With the end-date of local payment formats in February 2014 looming around the corner I have started to evaluate the SEPA endeavour. The first part was published at April 3 last: “SEPA: a Missed Opportunity for True Payments Standardisation?”
Today, I would like to address the high impact of SDD on corporates. Even though some direct advantages can be identified, for most of the companies I have been involved with – in assessing the impact of SEPA or implementing it – SEPA does not bring any advantages that would have warranted the investment without it being a mandatory change.
The impact on single corporates – in money and time spend – has been much higher then was anticipated in the early phases of the realisation of SEPA. Banks have had their part of the burden but companies are to invest many millions without tangible direct benefits.
When discussing the impact of SDD with corporate prospects & clients I have been asked many times why implementing SDD is supposed to be so time and resource consuming: “It can’t be that difficult?”. As many corporates can attest by now the implementation of SDD is not at all simple, nor cheap.
Explaining the technicalities involved helps to shed some light on the matter. But this explains only half (at most in my view) of the implementation challenges the corporates are faced with.
The other halve of the challenge to implement SDD in my view boils down to the fact that SDD is “process orientated” while companies are organised and supported with systems that are “functionally orientated”. A process-orientated responsibility is not easily managed in a functional environment.
The very complex patchwork system architectures and “distributed” data management that is a result of continues functional renewals and additions do not help. But even at companies that have very balanced and up to date systems the impact is pretty high with the coordination between sub systems and company departments taking up a lot of coordination (and friction) due to this process vs functional devide.
For businesses, while creating commercial offerings and distribution channels, payments are (still) mainly an afterthought. And before SEPA that was not a big problem; when did you encounter a product manager or business developer, let alone a business architect bringing up payments as an essential element for the last time?
But with SDD the payment is based on information that is gathered from the first instance the client gets in contact with the company until after that client has long gone from the company. During the “life time” of the client various functional departments and systems are involved. Many events in the interaction with the client have an impact on the payment process (and vice versa). All kind of timing triggers will be influencing the client processes and hence the payment.
In time while adopting to new technologies and with the convergence of the “real” world and the virtual world into a highly interconnected environment companies will have to adopt process-orientated approaches, not only for payments. This change will not be an easy one as the implementation of SDD is showing us every day.
I have often discussed the new reality of payments (not only SEPA) with commercial departments and officers. My take from these encounters is that grosso modo commercial departments are not aware of this new aspect they will have to take in to account in the future.
Designing new products and services need to incorporate the design of the distribution channels and company organisation and systems up front including payments as an essential part of it. Product management will have to evolve where the commercial aspects are combined with business design (processes including payments, systems and distribution channels,).
In my opinion the interaction between business and product development and payments will become a new and very interesting area that needs knowledgeable input and knowledge transfer.
Until now many involved in payments have been focused on payments only; mainly driven by the technicalities of payments. The challenge for payment professionals will be to (help) translate these technicalities into viable commercial i.e. business solutions.
For further reading on SEPA at Red Planet Dust: