up to speed and whether the legal framework will be ready.
G.M. Stetter, a group senior vice president in the global treasury advisory unit at ABN Amro Inc. in Chicago, said many companies do not understand what they need to do to get ready.
Some of them have had some experiences that have given them a wake-up call, he said, but many have not made Sepa compliance a priority. They hear about delays, they hear about 2009 or 2010, and they say Ive got other things I need to focus on.
David C. Robertson, a partner in the Chicago consulting firm Treasury Strategies Inc., said banks and companies will only gradually begin to use Sepa payments, which would let a company, for instance, make direct deposits to employees in numerous countries from a single payroll account, without needing accounts in each country.
The opportunities for corporates, and for banks, to gain efficiencies are greater than ever, but the magnitude of change is so great that it can be very daunting, he said.
Treasury Strategies has been consulting with a multinational corporation that will not be able to meet the target, he said. He would not name the company, but said it has operations in several European countries and the problem is its own accounting systems complexity. Their systems are so messed up and hard to work with, he said, that if Sepa hits its deadlines, they are going to devolve back to paper drafts.
Banks face similar difficulties, Mr. Robertson said, incorporating Sepa into deposit-account systems or wire transfer systems. Anything that touches their DDA system is an 18-month project, he said, or anything that touches the wire system.
Mr. Stetter said the adoption of Sepa also is likely to be hampered by an unprepared legal framework and by infrastructure projects that are growing increasingly complex.
European Union finance ministers voted in March to approve the payments services directive, but each of the 13 countries in the euro zone must incorporate these provisions into national laws.
When that happens, banks and companies will have to renegotiate preauthorized debit agreements, so that an insurer, for instance, could withdraw monthly premiums from a policyholders bank account.
Meanwhile, he said, banks and corporations are adding technology projects that do not directly bear on Sepa compliance. Its all being thrown into the Sepa bucket, he said.
