The experience of Italian energy giant Enel provides a strong example of the SEPA-compliance process for companies needing to meet the new standard by October 2016, says Fernando Santini, vice-president of cash management sales at UniCredit in Italy.

Corporates in non-euro EU countries have until October 2016 to become compliant with the European Commission’s Single Euro Payments Area (SEPA) initiative. The aim is to simplify payments processes across Europe through open standards and common rules, although the reality has been complex migrations for the companies that have already undertaken the transition (in line with the August 2014 deadline for euro-area corporates).

Companies still working in the old format therefore have the opportunity to forearm themselves against the problems of this transition by learning from the experience of their peers – especially those in the energy sector with high levels of cross-border payments. Enel’s case in particular provides a strong example for two key reasons. First, as the second-largest utility in Europe by market capitalization, it processes around 20 million payments every month. The scale of its payments operations will therefore give a magnified view of the effect SEPA migration can have on an energy company.

And second, as part of its SEPA transition, Enel chose to undergo a complete overhaul of its payments systems to ensure that all SEPA functions were fully integrated. For any company of this size – carrying out such fundamental work on its core systems – the issues are likely to be numerous and complex, and in some cases unexpected. This makes Enel a strong case study. As the bank in charge of overseeing Enel’s transition, we at UniCredit were able to take part in one of the major SEPA undertakings, and see how it affected the company.

Unexpected difficulties
Yet it wasn’t the transition itself that caused Enel problems – this was implemented without serious issue. It was only once the system went live in February that Enel began to experience a number of unexpected glitches. One concern was that in some cases banks were not receiving the reconciliation files for transactions – a fact which came about because parties had interpreted the new rules differently. Another difficulty stemmed from the size of the new SEPA files, which are 10-times larger than direct-debit file types. This caused an overload in the corporate banking network – meaning banks received files only after a delay.

Problems were also caused by parties who had not fully integrated SEPA into their system. Their use of the old direct-debit data format caused difficulties with transactions and meant that both sides had trouble understanding the problem with their payments. As Giovanni Vattani, head of payment systems at Enel, explains, “other banks hadn’t fully tested the new SEPA functions. Even we had trouble finding the capacity to test them, because we had to work around the large number of transactions we process every day”.

These issues were in some cases severe enough to affect Enel’s clients – making it vital that the problems were managed both quickly and effectively.

The importance of partnership
Fortunately – though the scale and complexity of its operations meant that the smallest of hitches would lead to backlogs – Enel was able to negotiate these issues and mitigate the effects on its clients. The key to this was working in partnership with its bank.

The partnership could be seen in action when Enel found that it was not able to integrate the new SEPA Direct Debit information into its sequence flows. After consultation with UniCredit, Enel adopted a new process that allowed them to input the new data without any difficulties.

Indeed, UniCredit worked directly with several Enel departments – including product development, communication and finance. Each had their own specific problems, requiring individual solutions. This consultation was supplemented by round-the-clock assistance for all relevant departments. Meanwhile, the two companies kept an eye on the bigger picture by holding formal meetings once a month.

Perhaps most important, however, as Vattani explains, was the fact that 'UniCredit didn’t just solve the problems – they also showed us how to solve them ourselves. If these issues – or any similar ones – resurface, we are now prepared to deal with them'.

Collaboration, then, is crucial: SEPA migration throws up complex issues that fall outside the area of expertise of even major energy companies such as Enel – making the expert advice of a trusted banking partner essential.

The fruits of European integration
Of course, SEPA implementation brings with it a strong upside. Once the obstacles are out of the way, companies can take advantage of the many benefits it has to offer. Foremost among these is the fact that, under SEPA regulations, international payments made within the EU are counted as domestic transactions. Any energy company operating in multiple EU countries will see the advantage of this immediately – with every payment incurring less administration and lower transaction costs than before.

What’s more, full compliance – as undertaken by Enel – enables firms to manage their bank accounts more efficiently. For example, companies are looking into the idea of 'virtual accounts', which will enable them to consolidate their funds into a single 'physical' account that can then be divided into numerous 'virtual' accounts – making transfers between company accounts simpler than ever.

So despite the inevitable issues that will be encountered, SEPA offers clear rewards for energy companies – with greater European integration leading to more-efficient payments and easier dealings in other European countries. This reduces administrative costs, improves cash flow and facilitates free movement into new markets.



 

Fernando Santini is vice-president of cash management sales at UniCredit in Italy.