The Significance of SEPA - Mark Hale, Barclays

The Single Euro Payments Area (SEPA) will dramatically change the way payments are handled in Europe. While some finance directors are aware of this, others seem to feel it is a less pressing issue. Just how high on their agenda should SEPA be?

Among the many political, regulatory and commercial changes that are destined to shape Europe's financial and business landscape, the creation of a Single Euro Payments Area could be among the most significant. However, attitudes among CFOs seem to differ widely.

New legislation is designed to create an integrated market for Euro-denominated payment services by removing the distinction between cross-border and national payments within the Euro area. Some, including the European Central Bank, see SEPA's introduction as the moment the integration of the single European currency will be complete.

"SEPA is a political vision, and a positive one. It is a logical next step after the introduction of the Euro and is a big step towards a single market," believes Mark Hale, Director of Payments and Settlements for Barclays Bank.

SINGLE EUROPEAN MARKET

SEPA brings 29 countries - the European Union, the European Economic Area and Switzerland - into a single market of 470 million people and 25 million corporates. All of whom can easily and cheaply make simple credit transfers to each other and can use direct debits just as conveniently. For corporates, this is a huge opportunity.

However, capitalising on this opportunity requires a close examination of its potential implications and careful analysis to define which approach suits a business best.

"CFOs have different visions for their organisations and different operational footprints. This, combined with their current business strategy, will affect how they approach SEPA. Companies in the UK may even have an advantage as without the need to worry about how to manage payments in both the new and old payment schemes during the migration phase of SEPA, they can focus solely on new market and operational opportunities," says Hale.

"It is not a zero sum game. As markets open to new entrants, who can compete with scale from the outset, and without the need for local collection and disbursement capabilities, competition will intensify. There is significant value at stake throughout the payments supply chain too and everyone will want to cut cost out of their infrastructure. Value will go to some firms and be drawn away from others. There will be winners and losers," notes Hale.

LOOKING BEYOND COMPLIANCE

Compliance with SEPA is obviously an important issue, as it is with any regulatory development. For Hale, SEPA is first and foremost a business issue, where the distinction between the winners and losers will depend on how far CFOs can look beyond compliance and visualise the opportunities SEPA will provide to spur their business on.

SEPA gives companies extended reach into Europe, with greater confidence in payments that are settled faster, with greater certainty and with less cost.

Some CFOs classify SEPA as merely a compliance issue. Others, however, say that it will be the moment that Europe truly becomes a single market. While Hale does not go this far, he does agree that SEPA should be high on the agenda.

"CFOs need to deliver top rate company performance in terms of revenue growth, cost reduction, capital utilisation and cash management. This says to me that a considered response to SEPA by them is vital. However, this is especially true of the CFO who is also responsible for strategy or technology. CFOs, being briefed by consultants and major software vendors who are recommending or rolling out SEPA-compliant software, will understand this. It is an important agenda item for them, and depending on their business and operating model, SEPA could even be a core activity," he stresses.

PREPARING FOR SEPA

The pressure is on to act quickly. Deadlines for the initial offering of the new payment instruments and implementation of the legislation are looming, though there is much work to do before January 2008 in order to be ready.

In the meantime, CFOs may also have to address major changes to their companies' technology infrastructure.

"The technological changes depend on where you are starting from. If you have a standardised and centralised ERP platform, from someone like SAP or Oracle for instance, SEPA will be part of the evolution of your existing environment, so, only the usual acceptance and regression testing will be required," remarks Hale.

"If you have deferred IT investments in the past, are working on old infrastructure, have a distributed infrastructure, or have either inefficient or fragmented cash management solutions then the changes will be more profound," he adds.

The banking industry is in the vanguard of the migration towards SEPA, and Hale believes that the significant changes that will be brought about will mean corporates must focus on those banks best placed and best able to help them negotiate the challenges, opportunities and pitfalls ahead.

About the Author

Mark Hale joined Barclays Treasury department in 1995. He became director of payments and settlements in 2004.

Prior to joining Barclays, Mark Hale was with Pricewaterhouse, where he planned and managed financial and advisory audits for a many organisations and led large-scale implementation consultancy assignments. He also specialised in information systems risk management.

Mark represents the bank on a number of industry bodies and working groups, and chairs the European Payments Council Credit Transfer Scheme working group as well as the UK industry European Payments Council working group within APACS. He also represents the bank on the plenary of the European Payments Council, the UK industry in the EPC Co-ordination Committee, and he is board director of Voca Ltd and CHAPS Co Ltd.

Currently Mark's responsibilities include defining and implementing the bank's strategic business response to SEPA (he is Barclays SEPA programme director), driving the Enterprise payments strategy, coordinating responses to legal and regulatory developments, and managing material enterprise payments and settlements issues.

Mark attended Queens University Belfast, where he gained a Bsc Hons (Computer Science major, Economics minor) before subsequently becoming a chartered accountant at Pricewaterhouse.

Mark is married with one daughter and his interests include golf, at which he competes to district level.