SEPA is suffering a tough baptism with credit transfers falling way below the volume estimates, hoped for last year. Much has been written about why this has been the case, but the facts are clear that SEPA credit transfers have very little interest at the moment for banks or their corporate customers. Indeed anyone can trip along to their local high street bank and enquire about SEPA credit transfers and you will be looked at as if you’re talking Martian. SEPA within banking institutions is a non event with very little if any training being given to banking personnel let alone system developments. SEPA has created the environment for change in payment systems and practises but at the moment hardly any activity has been evident with only a very small volume of SEPA transactions. So what chance then, does SEPA direct debits have of bucking the trend?

Well, the future is far brighter for direct debits with the retail market waiting in the wings to take up the efficiencies offered by SEPA. There should be no issue with volume of transactions as the direct debit aspects of SEPA cater for the breadth and depth of the payments business, inclusive of the wholesale and retail markets.

It’s worth highlighting the software vendor position for SEPA direct debits against the recent experience of smoke and mirror developments in the credit transfer space. Imaginative marketing of illusory functionality has made banks sceptical about the reality of systems and nervous of procurement, especially as IT budgets will be slashed because of the financial crisis. With banks more circumspect about third party software vendors and their solutions, will this impact the implementation for direct debits?  

Sentenial is a software house focussed entirely on direct debits and this is seen as a strength by their management team. Many software vendors moved quickly into SEPA credit transfers but Sentenial read the market really well and spent their time wisely, producing an exceptionally smart direct debit system.

B.I.S.S. Research has been monitoring Sentenial for the past three years and has witnessed close hand, the growth of confidence within the firm about its product and how this is now being realised in the market. During the last three years Sentenial has remained entirely consistent in its marketing message and almost manic in its system development, to produce SEPA direct debit solutions way ahead of the market.

The crunch (excuse the term) time is now coming, where Sentenial has to deliver sales to the market and where they will achieve success, if they operate as well as they have done, to get to this point.

Sentenial have to be congratulated by taking the risk and getting ahead of the field. This risk has been alleviated greatly by utilising their undoubted and unparallel industry knowledge and getting together with some outstanding technicians to produce a product that knocks other solutions into also ran’s.

Sentenial is full of clever people all fervently focused on delivery of their solution but SEPA to date has failed to achieve its volume objectives for credit transfers, so what will be the likely scenario for SEPA Direct Debits?  

Sean Fitzgerald, Sentenial CEO comments “the market is going through radical change but the SEPA mandate is still something that has to be addressed. The value of the opportunity for all players is becoming more obvious and the volume of Direct Debits is set to grow as we get closer and drive through the deadline. Banks are realising that failure to act will result in losing out to those that have invested in preparation, projects and delivery. We will also see a return to basics on the part of banks in the coming years. Payments transaction revenues did traditionally account for a significant proportion of banks operating profits. These revenues are now of significantly increased importance for the banks as we move forward in a new banking environment. The SEPA DD is a significant opportunity for banks to enhance services to corporates and generate annuity type revenues. It’s not often that a compliance type investment doubles as a revenue generating opportunity.”

As a single product company Sentenial has a resolve to win at all costs, which has real benefits to the buyer. The management team are able to use lateral thinking to second guess the market and like all good software innovators are able to look at all sides of a problem and then come up with an answer. This ability stands them in good stead beyond SEPA direct debits, as new ideas will surely arise.

Sentenial will be an extremely valuable partner for complementary vendors and their product a highly prized asset for banks looking to ensure delivery of SEPA direct debit services.

Like all growing software vendors Sentenial has to manage its ability to produce successful systems with its ability to reach its sales targets. Potential can be hindered by the size of the bandwidth. This can be a severe limiting problem and one that Sentenial has now overcome through a strong partner and alliance program. This program has led Sentenial to enter into an alliance with ACI. ACI is one of the leading software vendors for payments and has the bandwidth to sell Sentenial direct debits into their existing customer base but also this product adds considerable value to their existing product portfolio. The partnership of Sentenial and ACI is great for the chances of SEPA direct debits and will certainly be welcomed by the market.

Sentenial said “The Sentenial Partnership Program is now maturing and the relationship with ACI brings an added value to Sentenial’s proposition, as well as enabling ACI to deliver a full end to end payments solution. Both companies are benefitting from the others expertise and solutions and this can only be beneficial for the banks”.

Craig Ramsey from ACI said: “Processing SEPA Direct Debits is the next big challenge for European banks, and one that will exceed the work required to get ready to process SEPA Credit Transfers. Sentenial’s EuroDebit solution combined with ACI MTS SEPA Express^™ offers a full-function solution enabling banks to process Direct Debits quickly whilst ensuring all transactions are compliant with SEPA and minimising the impact to payment processing.”

This looks like a winning partnership for both firms and with the banking industry in crisis, an unbeatable combination to assist them overcome SEPA challenges and make direct debits a certain success and that hopefully kick starts SEPA. If this partnership achieves its potential the industry across the board will be grateful.

By Gary Wright, M.S.I.