The insider

Can we migrate to SEPA?

It is very clear that our industry must migrate to SEPA and therefore it will. It’s probably useful to look at other recent industry initiatives of this magnitude and importance, like BACSTEL IP and new BACS within the UK. It is clear that the industry can mobilise its many players to implement such a high impact initiative.

Clearly the objective of getting critical mass by 2010 represents a major challenge. I think we will see more of an observational period throughout 2008, with the migration starting to gather momentum after that as people get a better understanding of what is required.

The industry has shown that it can achieve these things. Will it achieve these things before 2010? I think it’s unlikely.

The implications of BIC and IBAN

Companies are spending a lot of time on BIC and IBAN at the moment, and it is a major communication exercise from our perspective. We have to cover why it is valuable to them.

There are obviously implications for infrastructure – it’s not only education – we have to get the infrastructure right and the companies have to link it to their back office processes. The utopian situation of things being straight through assumes that people have all of their information systems connected; that these systems can take data, transfer it, manipulate it and move it on to the next stage; and that all parties are delivering data in the right format.

Like many of these things, only when everybody is holding hands together will we get real added value across the PISTE. We can put AGENT 20 on these things quite effectively.

SEPA for corporates

At a macro level, SEPA really helps in terms of geographical reach. At a micro level – very important with today’s focus on managing the P&L on a very focussed, short-term basis – it’s clear that some of the benefits are reduced fees associated with payments and collections, which improves the bottom line, improved daily sales outstanding and customer supply relations. I think it can also help people to cement and facilitate relationships with clients and it facilitates faster payments through that connectivity.

Another area that a lot of people are talking about (certainly we are!), is this capacity for additional payment information assisting automated payment reconciliation. In studies speaking to treasurers, they are very keen to say that a lot of work has been done in terms of reconciliations but they are still spending too much time internally reconciling the invoice and the payment.

There is also greater transparency, which is the trend within the industry generally, and an opportunity to consolidate the number of accounts, which is always a dream of both treasurers and banks.

Is a new legal framework necessary?

To get everybody to move forward it is important that we have something that underpins the investment market. As ever, if it is too detailed and too restrictive the danger is that it will actually frustrate and slow implementation because it will be such a big step for so many people. If it is something like an outlined framework that gets everybody up to a minimum level, which doesn’t mean it will be as good as a particular payment in a particular country today, maybe a local ACH is more efficient and provides more information, it doesn’t matter. The key thing is to get everybody up to a minimum standard. And that does need something like a new legal framework.

What do corporate customers want?

Corporates would like to be bank agnostic. They would like standardised formats, but it is not just the standardisation of interface that is interesting – it’s what information can be passed over that interface and how that information can be integrated with their own underlying systems that is important. The richness of that data is what will determine which provider they go with.

How can banks ensure corporates react to SEPA positively?

It is the age-old thing of talking to your customers: helping them to understand the implications of SEPA as we see it, helping them to understand the opportunities of SEPA, and then working with them and the industry to shape the ultimate outcome in a way that enables all parties to be more efficient.

The more you understand about what corporates are trying to do, the easier it is to understand how that links with what our systems offer today and what they will need to offer going forward and how SEPA itself should be shaped. At the end of the day, everybody wants the ultimate system to be one that enables them to be more successful and the only way that is going to happen is through dialogue and iterations at the right levels with the right industry bodies.

The really encouraging thing is that everybody wants this to succeed. It’s very clear that the EU is trying to do something sensible. If we can make the EU seem like one country and reduce some of the friction associated with handling payments today – and that friction can be in terms of costs of executing or lack of data to facilitate the reconciliation – that’s got to be good for the European economy and the global economy.

The challenge is how we get from where we are today to where we want to be. What things are really important and what things are rather expensive but really add little value?

SEPA: an overview

In terms of the context of the overall evolution of payment systems, we are seeing changes in terms of faster payments in the UK. Faster payments are a good example of a dramatic improvement in payment services, reducing payment cycles from three days to a few seconds.

It’s all about realising the benefits of digitisation and saying that, actually, in many cases, making a payment happen is just moving a few bytes of information around in a very secure manner – with a degree of certainty that when you make that instruction the bank is going to be involved and it has the liquidity and the connections to make it happen.

The SEPA is very much in the overall context of the evolution of payment systems generally. Is it for corporates or consumers? For many organisations such as ourselves, we are heavily involved in retail banking, consumer banking or corporate banking so we look at it from the whole gambit of what it means to those individual groups or segments of customers. It’s not clear to me when SEPA was conceived whether the focus was on corporates or consumers, but I think that ultimately what is good for the corporates – and they tend to drive change – will feed through to the consumer side.

Account portability

The key here is that all economic players have an opportunity to choose and switch to the provider of their choice. I think that’s an important competitive element. In terms of how do you actually provide that opportunity, we should recognise that account number portability is just one option. There are examples in the Netherlands and the UK where account switching services and redirections offer maybe a more efficient means of achieving the same objective. My focus would be less on one particular way of achieving the ability to choose and switch and more focussed on: that’s an important element and we need to be able to respond to that.

As Head of Corporates for HSBC, Richard J Moseley is globally responsible for driving the Payments & Cash Management, Trade Finance and Supply Chain businesses for HSBC Global Transaction Banking (GTB). GTB also includes Investment Funds Administration, Custody and Wholesale Bank Notes.

Prior to April 2005, Richard was Chief Operating Officer for GTB, (from January 2004). Previous roles included General Manager, Corporate and Institutional Banking, HSBC Bank plc; HSBC Country Manager and Chief Executive Officer, HSBC France; and Head of Group Private Banking UK, HSBC Holdings.

Richard graduated from Loughborough University and joined HSBC Group in 1980. He is married to Kathy and they have two children. His sporting interests are golf and tennis.

Richard J Moseley, Head of Corporates, HSBC: “It is very clear that our industry must migrate to SEPA and therefore it will.”