POBO - time to leverage the SEPA investment

Now that SEPA is in place, corporates will be able to leverage that investment to start making payments across the entire eurozone using a single instrument from as little as one bank / account. The idea of collapsing down to one Euro account for all of those payments across the entire eurozone is made possible under SEPA.  And introducing a POBO structure allows a corporate’s holding / governing entity to make all their non-urgent Euro payments from one account regardless of the originating entity.  Actually, there’s even talk about processing urgent payments via the SEPA instruments so before long it might truly be ‘all’ payments.

One of the challenges of POBO is how you enable the payee to see who is really paying them.  They could receive a payment from a company name that bears no relation to the underlying entity that they actually did business with – a potential headache for any A/R team and / or recs process.   But with SEPA, the Credit Transfer (SCT) message (ISO20022 PAIN.001) supports the concept of the ultimate payer to help provide that visibility.  The SCT allows the information to flow through the clearing mechanism to the beneficiary, who then sees who the ultimate payer was when they receive the credit in their account and a line item in their account statement.

For corporates considering a POBO structure, SEPA has meant that the Eurozone is a good place to start.  And once in place here and the benefits realised, pushing it out to other geographies potentially becomes easier to sell internally.  And that’s without even considering the benefits for those subsidiaries located outside of countries where POBO has been implemented.  Take a US-based subsidiary for example – they can take advantage of a POBO structure in Europe so that instead of having to enter into a potentially costly one-off foreign exchange deal to pay a supplier in the Eurozone, they can just make a domestic payment via the holding company and then be charged appropriately as an intercompany movement, in dollars.

As we have seen, an organisation can benefit greatly from a POBO structure.  And for payment professionals considering implementing this structure, SEPA has transformed the eurozone into an almost ideal launchpad.