The creation of Single Euro Payments Area is the most important change affecting the financial services market in Europe, after the launch of the single currency. The project extends upon all payment industry players. The purpose of this paper is to highlight the implications of SEPA initiative on European corporate bodies, in terms of challenges, opportunities and benefits, and how the associated advantages can be obtained as a result of a solid collaboration with the partner banks and the effective implementation of the SEPA standards and products. Customers, both consumers and corporations will greatly benefit of the whole range of new opportunities offered, as the project promotes the efficiency, competition and innovation.Single Euro Payments Area; corporate bodies; financial crisis; standardization

Avadanei, Andreea

English

Research Papers in Economics

THE IMPACT OF THE SINGLE EURO PAYMENTS AREA ON 
EUROPEAN CORPORATES 
 
Andreea Avadanei 
Universitatea „ Alexandru Ioan Cuza”, Iaşi 
 
 
Abstract. Introducerea Zonei Unice de Plăţi în Euro este cea mai importantă schimbare care 
influenţează asupra pieţei europene a serviciilor financiare, după lansarea monedei unice. 
Incidenţa proiectului se extinde asupra tuturor jucătorilor industriei de plăţi.Scopul prezentei 
lucrări este de a sublinia impactul pe care acest proiect il exercită asupra corporaţiilor la 
nivel european, în termeni de provocări, oportunităţi şi beneficii,  precum şi modalităţile prin 
care  acestea  pot  fi  obţinute,  ca  urmare  a  colaborării  solide  cu  băncile  partenere  şi  a 
implementării efective a produselor şi standardelor Zonei Unice. Ca şi rezultat al acestei 
initiaţive, clienţii, atât consumatori cât şi corporaţii, vor beneficia în mod considerabil de 
întreaga gamă de noi oportunităţi oferite, în condiţiile în care proiectul promovează eficienţa, 
competiţia şi inovaţia. 
 
Cuvinte-cheie: Zona Unică de Plăţi în Euro, corporaţii, turbulenţe financiare, standardizare. 
 
1. Introduction 
In  its  premises,  Single  Euro  Payments  Area  is  an  initiative  of  the  aiming  at 
harmonizing  the  system  of  cashless  payments  in  the  extended  Euro  zone,  creating  a 
coordinated environment of rules, standards and procedures, working as a single domestic 
payments market in which citizens and economics actors are able to make payments as easily 
and inexpensively as in their home countries.  
The Single Euro Payments Area is a challenging project for the banking industry. 
Over  time  it  will  also  affect  citizens,  corporations  and  public  authorities  in  Europe.  The 
creation of the Euro was a great achievement, but is it enough? SEPA is necessary if we wish 
to have a modern, sophisticated and efficient payment market for the Euro. Without SEPA, it 
will not be possible for the users of payment services to fully reap the benefits of a common 
currency and an integrated internal market. 
The project’s benefits are promoted by its initiators both from the political (European 
Commission) and the banking (European Payments Council) arenas. The corporate market, 
represented  by  the  European  Association  of  Corporate  Treasurers,  too  has  embraced  the 
vision and acknowledged the potential benefits.  
Any major market transformation produces winners and losers. But rather than size, 
the ability to manage the change, reap significant cost savings and reposition the product 
portfolio may appear to  be more important for surviving and  prospering in a  post-SEPA 
market. 
 
2. Chances and challenges for European corporate bodies. 
From a perspective of little more than twelve months since the SEPA launch, it is clear 
that we have not witnessed a blockbuster, at least not so far. At the same time, we should all 
realize the potential benefits that SEPA could bring to business and consumer alike, and to 
paraphrase, this is “only the end of the beginning”. 
In 2009, no country is isolated. Trade and business deals flow across all physical state 
borders, emphasizing the need for widely accessible and secure ways of effecting payments. 
     The article is structured to answer three research questions: A.  What does SEPA really mean for businesses as a corporate and how should they prepare 
for implementing the project? 
B.   What are the SEPA benefits, opportunities and costs for different corporate bodies? 
C.  How is the credit crisis changing the payments landscape for the european corporations? 
What does the market analysis show? 
 
