Small and medium sized businesses are stalling on updating their payment systems in preparation for the Single Euro Payments Area (SEPA) and face disruption if they leave the necessary changes until the last minute.
The European Central Bank has warned companies that are stalling on updating their systems that the deadline is fast approaching and that big-bang upgrades will cause significant problems to payments in the region.
The SEPA initiative is a part of wider European Commission plans for a single market for the euro currency, first unveiled back in 2002. It is aimed at improving the speed and reducing the costs of cross-border credit and debit payments by businesses, as well as increasing competition between banks.
Although changes are mainly aimed at countries using the euro, any UK business making regular payments with the currency will be impacted.
The deadline for the migration to the SEPA credit transfer (SCT) and SEPA direct debit (SDD) schemes is set for 1 February 2014.
UK banks have invested in their systems to enable SEPA transfers, and many larger businesses are already prepared for the regulations. However many small mid-sized businesses are yet to act and are not prepared for the upcoming changes, according to the ECB's second migration report.
Benot Cur, member of the executive board of the ECB, commented: "I have said this before and will repeat it: everybody has to be ready on 1 February 2014 or risk disruptions in their individual handling of payment orders.
"Since our first migration report, we have been emphasising the fact that both payments providers and users are responsible for being sufficiently prepared. And our message to them is still the same: don't leave it to the last minute."
The ECB report specifically warns against last minute "big bang" migrations, which will create "capacity issues and bottlenecks" for payments providers as the deadline approaches, and put time pressures on end users which will need to test their own systems and adapt to the payment service providers' new standards.
Cur continued: "A successful migration will require considerable effort, so it is important to further strengthen communication and cooperation among key stakeholders and competent authorities at the national level."
In order to avoid payments being blocked, many SMEs have decided to use XML conversion services supplied by many banks to meet payment requirements. But the report warns that relying on these conversion services for too long "may prevent stakeholders from reaping the full benefits of SEPA", and will still require some preparation.
For businesses seeking to fully comply with SEPA regulations it will be necessary to update their databases and financial systems to incorporate new payment details for customers and suppliers, as well as ensuring they have up-to-date versions of enterprise resource planning (ERP) systems.
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