By José Teixeira, Cash Management and Electronic Banking Market Manager with Sage
As UK firms and the rest of the Eurozone make the transition to Single Euro Payments Area (SEPA) compliance, a key deadline passed just a few weeks ago on 1 February. Firms within the Eurozone were given an extra six months to get fully complaint, but José Teixeira, Cash Management and Electronic Banking Market Manager with Sage, reflects on the implications.
Less than one month before the SEPA migration deadline, the European Commission extended the transition period by an additional six months, during which time any payments not in SEPA format may still be accepted.
It must be said that the last migration figures recorded at the end of 2013 were unequivocal: Only 65% of company credit transfers (SCT) and 26% of direct debits (SDD) were made in compliance with the SEPA standard in the Eurozone. Companies are slow to migrate, although any that do not adopt this new obligatory format for their credit transfers and/or direct debits, whether in the Eurozone or UK firms making payments in Euros, will face great difficulties. For example, it will be impossible for a UK-based firm to pay employees or suppliers based in the continent by bank transfer, and they will incur severe financial penalties for all rejected payments.
SEPA Migration: the race against the clock is on!
The cut-off date of 1 February 2014 remains the official date, but for the many companies that have not completed or even started to migrate their payment systems to the SEPA European standard (Single Euro Payments Area) there is now a six-month buffer period in which to do so.
This is a true race against the clock for companies to complete the transition in time. The many last-minute migrations by companies that wanted to be ready on 1 February 2014 generated bottlenecks. The urgency is therefore to take advantage of the agreed transition period to launch the migration process as quickly as possible. The UK and Poland have until October 2016, however of those firms who do a lot of business with the rest of the Eurozone the onus is to get SEPA compliant in order to stay competitive with their European neighbours, and to optimise their own cash systems.
Next step: harmonise all the flows in XML
The Single Euro Payments Area is where more than 500 million citizens, over 20 million companies and the European public authorities can make and receive payments in euros under the same basic conditions, and with the same rights and obligations, whatever their geographic location.
For all the companies that have migrated to SEPA, this deployment not only marks the end of an era, it will mark the start of a search for harmonisation of all their bank processes. The format used for SEPA actually relies on the international ISO XML 20022 standard, which must be used for all other types of financial processes in time. This concerns cash transfers or commercial transactions, unpaid returned and rejected payments, the flows of account statements or notices, but also international money transfers beyond the SEPA zone.
The application of this worldwide standard will lead to the improved technical and functional harmonisation of companies’ international centralisation projects. Thus, for companies that operate internationally it provide them with an opportunity for rationalising a common platform for all their processes. The benefit for UK firms is about remaining competitive – payment codes in two different formats could be off-putting to a customer or supplier based on the continent
The benefits for companies are numerous. This includes simplification of cash management; optimisation of costs and service provisions in their relationships with banks; financial processes including the centralisation of back offices; cash flow management on a larger scale; optimisation of the value chain towards Straight-Through-Processing (STP). On top of this, there are benefits for information systems with aspects such as centralised interbank communications for making payments, as well as improved communications with third parties.
Interbank payments and electronic payments: deadline of 1 February 2016
The next two years will provide the ideal occasion for launching optimisation projects, such as companies wishing to transfer all their processes to XML or those making strides towards a paperless system.
By 1 February 2016, certain types of purely local payments will disappear in favour of a SEPA payment.
These interbank payments (in each European territory) are traditionally done in paper, and will be replaced in party by online or mobile payment. This allows payments to updated in light on modern business practices such as cloud and mobile working.
This type of process affects insurance companies for example, but it mainly concerns the tax authorities which represents transactions of several billions of euros.
Generally, all non-SEPA payment methods, including niche products like bills of exchange, will have disappeared from all European companies before 2017. The SEPA process converters mentioned will therefore become obsolete and the complete migration to SEPA will no longer be an option, but an obligation for all European companies. This includes those in the UK wanting to make payments abroad!