A. The SEPA project had its point of no return for banks in early 2008 with the go-live of 
SEPA Credit Transfers (SCT). 2009 is likely to create more interest for corporate users of 
payment  services  to  change  processes  and  systems.  The  most  important  driver  for  such 
change is the implementation of the Payments Services Directive on 1 November 2009, which 
includes measures that are beneficial for corporate bodies and oblige banks to offer updated 
services for any EU currency in each of the 31 EU Member States affected by the regulation. 
             But what does SEPA really mean for businesses as a corporate? This initiative will be 
a key accelerator in reducing the number of accounts they need to hold through the use of in-
house  banks  and  pan-European  accounts,  as  well  as  ensure  interoperability  through  open 
formats  and  connectivity.  In  particular,  SEPA  offers  multinationals  the  opportunity  to 
centralize payment and collection initiation by establishing shared service centers or payment 
factories, as well as reduce the number of bank relationships as consolidation of the banking 
industry creates truly pan-European banks
1. 
Practically,  how  should  corporations  prepare  for  SEPA?  Every  corporate  should 
undertake some level of impact analysis regarding SEPA-if they not really done so this should 
be a priority in 2009. This is a discussion that they should have with their cash management 
banks. Each corporate body must understand where the potential advantages are in terms of 
migration to SEPA and the immediate advantages that result from the reduced cost of cross-
border transfers. This entails understanding issues such as: 
  The impact of SEPA on internal systems; 
  The profile of their organization’ transactions today, how they are being used and 
what they cost; 
  How  the  new  data  elements  being  introduced  to  account  statements  will  affect 
reconciliation; 
  How will their systems manage the period that requires the dual running of legacy 
information/data  with  new  SEPA  data  including  BIC  and  IBAN  alongside  legacy 
account details? 
Today,  one  of  the  most  important  challenges  is  to  make  the  case  for  SEPA  to  a 
corporate audience that has shown some reluctance towards this initiative. While many of the 
larger multinationals have been able to see the potential benefits from the early stages-cost 
savings through greater operational efficiencies and further centralization potential, to name 
but a few-there are corporate bodies that are yet to be convinced that SEPA will yield any 
tangible benefits for them. A very fragmented development towards the full SEPA vision is 
foreseen. There will definitely not be a „one-size fits all”solution for SEPA adaptation. To 
passively sit and wait for solutions to come is however not an option. It will take time before 
SEPA has replaced current payments practices but future positioning needs to be planned 
now. Such activities, except from seeking advice from their banks, could be: 
  To  take  part  in  discussions  on  how  payment  references  and  invoices  should  be 
standardized on European level; 
  Raising investment budgets for format adaptations; 
  Restructuring of accounts receivables and/or payables to a payment collection factory 
or a shared service centre. 
                                                
1 Gtnews, 2008, Survey Reveals Corporates View SEPA as an Opportunity but Further Clarity is Vital, from 
http://www.gtnews.com/feature/328.cfm Depending  on  various  factors  such  as  customer  segment,  presence  on  different  national 
markets,  desired  pace  of  adapting  to  new  standards  and  overall  cash management  needs, 
corporations’ own SEPA roadmaps should look very different. A deep competence on each 
local market combined with an overall perspective on SEPA and how it from case could best 
be integrated in the cash management solutions is the advice that every corporate body now 
should seek from its bank.  
 
B. Corporate bodies should not underestimate the opportunity that is presented through SEPA. 
Equally,  SEPA  should  not  be  considered  as  a stand-alone  project  impacting  cross-border 
transactions only if it does not represent exclusively a way of reducing cross-border payment 
fees; if analyzed and embraced, SEPA presents an opportunity for significant process, risk 
management and cost- related improvements. 
 
Fig. nr.1-Benefits of SEPA for Corporations 
 
                                            Separate banking relationships per country 
 
                                            Lack of common processes 
Pre SEPA                             
                                            Different payment platforms and clearing house per country 
 
                                            Different remittance data structures per country 
 
 
                                            Fewer banking relationships per country 
 
                                             Harmonized processes 
Post-SEPA                              
                                              Common platform and Automated Clearing Houses 
 
                                              Same remittance data structures 
 
Source: Asymmetric Solutions Limited, from 
http://www.merchantbanking.fortis.com/Documents/SEPA/SEPA_Outside_In.pdf 
 
