Opportunity knocks

Much has been said about the investment needed to make Europe’s domestic, disparate payment services and systems Sepa-compliant by 2008, but less about the opportunities that this offers both banks and corporates alike to develop a strategy that will both deliver a return on investment and yield results to enhance competitive position.

The significant and constant investment needed to build and maintain a payments infrastructure means that the arrival of Sepa represents an opportunity for banks to re-evaluate their business models and decide whether future investment in payment products and systems is necessary and sustainable.

Immediate benefits

Through partnerships, banks can leapfrog short-term costs and go straight to the benefits by spending less time and investment thinking about Sepa products and processes related to operations, technology and compliance, and focus more on how they can channel investment into client-oriented opportunities.

Banks in Europe that approach Sepa strategically will be able to gain access to new markets, new customers, greater standardisation, greater control, greater efficiency, lower costs and higher volumes.

For these banks, Sepa represents a transformational opportunity to enhance focus on their client base by delivering a better product capability at a reduced cost.

For corporates, Sepa allows for a varied degree of centralisation, depending on their business strategy and evolution of the treasury and commercial model. For large, multinational companies – especially those that have already created shared service centres – Sepa creates a platform to rationalise their account structures through common standards, enabling them to achieve their objectives of improving risk management and greater efficiency in processing and liquidity management. Sepa also allows these companies to lay the foundation for greater financial supply chain integration. For those that have not centralised their treasury and commercial processes, Sepa will provide the impetus to centralise, improve liquidity management, and automate payment processing.

To take advantage of Sepa, corporates need to determine the best way to invest in the future while evaluating how to integrate Sepa requirements into their current systems and financial processes and find the banking partner that can deliver such seamless integration.

Citigroup has a major stake in the payments industry given our global footprint and embedded links with the market infrastructures. With a presence in every domestic market in western Europe, no pan-European bank is better placed to help banks and corporates realign their operations in order to take advantage of the emerging landscape. Sepa is part of a much broader strategy at Citigroup and fits into our overall vision to provide comprehensive cash management solutions to our customers in Europe and around the world.

There are a number of initiatives under way at Citigroup to achieve this. We are investing in Sepa products and processes. We are extending the breadth and depth of our regional and global platforms to integrate with local product capabilities throughout Europe to provide seamless local, regional and global solutions to clients. We are forging strategic alliances along distribution, capability and processing dimensions to complement our strategy, enabling us to offer a broad and varied range of solutions to our customers in the emerging Sepa environment.

Standardisation strategy

This is not the first time that Citigroup has done this. It is part of an ongoing strategy to standardise processes and increase efficiencies across the more than 100 markets in which we do business.

Sepa presents us with an opportunity to do more. Who is better equipped to help businesses seize the opportunities of Sepa than a bank that has already gone through the process of complementing a pan-regional solution with deep domestic market capabilities as though they were one seamless market?

The harmonisation that will occur across the EU and the broader European Economic Area as a result of Sepa will offer tremendous opportunities. Therefore, the objective should not just be to comply, but to take a strategic approach.

For corporates this means integrating as much of the financial supply chain with the physical supply chain as possible. For banks it means engaging in the spirit of co-operation to focus spending on value adds for clients.

For all concerned, it means thinking today of what you will need tomorrow to succeed in the new landscape of change.

Naveed Sultan is managing director, head of cash management for Europe, Middle East and Africa, at Citigroup Global Transaction Services.