Dresdner Kleinwort: Reaping the Rewards - Manfred Fleckenstein

Far too many corporates are still failing to appreciate the remarkable effect SEPA will have on their cash flow. Manfred Fleckenstein, head of global cash management for Dresdner Kleinwort, tells FDE what corporates should be doing to realise these benefits.

FDE: Are corporates fully prepared for the Single Euro Payments Area (SEPA)?

Manfred Fleckenstein: We at Dresdner Kleinwort, the investment banking division of Dresdner Bank, have learned from our corporate clients that they’re aware that SEPA and the new Payment Service Directive [PSD] will affect their accounting, cash and treasury management from the start of 2008.

However, I would say lots of them are still searching for the right track, especially for their individual business case. Therefore – understandably – many corporates currently have not really decided exactly how they are going to use the new framework.

What are the potential benefits of SEPA to these organisations?

SEPA means the creation of one legal framework for payment transactions within the EU-27 plus Iceland, Lichtenstein, Norway and Switzerland as of 28 January 2008. As a result, payment processes and formats in the community will allow corporations to operate in a much more efficient way, helping them save costs by consolidating their bank accounts across Europe. It’ll have a positive impact on their liquidity management and their balance sheets.

How can corporates ensure that they derive these advantages from SEPA?

If I had to hand out a checklist, I would say companies have to focus on the following high-priority issues. Firstly, updating their ERP (enterprise resource planning, such as SAP) and office banking systems for receivables.

Secondly, exchanging their IBAN and BIC with all business partners and employees. It’s also crucial to set up a SEPA project to identify the right timing for the migration and the impact on other projects in the organisation.

Are there any potential problems that can arise from SEPA?

In general, the delayed implementation of the SEPA direct-debit has caused reluctance to early migration. From the technical point of view, XMLbased formats will basically extend the capacities for additional information, which will increase the size of files being transferred between corporates and banks. Furthermore, foreign trade regulations will have to be processed separately from the payment orders.

Is there anything about the SEPA payment formats that might hinder straight-through processing?

It is actually one of the main objectives of SEPA and the new XML-based payment format to streamline end-to-end processing. On the other hand, we have to consider that only the creation of standardised electronic accounting information on an XML basis will lead to fully efficient processes. Dresdner is involved in the detailed definition of a multibank and SEPA-compliant reporting message type. Due to its complexity, we don’t expect this to be realised before 2010.

What are the key elements of your SEPA strategy?

Given that Dresdner Bank and Dresdner Kleinwort are the first institute to be registered by the European Banking Association (EBA) for SEPA clearing, we are able to act as a strategic partner for our clients. It’s our philosophy to provide corporates with all the technical solutions for SEPA. It’s also our approach to consider the individual customers’ situation and to act client-driven.

How does this strategy differ to those of your competitors?

Clients get tailor-made solutions from us for their cash and treasury management. Each package is the result of a comprehensive analysis of our clients’ need. At Dresdner Bank and Dresdner Kleinwort we are strongly committed to supporting our customers to identify and realise their opportunities – and SEPA plays an important role in this.

What do you feel might be the next significant change in the area of European payments?

Besides the realisation of SEPA direct-debit, the next significant change should be the data fields ‘ultimate originator’ and ‘ultimate beneficiary’ for SEPA payments. This will lead to further benefits for payment factories and financial shared service centres. Further amendments to SEPA might be SEPA online payments and SEPA e-mandates.

Manfred Fleckenstein, head of global cash management for Dresdner Kleinwort.