JP Morgan's Treasury Services division says it is already helping its clients to enhance European receivables management with its new SEPA Direct Debit (SDD) services, launched today to coincide with the inaugural day of the latest Single Euro Payments Area (SEPA) scheme. Financial institution and corporate clients of JP Morgan will be able to participate in both the Core business-to-consumer (B2C) and business-to-business (B2B) schemes. Other banks too, such as Citi and Deutsche Bank are, of course, also marking this important occasion in the harmonisation of European payments by unveiling their new payments offerings in this space

SEPA Direct Debit (SDD) is the world's first pan-regional cross-border direct debit instrument and provides clients with a simple, standardised and cost-efficient way to collect high volume payments in Europe. It follows on from the SEPA Credit Transfer (SCT) instrument which was launched on 28 January 2008 but still only accounts for 4.4 per cent of these payments by volume. It is hoped and expected that SDD will attract far greater volumes and economies-of-scale savings now that it is launched, kick-starting the SEPA project, although some teething problems can be expected as the Payments Services Directive (PSD), which provides the legal framework country-by-country only came into force on 1 November. Some countries are facing delays and arguments are still being expounded about setting a final end date by which time all payments will have to use the standardised SEPA instruments - France, for example, announced a year-long SDD delay some time ago, highlighting the inconsistencies of implementation across the continent.

Regardless of the natural worries about any new launch though, the SDD payments instrument itself has long been technically ready to go - the banks, companies, consumers, account clearing houses and continent-wide payments processors, such as VocaLink, STET, EBA Clearing and others now have to make it work. The revolution starts here and the long-awaited consolidation, white labelling and other changes in the European payments space - already evident in the creation of Equens and numerous reachability and interoperable deals - can be expected to accelerate from now on.

"From today, banks across SEPA countries start to roll out SDD services to customers. By 1 November 2010 there will be full reach for the SEPA Core Direct Debit in the euro area, as mandated by EU Regulation," says Gerard Hartsink, chair of the European Payments Council (EPC) trade body, which represents the banking industry. "This launch presents European businesses with a prime opportunity to benefit from harmonised standards and streamlined processes when making and receiving payments across 32 countries - consisting of the 27 EU member states, Iceland, Liechtenstein, Norway, Switzerland and Monaco."

"The SDD schemes offer businesses significant efficiency gains through the automation of payments processing and the ability to optimise the cash management process. The latter can be achieved by businesses consolidating accounts currently maintained in different European countries to handle local payments into one single account and subsequently centralising liquidity."

As a key milestone in the creation of an integrated euro payments market across SEPA, the SDD schemes will also facilitate the expansion of business across national borders, by introducing a standardised payment infrastructure. Innovative end-to-end SEPA solutions based on global ISO [technical] standards will also lead to decreased IT costs, streamlined back office functions and simplified reconciliation. "The SEPA schemes defined by the EPC are instruction manuals for payments processing. All product-related features, such as pricing, are outside our scope. The real deal for businesses is the competitive and custom-tailored SEPA service offered by individual banks. Companies are therefore encouraged to shop for the SEPA bank products that best fit their needs."

To date 2,607 banks representing about 70 per cent of SEPA payment volumes have signed up to the new schemes ready for today's launch date - of those, 2,366 banks are offering both the Core SDD B2C and the SDD B2B service.

JP Morgan clients making or receiving payments can domicile accounts in any of the bank's European branches, and transaction activity can be monitored via the firm's online tool, JP Morgan Access. "JP Morgan has supported SEPA as an initiative to standardise payables and receivables in Europe, and the SEPA Direct Debit is the next logical step in its evolution. As all Eurozone banks will be reachable by SDD by late 2010, corporates can now start preparing to reap the benefits of this new payment instrument which will help centralise and standardise high volumes of collections," explains Alex Caviezel, head of JP Morgan Treasury Services in Europe, Middle East and Africa (EMEA). "SDD adoption will result in process efficiencies which should boost competitiveness in today's challenging markets."

Deutsche Bank, Citi & others prepare for SDD too
• Other banks are, of course, also geared up for the launch of the Single Euro Payments Area (SEPA) Direct Debit scheme. Deutsche Bank, for instance, has successfully completed its technical and testing preparations for the SDD Business-to-Business (B2B) service, starting today, with its launch client DKV Euro Service. The provider of transport sector services, covering fuel cards, tolls and other services will be one of the first of many companies to use SEPA Direct Debits (SDD) for collections in Europe. The bank will also provide pan-European cash management services for Axa - see the full story HERE

• Citi is also ready for the SDD launch and is looking to extend the benefits to others around the world. Working in conjunction with Experian, it is introducing an automated International Bank Account Number (IBAN) and Bank Identifier Code (BIC) conversion and validation service for SEPA-compliant cross-border payments. The data conversion service will be delivered across all 32 countries in the SEPA region, and also extends to Citi customers initiating payments to and from the SEPA area from anywhere in the world.

