The European payments landscape has changed considerably in the last decade.
Regulation has enabled many companies to collapse individual country structures and transact their pan European banking operations in an increasingly efficient and cost effective manner.
The Single Euro Payments Area (SEPA) comprises the 27 EU member states, as well as Iceland, Liechtenstein, Norway and Switzerland. Three key factors in the last decade have opened up the SEPA zone enabling companies to consolidate their payment related activities with fewer banks, bank accounts and associated bank systems.
- The implementation of the BIC and IBAN
- The availability of low cost SEPA Payments
- The SEPA Direct Debit scheme
The implementation of the BIC and IBAN in January 2002 improved the efficiency of pan European payments by putting in place a common European standard. The BIC and IBAN have been mandatory on SEPA zone payments since 1st January 2007 and have enhanced significantly the accuracy of pan European payables.
EU Regulation 924 / 2009 sought to standardize the difference in charges for cross border and national payments within the SEPA zone. This provides a cost effective option for companies engaged in pan European payment traffic ensuring that the equivalent of a local charge is applied on low value pan European payments within the SEPA zone.
The SEPA Direct Debit scheme which formally began in November 2009 is another significant development enabling a corporate to collect euros from accounts across Europe.This provides an opportunity for a pan European business to streamline and simplify collection activities into a single physical location. This offers the Direct Debit Originator an opportunity to expand their business opportunities beyond local markets and coordinate collection of funds within an established pan European framework.
Prior to the implementation of the above regulation a US multinational operating across Europe typically maintained a series of potentially costly country specific banking relationships reflective of business transacted in Germany, France, Ireland, Belgium etc.
In 2011 a pan European business can manage its receivables and payables across Europe efficiently and cost effectively maximizing accounts within a single SEPA zone country.
The changed regulatory landscape has itself presented a number of wider benefits to corporates including a greater choice of service and competition from banking providers. By enabling a company to manage pan European flows from a single location utilising one provider it is worth noting that a corporate can glean additional benefits including:
- Consolidation of banking operations – with fewer banks, bank accounts and banking systems.
- Improved security through a single banking provider offering increased control compared to multiple providers, bank accounts etc.
- Improved control and visibility of cash flow.
- Reduced costs as considerable time is saved in reconciling payments and receivables back to core systems.
The tangible benefits referred to above are reflected in the increasing number of multinational EMEA centerss located in Ireland utilizing a single Irish provider for their pan European banking activities.
By Paul Hogan
Relationship Manager,Corporate Cash Management, AIB Global Treasury Services
Case Study:
Paul refers to a recent discussions with a large US travel company who historically utilized individual country files to effect payments in a number of different European countries.
In the past this company incurred a variety of costs associated with processing payments in different jurisdictions. This resulted in additional administrative input required in the funding of a number of accounts and in the reconciliation of country specific payment files.
In 2011 the business can generate a single SEPA zone file from its Irish SAP platform to effect vendor payments around Europe, enabling efficient payment and the smooth reconciliation of a single payments file.
