The council of the European Union has not yet ratified the delay to the Single Euro Payments Area’s 1 February deadline, but small and medium enterprises have slowed down their compliance efforts. Brian Hanrahan, from Sentenial, which offers products to banks and corporates to be SEPA compliant, discusses whether the six-month extension will be enough.</p> What did you think of the European Commission’s SEPA extension to 1 August when it first came up?</h3> It was fairly inevitable. The number of compliant corporates and SMEs in particular was simply to low for it to be achievable in the remaining three or four weeks. Had they not moved it, we would have seen industry disruption. The extension, so late in the day, didn’t really have a big impact on the larger corporates and banks. They were typically well underway at that stage and continued as planned. A lot of larger corporates have achieved compliance and switched over in the remaining few weeks of January. The remainder would likely move in February and March. It was really the SMEs that were further behind. SMEs are now largely now expected to take whatever additional time is given to them to progress from here.</p> Were people confused about the SEPA deadline extension?</h3> The communication around the deadline was far from ideal. The Commission came out first with a proposal but that didn’t have any force without approval from the Parliament and Council. What we’ve seen is that individual countries are now creating their own rules. Belgium and Ireland have set internal mandates of 1 April and 21 March respectively. They are not taking advantage of the full six months, only setting an earlier deadline, simply to get this done because all the momentum has been built up. There is some appetite at least in a few countries to not take the full six-month grace period and get this completed sooner rather than later.</p> Why have SMEs left it to the last minute, following a long lead-in?</h3> People in the industry sometimes assume that the way banks run their operations, with big compliance teams and budgeted initiatives, is the way corporates run their business. But if you look at SEPA users, 65% of payment-originating businesses do less than 100 transactions a month. So these are really small operations. They don’t necessarily monitor initiatives like SEPA, so it’s really left to the banks to make them aware. In some countries, banks were very proactive; they ran campaigns and raised awareness. But in other countries that was less common and awareness levels were relatively low until pretty close to the deadline. Also, the motivation didn’t really exist for some SMEs. They don’t really see a lot of benefit from SEPA because they may not operate cross border.</p> What demand did you experienced in the lead-up to 1 February?</h3> We’ve been in the SEPA space now for nearly seven years. Over the last three years consecutively, we’ve managed to double the company’s turn over year and year. The demand has been building steadily. The volumes we are processing now are a result of customers that signed throughout the course of 2013. Mostly, they wanted to go live in December or January to be pioneers or early adopters. They didn’t want to experience the learning process when real volumes started to flow. We also saw a massive spike in volume over the last eight to 10 weeks. On the SME side, we also saw a build up, but from mid-January onwards adoption by SMEs has not been the massive rush that would have taken in place had the 1 February deadline stuck.</p> Looking ahead, do you think everyone will be prepared for the next deadline?</h3> The regulators are unlikely to be forgiving of another slip. I think there will be some proportion of SMEs that still won’t be ready come August 1, or whatever the deadline is in any particular country. There are a lot of commercial services that banks can provide and I think that’s probably the only way for the final 10% to 15% of SMEs to achieve compliance. We’re working with a number of banks that are white-labelling our services to capture those remaining customers. Looking forward, we are seeing a lot of corporates that have already achieved compliance trying to work out further SEPA benefits. We are seeing what we call a SEPA 2.0 trend picking up, with people who are in multiple countries, trying to figure out how they can consolidate, increase efficiencies and enter into a new SEPA phase.</p>