SEPA Toolset:
Speed Implementation of Europe’s Payments Initiative
By Rashi Goyal, Nikhil Kamma
The pan-Europe SEPA initiative carries with it unavoidable business costs. European
banks, corporation and payment processors have made significant investments to
meet imminent SEPA regulations—with the total projected cost for migration to full
SEPA compliance expected to exceed €5 billion. A significant portion of these costs
will be incurred in bringing institutions’ IT environments up to SEPA compliance.
As a result, financial institutions are seeking cost-effective IT solutions that
accelerate SEPA compliance. The Cognizant SEPA Toolset meets this need by
providing a unique suite of tools—including horizontal prototypes, test data
generators, and ready-to-use simulators—to address the entire payment process.
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The Cognizant SEPA Toolset performs business validations, enables storyboarding,
and generates and parses customizable SEPA-compliant XML messages along
different points in the payment chain. The Toolset comprises two innovative
components:
- SEPA-DD tool. The SEPA-Direct Debit (DD) payment scheme is replacing current
domestic direct-debiting instruments in the European Union. Cognizant’s SEPA-DD
tool facilitates this transition. It generates EPC and Universal Financial
Industry (UNIFI) message scheme-compliant (ISO 20022) XML messages for
carrying out the direct-debit collection process.
The Cognizant SEPA-DD tool, along with Business Overview (BO) and Business
Requirement Overview (BRO), provides for:
- End-to-end simulation of the entire SEPA-DD collection chain
- All "pain" and "pacs" messages, including exception flow—reject, refund,
reversal and return
- Implementation of all mandate amendment scenarios
- Incorporation of various clearing and settlement mechanisms
-
SEPA-CT tool. This tool produces financial messages for SEPA credit transfer. It
generates customer-to-bank and bank-to-bank XML messages—based on ISO
20022 standards—at various points in the payment/collection chain by
accepting inputs such as debtor and creditor information, payment/collection
information, and settlement information. The tool conforms to implementation
guidelines set by the EPC.
In addition to acting as an XML generator, the SEPA-CT tool can also be used as
an XML parser for SEPA messages, especially during exception flows. All SEPA-specific
business validations can be simulated.
Another valuable innovation in the Cognizant SEPA Toolset is the Business Overview,
which lists business processes and underlying use cases pertaining to
implementation of SEPA-DD functionality. Features of the Business Overview include:
- Top-down view of SEPA Direct Debit business principles
- "As-is" and "to-be" business models
- Critical success factors
- Business strategy
- IT goals and strategy
In addition, a Business Requirements Overview function further accelerates rollout of
SEPA-related functionalities, by adding value to the entire software development
lifecycle. Features of the Business Requirements Overview include:
- Conceptualizes principles of SEPA-DD into technology-agnostic models
- Details process elements and their relationships
- Provides use cases that define process flows, exception flows and interfaces
- Includes business scenario mapping, which lists all requirements and their
mapping with use cases
Here are a few of the practical business challenges that SEPA regulations have
created for European financial institutions—and how Cognizant’s SEPA Toolset
addresses them.
- Increased competition. SEPA is standardizing the payment landscape, leveling
the playing field for all European financial institutions. This will result in increased
competition—so banks that quickly adopt SEPA will gain a competitive
advantage.
Cognizant’s SEPA Toolset helps banks accelerate SEPA adoption. It provides a
combination of ready-to-use software and other business artifacts, such as
business requirements and use cases. These facilitate faster time-to-market,
helping banks get ready for the new competitive environment.
- Cost sink. Since the SEPA regulation is seen as a cost sink, European banks are
seeking cost reduction strategies, especially in the current recessionary
environment.
The Cognizant SEPA Toolset provides a flexible migration strategy and phased
transformational roadmap. These are designed to achieve SEPA compliance with
minimal infrastructural investment, fostering lean, cost-effective solutions.
Among the business benefits of the SEPA Toolset:
- Serves as a horizontal prototype and helps in defining solution boundary
- Provides context for project requirements definition and solution design
- Facilitates requirements validation and development of XML parsers
- Reduces testing efforts and costs of re-work
- Enables automated testing, reducing test cycles by up to 50%
- Software development from scratch, or purchase of commercial off-the-shelf
(COTS) products. The Cognizant SEPA Toolset provides organizations with
the best of both these software worlds:
- It’s ready-to-use, helping banks stay in control without relying on third-party
vendors, and without the additional expense of software integration.
- It achieves the goal of COTS by incrementally reducing costs and system
development time in all software development phases.
Implications for the Future of Work
The Future of Work—major elements of which include globalization and
virtualization—require organizations to transform and modernize their IT systems to
succeed in the 21st century marketplace.
For financial institutions, that IT transformation and modernization is further
necessitated by SEPA regulations and other standardization initiatives. For example,
the payment landscape is complex and fragmented, requiring time-consuming and
costly maintenance and changes. However, large-scale transformation can be risky,
expensive and impractical. Banks require managed, business-driven transformation
of their IT infrastructure.
SEPA is a means toward this end. It provides standards that can be used not only for
generating inter-bank efficiencies, but also efficiencies across systems. Cognizant’s
SEPA Toolset helps achieve these goals by enabling banks to manage their systems
more optimally. It provides the following features and benefits:
- Value-added managed interface services for testing, maintenance and migration
- Optimized bank interfaces to support SEPA and evolving standards
- Easy integration of solution components from application providers
- Simplified infrastructure and decoupling from legacy systems
- End-to-end connectivity across bank systems
- Increased agility and efficiency in payments processing in banks
- Improved monitoring and better management oversight
For European financial institutions pressured to meet imminent SEPA regulations and
standards, Cognizant’s SEPA Toolset addresses two primary business challenges:
- As SEPA creates a level playing field for all financial institutions in Europe,
competition will increase in kind. Banks that accelerate their SEPA compliance will
gain a competitive edge. Cognizant’s SEPA Toolset can accelerate rollout of SEPA-related
functionalities, while adding value to the entire software development
lifecycle.
- With SEPA regulations generally seen as a cost sink, European banks are looking
for cost reduction strategies. The Toolset offers a flexible SEPA migration policy
and phased transformational roadmap that ensures cost-effectiveness in SEPA
compliance efforts.
Figure 1 - SEPA direct debit process
Figure 2 - SEPA credit transfer process