What changes does SEPA make to the principles of accounts payable reconciliation? In what ways do these changes prepare us for real-time payments?
Since the 18th century, a key principle of account reconciliation has been monitoring account balances. When applied to payments, by comparing deposit amounts and the amounts of outstanding payments due, you can quickly validate all transactions, even given the possibility that two errors could offset each other. Until now, banks have accommodated this method through technological transformations. Bills of exchange were submitted electronically on tape, then on disks, and finally in bulk, and by monitoring the totals it was possible to quickly verify transaction packets.
SEPA could bring an end to this system. The two key elements of this type of verification are the aggregates and amounts, which SEPA does not support well. A single group of transactions must be separated into First and Recurring transactions, with different submission times. Returned transactions could include a bank surcharge, which would change their amounts.
What SEPA does is prepare us for continuous-flow bank processing, the key to the real-time banking of tomorrow. For the first time, SEPA introduces the concept of end-to-end payment references, chosen by the user, which will remain associated with every individual transaction no matter what banking service intermediaries are used. From now on, this unique key will be the only way to reconcile a payment order and its corresponding deposit with certainty.
Once these end-to-end payment references are in place in merchants’ management systems, automatic, real-time reconciliation can be performed. This is the only error-free approach when dealing with cancelled transactions and transactions submitted multiple times.
In order for SEPA to achieve its full potential, software developers will have to take advantage of this new approach, or risk losing control of reconciliations, and not helping merchants transition to the payment processing of the future.