While SEPA may be deemed a “necessary evil”, it should actually be seen as an opportunity – it will open up the market in a digital economy. These major legal, organisational and financial upheavals should represent opportunities for European companies to create new services in e-commerce, as well as an opportunity to move towards paperless authorisations and electronic signatures. On top of this, we will even move towards replacing the localised interbank payments and the good old paper cheque!
Oil rises as vaccine and U.S. stimulus boost demand outlook
By Laila Kearney
NEW YORK (Reuters) – Oil prices were up on Monday on rising optimism about COVID-19 vaccinations, a U.S. economic stimulus package and growing factory activity in Europe despite coronavirus restrictions.
Signs that Chinese oil demand is slowing kept prices from moving higher.
Brent crude rose 51 cents, or 0.8%, at $64.93 a barrel by 11:29 a.m. EST (1629 GMT), and U.S. West Texas Intermediate (WTI) crude gained 28 cents, or 0.5%, to $61.78 a barrel.
Both contracts finished February 18% higher.
“The three major supportive factors are the prevalent vaccine rollouts, the optimism about economic growth and the view that the oil balance will get tighter as a result of the first two points,” PVM Oil Associates analyst Tamas Varga said.
Support also came from a $1.9 trillion coronavirus-related relief package passed by the U.S. House of Representatives on Saturday.
If approved by the Senate, the stimulus package would pay for vaccines and medical supplies, and send a new round of emergency financial aid to households and small businesses, which will have a direct impact on energy demand.
The approval of Johnson & Johnson’s COVID-19 shot also buoyed the economic outlook.
Manufacturing data from around the world was mixed.
China’s factory activity growth slipped to a nine-month low in February, sounding alarms over Chinese crude buying and pressuring oil prices.
“One negative is more and more talk about Chinese oil demand maybe faltering, that they bought all the oil that they’re going to need for a while,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “There’s some talk that their strategic reserves are filled up and so some people are betting against the Chinese continuing to drive oil prices.”
German activity, on the other hand, hit its highest level in more than three years and Euro zone factory activity raced along, driven by rising demand.
OPEC oil output fell in February as a voluntary cut by Saudi Arabia added to agreed reductions under a pact with allies, a Reuters survey found, ending a run of seven consecutive monthly increases.
The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, meet on Thursday and could discuss allowing as much as 1.5 million barrels per day of crude back into the market.
(Additional reporting by Bozorgmehr Sharafedin in London, Jessica Jaganathan and Florence Tan in Singapore; Editing by Jason Neely, Edmund Blair, Barbara Lewis, David Evans and Will Dunham)
EU auditors warn over 5 billion euro emergency Brexit spending
BRUSSELS (Reuters) – The European Union lacks tight oversight of 5 billion euros in emergency Brexit aid, the bloc’s auditors said on Monday, warning over governance risks regarding quick cash injections as Brussels prepares to disburse massive amounts of COVID-19-related stimulus.
The European Court of Auditors (ECA) said member states are due to get 4 billion euros, or most of the funding from the so-called Brexit Adjustment Reserve this year, without the usual requirement to agree with the bloc’s executive in advance what exactly they plan to spend it on.
“We therefore raise concerns that this proposed timing and structure creates a lack of certainty where member states may choose suboptimal or ineligible measures,” said Tony Murphy, a member of the ECA, an agency set up to ensure EU funds are spent properly.
Murphy said EU countries would only report on their completed spending in September 2023 and would need to pay back money that would not be deemed eligible.
“We would like to see changes,” to improve financial management and ensure the overall effectiveness of the Brexit emergency fund, Murphy said, though he said the ECA realised those most affected by Brexit needed the money swiftly.
Based on the size of trade ties with now-departed Britain and the share of fish catch in UK waters, Ireland is due to get a quarter of the Brexit emergency allocation, followed by the Netherlands, Germany and France.
As the EU moved from a protracted Brexit crisis to grappling with the coronavirus pandemic, last year it designed another unprecedented spending plan – economic stimulus worth 750 billion euros to pull member states out of a record recession.
While EU countries need to pre-agree with the Brussels-based European Commission their spending plans to receive recovery money, Murphy said trade-offs between swift and diligent spending were on the auditors’ minds.
