ING: The Road Ahead - Sander Cok

Sander Cok of ING Wholesale Banking Products talks to Jim Banks about SEPA's challenges and rewards, highlighting significant competitive advantages.

Corporate readiness for SEPA significantly depends on how well prepared their banking are. Recent EPC data suggests that approximately 1,500 adherence packs have already been approved, while a further 1,000 or so have been presented for approval on 19 December 2007 and the remainder on 9 January 2007.

‘We are continuing with the strategy we started years ago and we are continuing to invest in payments, in which we are the market leader in the most efficient countries in the world.’

This is good news. Nevertheless, the expectations are that the ramp-up of the volumes will be low.

There are several reasons for this - for domestic service levels we need full reachability otherwise payments will be returned to sender. This could be explained as a deterioration of the current STP level. Sander Cok of ING Wholesale Banking Products says:

’This means that reachability will ramp-up during 2008. In fact, SEPA payment instruments, such as domestic payments, assume a closed community that guarantees 100% reach. From the current outlook, one can conclude that service levels for the start of SEPA are on a best-effort basis.' We will need 2008 to achieve full reachability and bring processing capabilities to a domestic level within all banks. Clearing houses have to harmonise their service level with that of the most efficient countries.


There are a number of key issues to be resolved, and direct debits are among them. A Finextra Market Intelligence report from October 2007 suggests that banks see direct debits as their top priority for SEPA in 2009, though they anticipate delays in implementation and will run legacy domestic schemes after 2012.

‘I cannot believe consumers will accept that their mandate can automatically be used by creditors on a pan-European level without solid fraud prevention measures.’

The report also shows that many believe that the management of direct debits will be difficult. There are certainly a number of issues that persist around SEPA direct debits (SDD) that must be urgently addressed.

Cok says: ‘Direct debits are very popular, safe, efficient instruments for domestic payments, but to extrapolate this to a pan-European level is not so easy. The current rulebook is a compromise and the risk management appendix is optional. I doubt if many details and specifications are clear and robust enough.’

Many corporates appear to have concerns about mandate migration, because they fear losing customers when resigning the mandates become compulsory. From a consumer perspective, the outcome of an automatic mandate migration is that the mandate details could now be used for transactions across a wider geographical area.

‘I cannot believe consumers will feel comfortable with the fact that their mandate can automatically be used by creditors on a pan-European level. They may not want to lose the security they have had with their trusted domestic direct debit, including solid fraud prevention measures,’ adds Cok.

Another notable aspect of the Payment Services Directive (PSD) is that it extends the refund period to eight weeks. This may have an impact on many potential SDD customers, such as companies listed in the US, given that USGAAP has strict rules on revenue recognition.

Cok wonders, therefore, whether some companies might choose to leapfrog SDD and go straight to e-invoicing. He points out, however, that there are concerns over differing practices around Europe. What Nordic countries do overnight may take longer in Spain, for example, where it is often mandatory for customers to sign direct debit mandates.

‘Regarding the implementation of SDD, we should reconsider this and go for the smart approach.’


As well as highlighting issues among banks, research shows that many corporates are equally unprepared. The recent World Payments Report (2007) by Cap Gemini, for instance, suggests there will be no critical mass of SEPA payments among corporates before 2010, and that some companies want to retain legacy payments as long as demand exists, which could create a mini-SEPA.

Furthermore, the research suggests that regulatory incentives are needed, and that there is a call to decommission legacy payments at a common end-date. But during a consultation of the EC internal market early in December 2007, with all the representatives of the major stake holders in the room, the question, 'do we have to fix an end date for SEPA?' was raised by EC staff. The answer of corporates, associations and consumer organisations was that it is still too early because the SEPA products are inferior compared to the current domestic instruments.

‘We believe e-SEPA is the future and we are investing in it.'

Additionally, an ATOS/Origin Deloitte study on the awareness of and readiness for SEPA among corporates and public organisations in the Netherlands showed that overall awareness and readiness for SEPA are low. Most corporates there have a passive attitude, with a majority expecting their banks to offer BIC/IBAN and format conversion services.

They often do not realise that banks can charge or even reject payments without BIC/IBAN. ING’s own sounding of the market also highlighted some interesting attitudes among corporate and institutional clients, notably a widespread belief that SEPA will push transaction prices up. Many also agreed that migration would require incentives, and that regulation will be a far better approach than any market-driven initiative.

‘Our message is: SEPA will start at an easy speed, with opportunities for early adopters, especially clients with a European footprint and a centralised treasury, those at the start of centralisation, import/export companies and last but not least public sector organisations, which could kick-start SEPA with their massive bulk payment volumes. We have already contracted our first customers,’ he says.


Cok also urges corporates to act quickly: ‘Align SEPA implementation with the investment cycle of your ERP systems, make a clear business case and convert to BIC/IBAN standards.’ Work is certainly needed to clarify the direct debit issue, and no doubt e-invoicing will be increasingly important going forward. Cok says: ‘We believe e-SEPA is the future and we are investing in it.’

Having the right banking partner is crucial for any company to derive benefits from SEPA and avoid potential pitfalls. Performance and service offering for the post-SEPA environment, however, varies greatly between banks.

ING is confident that it is ahead of many rival banks in terms of SEPA services. Its own competition analysis against its main competitors showed that ING was among the first 91 banks that signed the adherence agreement yet, and that only a few provide extensive SEPA information, either in print or online. But above all that ING put their mass processing capabilities with the newest channels into the SEPA arena.

‘Within the FI market we are perceived by potential customers as a SEPA premier league bank,’ says Cok. Many FIs have requested we help them with SEPA compliancy. ING is certainly among those banks that recognise SEPA to be part of an ongoing process, which Cok believes will be characterised by increased regulatory pressure, growing standardisation, greater customer demand and increased competition among banks. This will further push the consolidation process in the FI market. Banks will feel continued pressure on margins, so corporates will need partners they can trust to respond to these changes, whether they affect the bank or its clients, as there will no doubt be many more in the future.

The strategy at ING centres on further improving the C/I ration by moving from paper to electronic, from cash to cards and its focus on increasing its scale and delivering flawless execution. The other leg of the strategy is about differentiating through connectivity, browser-based banking, enhanced reporting and sophisticated cash management services. ‘We are continuing with this strategy that we started many years ago and we continue to invest in payments, in which we are the market leader in the most efficient countries in Europe, even world,’ adds Cok.

Corporates in Europe need advice quickly on SEPA, but must be careful where they seek it. The good news is that they will have more choice.

Sander Cok of ING Wholesale Banking Products.
Corporate readiness for SEPA significantly depends on how well prepared their banking is.
SEPA payment instruments, such as domestic payments, assume a closed community that guarantees 100% reach.