 
   The most obvious opportunity that SEPA provides to a corporate is the ability to 
centralize and rationalize the accounts payable process. SEPA brings along an instrument, the 
SEPA  Credit  Transfer-SCT,  which can  be  used  both  for  domestic  and  cross-border  Euro 
transfers  within  most  of  Europe.  This  means  that  in  sixteen  Euro-countries  the  different 
national payments types and data formats can be substituted with one single payment type. 
There are, however, still some limitations concerning non-vendor payments
2, e.g. the SCT 
may not fully support tax or salary payments in all countries. There is also a counter-force to 
harmonization as some countries regard the standard SEPA payment as inferior to existing 
payment  types.  For  example  in  Finland,  reconciliation  of  receivables  is  already  highly 
automated, something that standard SEPA payments not have been able to support. 
                                                
2 Macknight, J., 2009, SEPA-Lost in transposition?, from 
http://www.vocalink.com/SiteCollectionDocuments/gtnews_SEPA%20article.pdf 
 Corporate bodies with operations in several countries  are  now  able to  create (and 
receive) a single aggregated file for all payments (domestic and cross-border) and submit 
those to a single institution within standard clearing and settlement timeframes. Entities with 
large volumes of direct debits and credit transfers can now to shop around for banks a clear 
and  settle  at  best  service,  and  lowest costs,  inclusive  of  additional  bank  services,  in any 
country. 
Even for smaller, mainly nationally-oriented companies, SEPA is expected to provide 
benefits as competition in the banking sector increases, leading to a broader range of banks 
and banking services to choose from.  
As we  stand today,  the majority of  the  European corporate bodies understand the 
benefits of SEPA. The question is: if so why aren’t more taking action with their adoption 
plans? A study conducted by Gtnews in 2008, “The Taking Stock of SEPA” clearly showed 
that the main hurdle impeding corporate adoption is the “systems development requirements”-
45% of the respondents agreed on this point.  
 
           Graphic nr.1-The main challenges for corporate bodies to SEPA migration 
Main SEPA Migration Challenges %
45%
30% 29% 27%
22% 19%
14% 11% 8%
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Source: gtnews „Taking Stock of SEPA”, survey 2008, from 
http://www.gtnews.com/feature/328.cfm 
As the graphic reveals, there are a variety of stumbling blocks and each corporate will 
have  a  different  view  on  this  depending  on  their  organizational  structure,  location  and 
business operations. 
Nothing ventured, nothing gained. There is, however, a price to be paid for progress. 
The transition to SEPA necessitates considerable investment and administrative adjustments, 
and will cost a lot of money and effort. Companies and organizations using less efficient 
methods of paying and collecting money may possibly end up paying higher charges than is 
now the case. Here lies an additional difficulty: the extra investments and costs are often more 
visible at individual level, whereas the benefits can be expected to be greater at macro level. 
For this reason, communication is important. Furthermore, the cost-benefit ratio will vary from  one  country  to  another.  In  a  country  where  payment  flows  are  already  relatively 
efficient, this ratio may turn out to be fairly unfavorable, particularly in a short term. 
In  responding  to  the  changes  brought  about  by  SEPA  and  the  Payment  Services 
Directive  in  Europe,  corporate  users  have  a  lot  to  learn  from  similar  payment  services 
initiatives in other countries, such as Australia. 
The need to improve payment service is not unique to Europe
3. In many countries and 
regions, such as Japan, China, in the Middle East and Australia, there are projects under way 
that aim to upgrade payment services to meet modern requirements. In Australia, for example, 
the Australian Payments Clearing Association (APCA) published an Australian roadmap for 
low  value  payments  in  December  2008.  This  roadmap  includes  a  high  level  vision  of 
Australia low value payments leading out to 2018, as well as a short-term industry solution 
path for the next few years to work towards. 
 