“What we’d be striving at is a good balance between flexibility and appropriate control structures,” he said. “They are emergency measures, we can’t wait around for years for the plans to be drafted. It’s a matter of getting the balance right.”
(Reporting by Gabriela Baczynska; Editing by Hugh Lawson)
Egypt wants to register millions of gig workers for state insurance, aid
By Menna A. Farouk
CAIRO (Thomson Reuters Foundation) – Egypt will start registering millions of gig workers in order to offer them health insurance and emergency state aid during the coronavirus pandemic, which has taken a particularly heavy toll on the nation’s ad-hoc employees, officials said.
There are at least 14 million gig workers in Egypt, and while some workers and campaigners welcomed the government’s drive, others warned that many workers could be reluctant to sign up – fearing tax and social security payment demands.
The government said it plans to identify and support 2 million gig workers in the country of 100 million people by the end of this year, labour ministry spokesman Haitham Saad El-Din said on Saturday.
“It is part of a government plan to give assistance to this segment of the society which has been majorly affected by the pandemic,” he said, adding that officials were focusing first on identifying casual construction labourers.
Gig workers who have their employment status registered on their national identity cards under a new “irregular employment” category will be given free social security insurance and be eligible for state welfare programmes.
Egypt’s state-run insurance plan includes life insurance and disability cover, as well as covering healthcare costs.
The announcement is the latest in a series of government measures aimed at shielding vulnerable groups from the economic fallout of the pandemic.
Soon after the coronavirus outbreak began, it launched a programme that supports irregular workers with monthly aid, and Egyptian President Abdel Fattah el-Sisi called for financial support to be boosted when a second virus wave took hold.
State welfare spending surged 36% in the first half of the current fiscal year, Finance Minister Mohamed Maait said recently.
ON THE BOOKS
Some daily labourers hailed the registration drive as a positive step, saying it would help bring them into the formal economy and recognise their economic contribution.
“Millions of Egyptians have been affected by this pandemic but it’s really good that the government is not leaving us behind,” said Farouk Mahmoud, 35, a temporary worker from the city of Sohag.
Still, while the latest data puts the number of gig workers at 14 million, the real number may be much higher – making registering them a daunting administrative task, said Bassant Fahmi, a member of parliament’s economic affairs committee.
Some workers may also be wary about being on the books.
“Many of them may fear being asked afterwards to pay taxes or insurance. That could mean a lot of gig workers avoiding being identified by the government,” she told the Thomson Reuters Foundation.
But besides any misgivings about being under the government’s radar, many gig workers in Egypt are more concerned about the dearth of permanent job opportunities – especially for young people – and the health of the wider economy.
“It isn’t crucial for me to have a job on my ID,” said Abanoub Lotfi, a 26-year-old driver for ride-hailing service Uber, who has a degree in commerce.
“What really matters is that the government offers me a stable job that suits my academic background and helps me afford my needs and those of my family.”
(Reporting by Menna A. Farouk; Editing by Helen Popper; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)
GameStop surges more than 18%, other ‘meme stocks’ also rally
By SinÃ©ad Carew and Lewis Krauskopf (Reuters) – GameStop and other â€œmeme stocksâ€ mounted a late-day rally on Monday, with...
Wall Street rallies on U.S. stimulus and vaccine hopes as bond markets calm
By Suzanne Barlyn NEW YORK (Reuters) – Global equities markets rose and the S&P 500 on Monday had its best...
Oil down more than 1% on Chinese fuel demand doubts, OPEC supply concerns
By Laila Kearney NEW YORK (Reuters) – Oil prices fell more than 1% on Monday as fears that Chinese oil...
Dollar gains on reflation trade, Aussie recovers
By Karen Brettell NEW YORK (Reuters) – The dollar index rose to a three-week high on Monday as investors bet...
Climate extremes seen harming unborn babies in Brazil’s Amazon
By Jack Graham (Thomson Reuters Foundation) – A new study that links extreme rains with lower birth weights in Brazil’s...