Experian will check, validate and convert existing domestic BBANs (Basic Bank Account Numbers) to the required IBAN and BIC standard in bulk, enabling customers to avoid rejection or failed payments, thereby reducing transaction costs and improving straight through processing of payment instructions. In addition, Citi's customers will be able to identify invalid records that require further or correct information to be obtained or verified, including invalid account numbers and closed bank branches.

"By ensuring bank account details are converted into the right format, we will enable our customers to reduce the cost of correcting rejected payment information," explains Ruth Wandhöfer, EMEA head of payment strategy & market policy, global transaction services at Citi. "In addition, the service enables us and our customer base to be ready for the introduction of SEPA Direct Debits."

PSD: Payments Council UK advice
The Payments Council has published its guidance for the Payment Services Regulations (PSRs), which is the UK legislation for implementing the European Union's continent-wide Payment Services Directive (PSD). This new European law, which also facilitates the SEPA project, has been introduced to enhance competition, transparency and ensure a consistent level of consumer protection in payments services across the EU. The PSR came into force in the UK on 1 November and will be enforced by the Financial Services Authority (FSA).

The guidance document entitled PSRs Industry Best Practice Guidance on Selected Issues aims to assist payment service providers in complying with the new regulations. This final version of an on-going advisory series focuses on specific issues and requirements where the Payments Council industry representative body felt more guidance would be beneficial, such as what a payment account is under the new regs.

"Lots of us as personal customers of the banks have been receiving revised copies of terms and conditions for our different payment accounts and this is all to ensure they comply with these new rules," explains Rosalind Sellers, public affairs manager at the Payments Council. "We've tried to add value with our practical guidance." The best practice document can be downloaded from http://www.paymentscouncil.org.uk. The PSR can be seen HERE

Industry reactions to SDD/PSD launch
According to Jeremy Light, head of the payments practice at the Accenture consultancy, the PSD will encourage innovation and a continued rise in electronic transactions, which will make cheques even less relevant in the future. Already cheques are no longer issued in some European countries and it is only a matter of time before they disappear in the UK (their decline accelerated last year with a 12 per cent fall), as they are costly and cumbersome for banks to process. "The other main outcome for retail customers as a result of the PSD will be that transparency of bank charges on payment transactions will be enforced and money will appear in their accounts much faster," he adds. "Under the PSD, by 2012, money deposited or transferred must reach the account the following day. This will change the practice common in some countries of banks' holding on to customers' money to benefit from interest."

"The PSD and SDD is good news for businesses trading in the Eurozone because it invokes total transparency on transaction fees for international payments and will remove administrative headaches," continues Light. "Currently, if a business makes an electronic payment to a bank in another country, charges may be deducted by the various banks as the money is transferred from one account to another, potentially costing £40-50." SDD B2B will remove this burden, but is a challenge for banks losing this revenue, prompting consolidation in the payments space.

EBA Clearing, the so-called PE-ACH provider (pan-European Account Clearing House) is eager for SDD to take off, saying its STEP2 system is ready to absorb rising volumes. "We're very pleased that a substantial number of European payment banks have decided to connect to our PE-ACH platform from day one of the new SDD schemes," says John Broxis, director of STEP2 services at EBA Clearing. The firm has already supported 71 Core SDD B2C banks and 52 SDD B2B banks in carrying out readiness testing for STEP2 prior to launch, with 2,000 financial institutions reachable on day one. "We're expecting a progressive ramp-up of our Core and B2B offerings, which will certainly gain in speed after a SEPA migration end date has been set."

The Italian payments processor SIA-SSB, which has operations in 30 countries and subsidiaries in Belgium, Hungary and South Africa, agrees that it will be necessary to set a deadline for the final abolition of domestic payment instruments to ensure a complete migration to SEPA and, like others, is a strong supporter of the public sector advancing early uptake by using the new instruments for their payrolls. "The European financial community has no reservations concerning PSD and SEPA," comments Renzo Vanetti, CEO of SIA-SSB. "The single payments area will be realised, it is a final goal that we will certainly achieve; the point is how and when. In order for the entire migration process to be completed it is absolutely crucial to set a precise deadline, valid for every country involved. A single end date, or even different end dates for each type of payment instrument [e.g. SCT, Core SDD B2C/B2B] is necessary."

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