C. The pan-European payments landscape is evolving rapidly with the introduction of 
the SEPA project. Couple this with the ongoing impact of the credit crisis, whose effects 
spread  to  the  wider  economy,  corporate  bodies  face  numerous  challenges  and  place  a 
premium on efficient cash and liquidity management, especially where they manage a variety 
of euro denominated accounts in different Member States. 
The present financial turmoil has clearly shown the importance of liquidity and cash 
management and the superiority of retail deposits as a source of bank financing. In addition, 
the focus on driving further working capital efficiencies has never been as important. There 
are plenty of opportunities for improvement, though, and corporate bodies should look to take 
advantage of the tools and techniques that are available today. For corporations, SEPA can 
provide advantages to sell cash and liquidity management services; for consumers, it can help 
attract retail deposits. Moreover, payments are a profitable business in its own right-providing 
a regular, reliable source of income with average annual volume growth of 8-9%
4. 
The way to survive in today’s climate is to be pro-active and more quickly. Due to the 
credit crunch, all corporations need to „go back to basics”
5 in terms of pan-European liquidity 
management. 
The increasing automation of daily treasury operations is enabling corporate treasurers 
to take a more strategic role within the company. The treasury role now encompasses group-
wide  business  solutions;  working  capital,  risk  management,  productivity  management; 
involvement in dispute resolution; a collaborative role with the CFO; and a leading and more 
visible role as a key decision maker in regional and global activities. 
   This  is  particularly  important  against  the  backdrop  of  the  credit  crunch,  as  the 
priorities in terms of liquidity management have changed in the last few months. For example, 
guaranteeing  the  availability  of  funds  and  that  those  funds  are  used  to  their  maximum 
potential have asserted themselves as the priority for all corporate bodies right now. 
The credit crisis has had profound effects on the world of financial services and there 
will be a new financial market model as a result. In this light and despite the crisis, payments 
remain an attractive business and one where a bank will wish to maintain its competitive 
edge. To capitalize on these investments, it is crucial that SEPA migration is kept on time and 
on track-the redundant cots of running duplicate payments systems must be avoided. 
 
             
                                                
3 Buschman, T., 2009, 2009: A Good Year for Corporate Users of Payment Services, from 
http://www.gtnews.com/article/7520.cfm 
4 Lund, B., 2009, The Status of  SEPA in 2009, from 
http://www.ebaportal.eu/Content.aspx?PageGuid=4aa4bb85-c195-4bb1-bfc3-492047a25060 
5 Brissaud, O., 2008, Credit Crunch-Impact on corporates, from http://www.gtnews.com/article/7251.cfm Conclusion 
SEPA will bring a wide range of well documented advantages for a large group of 
corporate  bodies  in  the  Euro  zone.  In  addition,  however,  there  are  over  eight  million 
companies  operating  in  the  accession  countries,  an  increasing  proportion  of  which  are 
engaging in exports and imports to and from the Euro zone. These companies, often with 
substantial  euro-based  activity,  both  payables  and  receivables,  will  sees  substantial  cost 
reductions  post-SEPA  making  it  easier  to  do  business  competitively  compared  with 
companies  in  the  Euro  zone.  These  benefits  will  be  accentuated  even  further  once  euro 
conversion takes place. 
Once corporate bodies take full advantage of the opportunities SEPA creates, such as 
reduced costs through efficiency savings and reduction of their bank accounts, they will be 
able  to  benefit  from  a  more  standardized  approach  to  Europe’  s  payment  systems  and 
potentially grow their international customer base. This will truly be arrival of SEPA. 
 In summary, developments within SEPA are quite mixed and complex but there is a 
very strong momentum for change. It is a fact that SEPA, and change in general, provides 
opportunities for organizations with a pro-active and dynamic mindset, while it represents a 
threat to others. This is therefore a good time for corporate bodies to challenge the abilities of 
their banks while remembering that opportunities are rather seized than served.   
                             
References 
1.  Brissaud,Oliver (2008), Credit Crunch-Impact on corporates, from 
http://www.gtnews.com/article/7251.cfm 
2.  Buschman, Tom (2009), 2009: A Good Year for Corporate Users of Payment 
Services, from http://www.gtnews.com/article/7520.cfm 
3.  Gtnews, 2008, Survey Reveals Corporates View SEPA as an Opportunity but Further 
Clarity is Vital, from http://www.gtnews.com/feature/328.cfm 
4.  Lund, Berit (2009), The Status of  SEPA in 2009, from 
http://www.ebaportal.eu/Content.aspx?PageGuid=4aa4bb85-c195-4bb1-bfc3-
492047a25060 
5.  Macknight, Joi (2009), SEPA-Lost in transposition?, from 
http://www.vocalink.com/SiteCollectionDocuments/gtnews_SEPA%20article.pdf 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The impact of the Single Euro Payments Area on European corporates

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