Slouching Toward SEPA

It's been a little over six years since the first euro banknotes and coins were issued in the 12 nations that initially constituted the Eurozone. On January 28 of this year, Europe took another giant step toward a unified market with the launch of the first phase of the Single Euro Payments Area (SEPA). On that date, banks in the 27 member countries of the European Union plus Iceland, Liechtenstein, Norway, and Switzerland migrated to a unified credit transfer system that enables customers to make cross-border euro payments as easily and safely as domestic payments.

The implementation went smoothly, with only minor operational issues that were quickly resolved. By February 18th, euro clearing service provider EBA reported that it was processing 100,000 SEPA transactions per day. That number had doubled by March 4.

SEPA creates opportunities for U.S. corporations that do business in Europe to capture new efficiencies. The centralization of cash management functions has been a dominant theme of treasury strategy for many years, but European operations have resisted that trend, in part because the fragmentation of the payment system often required companies to maintain accounts or offices in every country in which they did business. But now treasurers should be asking themselves whether their European cash management operations would be better served by consolidating them in a single office.

U.S. companies may be missing out on the opportunity, however. Ninety-three percent of respondents in a March Business Finance online poll said that their company could benefit by addressing SEPA sooner rather than later. But only 55 percent reported that their organization has taken tangible steps to prepare for SEPA.

To some extent, it's early days yet. Mass adoption of SEPA-compliant systems by European corporates will likely take place over the next couple of years. And the SEPA initiative itself will run through two more major phases. The next milestone is SEPA direct debit, slated for late 2009, which will standardize systems for consumer and corporate direct debits across the SEPA area. The third and final deliverable is the SEPA Cards Framework, which will aim at establishing "an integrated, competitive market where you can use any card at any terminal," according to the European Central Bank.

Still, companies shouldn't wait too long before drawing up a strategy to capitalize on the SEPA revolution. The prospect of establishing a single entry point into Europe's vast marketplace is simply too good to pass up.