Vocalink

Dexia

SEPA, flexibility and the need for partnership

Dexia is a well-known, modern European bank and a leader in local public finance. It has been hit by the financial crisis. But, crisis or no crisis, Dexia is pushing ahead with its SEPA projects. As far as SEPA is concerned, it's business as usual.

SEPA is moving fast in Belgium and the pace is accelerating. Although the overall migration towards SEPA is largely based on self-regulation of the banking sector, the Government is providing the impetus by using SEPA formats for many regular payment types such as car tax and income tax returns. Dexia emphatically supports the SEPA programme and is determined to ensure that its customers experience real benefits: existing standards have been adopted as a minimum requirement and the intention is to embrace SEPA as an opportunity to enhance service lines.

The next important deadline that Dexia faces is November 2009 for the implementation of SEPA Direct Debit. The main challenge then will be to meet the complex requirements of large billers, such as utility and phone companies. Belgium currently has no B2B direct debit scheme, so significant investment is required and there is little time to get a PSD-compliant scheme in place. Having consulted with its internal stakeholders, Dexia set out to find a specialist payments partner that could offer a solution for the forthcoming SEPA challenges. It chose VocaLink. Why?

Dexia evaluated several options. The bank has a substantial in-house IT department but the cost (and opportunity cost) of implementing a substantial IT project is significant and to undertake a major development in isolation is always risky. So Dexia looked for a partner that could support its overall SEPA strategy throughout multiple geographies. The bank wanted to retain complete control over what was finally offered to customers, but it also needed standard interfaces to all third parties - after all, a major theme of SEPA is standardisation.

Selling not building…

The VocaLink services offered all the benefits of an outsourced solution for payment processing without affecting the bank's customer relationships. Ownership and control of customer relationships is fundamental to Dexia's business model as a great deal of new business comes from existing customers. A key element of Dexia's marketing strategy is to sell compelling business propositions to existing bank customers. Speed to market is very important, as Mr Ruymaekers explains, "Dexia's job is to design and market SEPA products, not to build them."

Dexia sees SEPA as a real opportunity for banks like itself. With the right payments partner, the minimum scale of operation is reduced. The agreement with VocaLink has been designed to manage cost and to mitigate the operational and commercial risk while maintaining flexibility. Dexia believes that achieving success in SEPA requires a phased approach rather than a 'big bang' - as Mr Ruymaekers points out, "Too many large-scale banking projects have failed by trying to achieve too many major objectives simultaneously."

The arrangements with VocaLink allow Dexia to progress at a pace dictated by success. The commercial terms reflect practical delivery of solutions to business problems, each of which is underpinned by a sound business case. VocaLink provides the necessary incentive to drive success - Dexia can choose only those  service components that offer cost savings, new revenue streams, or both. And in the current climate, the mitigation of risk is important too.

As well as core payments processing services, Dexia chose VocaLink because it offered a roadmap to new revenue. E-payments will become of great significance as Belgium continues its drive to eliminate legacy payment instruments such as cheques. As the new order emerges from the current chaos, Dexia is keen to collaborate with other banks to develop new payment instruments and drive new standards. As Mr Ruymaekers suggests, "Competition does not mean going it alone, especially if you are a small-to-medium sized player in the European payment landscape."