Vocalink

WestLB

SEPA - one year on

WestLB is a major international bank, employing 5,700 people in 35 locations worldwide. It operates in wholesale and retail markets and is committed to offering its customers quality SEPA services throughout Europe. As part of its SEPA strategy, WestLB is a reach partner and client of the VocaLink Euro CSM. Steffen Kowalski recounts his experience of SEPA, one year on.

What has been the response to SEPA from your perspective?

WestLB was an early adopter of SEPA services. Volumes of traffic have fallen short of expectations, partly due to the economic slowdown, but they are beginning to grow. At present we process around 40,000 transactions per month and, since December 2008, payments can be processed in both directions. WestLB has reach to almost all banks in Europe. Most payments are from private individuals, but the arrival of the SEPA Direct Debit (SDD) will accelerate volumes. Germany is the largest user of direct debits in Europe and automatic mandate migration will be a major driver of the SDD.

Are you surprised by the slow uptake of SEPA?

No. We never believed that SEPA was going to be a big bang. To be successful, SEPA instruments must be of equal or greater value to the market than the existing instruments. We are all still learning and it was always going to take time to achieve harmony throughout such a large area. The introduction of the SEPA Credit Transfer (SCT) was the first stepping stone and a massive achievement. There are only a few complexities to resolve at a technical level - the real challenge now is to encourage mass migration to the new instruments. Mass adoption will give SEPA the commercial impetus to succeed.

What is the feedback from your customers regarding SEPA?

The general view from customers is that the potential is untapped. There is still a need for clarity around various customer propositions. Standardisation will benefit all, but only if there is widespread agreement and adoption. Business has still to harness the real potential of SEPA, but it will happen. Initiatives such as e-invoicing and centralised treasury management will help business make savings and improve efficiency. But success requires collaboration between all parties and across geographic areas.

What is the business case for SEPA from WestLB's perspective?

There are many. The most obvious is probably our ability to reduce the number of market connections and the associated costs. SEPA is the largest free-trade area in the world. The proliferation of the web and e-commerce means that consumers no longer think along the lines of geographic markets. The persistence of domestic payment systems was the last barrier to true free trade throughout Europe. SEPA is ultimately about customer empowerment. As a bank we exist only to serve customer needs and SEPA gives us the opportunity to grow the business - our pool of prospects is immediately enlarged. When we emerge from the downturn, WestLB will be in good shape to expand even further.

What are the immediate opportunities for WestLB?

We can reduce our dependency on nondomestic payment platforms. WestLB has adopted an open approach to SEPA - we have formed several alliances to ensure we offer customers excellent service throughout SEPA and beyond Our partnership with VocaLink has allowed us to overhaul operating costs while mitigating risk. WestLB must gain a competitive advantage by offering quality products and not through technical projects such as payments. In this way we can fulfill our SEPA obligations and deliver on everything that is promised by the WestLB brand.

What is the role of market infrastructures?

To date, infrastructures have been of greatest value where they provide robust clearing and settlement facilities. Going forward, given current market conditions and the cost pressures within the industry, all banks realise that they need to reconsider and evaluate the cost of delivering and running their own payment infrastructures. We believe that market infrastructures can share that burden and the risk.

What convinced you to work with VocaLink?

WestLB was already a customer and sponsor of EBA Clearing, which offers a singular channel for pan-European clearing. But we must leverage all potential relationships to manage our costs and provide excellent customer services and we try to channel as much as possible incoming payments via WestLB as a hub for the savings banks. VocaLink offers instant access to new avenues for European clearing. Additionally, in the future we will also benefit from value-added services from VocaLink. We are committed to harnessing as many relationships as necessary to support the emerging needs of our customers throughout Europe and beyond.