Only 2.5% of direct debit payments and 45% of credit transfers are compliant with the Single European Payments Area (Sepa) standard, despite being required to be by February next year, according to Experian research.
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UK businesses could miss out on the benefits of standardised payments across Europe and the ability to centralise payment processing hubs.
Many businesses in the UK have been slow to start Sepa migration projects because they think because they are not in then Eurozone it does not affect them.
But in February next year, all European businesses making and receiving payments to and from the Eurozone – which includes most large UK businesses – must do so using the Sepa standard. This means using International Bank Account Numbers (Ibans) and the ISO2022 XML format.
If they fail to have their systems ready, businesses will be reliant on the banks or third parties to complete the transactions. But the banks will only do this for a short period and third parties will charge, so businesses will have to migrate.
The aim of Sepa is to streamline euro payments.
In 2008, a European Commission study found that: "Potential benefits from Sepa in payments markets alone could exceed £91bn over the next six years – and a further £177bn if Sepa can be used as a platform for electronic invoicing."
More on Sepa payments system
But despite the fact that the project has been around for years, there is a race against time for compliance.
This is partly down to the fact that the deadlines were long, making businesses too slow to start and a lack of understanding of the need to be compliant among non-Eurozone countries in Europe.
Jonathan Williams, director of payment strategy at Experian research as well as that from suppliers such as Steria and Capita, points to the fact that many corporates are yet to migrate their payments systems to Sepa compliant ones.
He said it will take between 12 and 18 months for businesses to migrate and with six months to go before the deadline, there are many companies that have not even started.
“I was recently at an event in Ireland and when I asked businesses about their Sepa migration, about 40% had not even started,” Williams said.
This process includes ensuring systems such as ERP (enterprise resource planning) software is compatible or has been upgrade, make sure the data format can be stored and ensure staff are trained on new processes.
Williams said Experian is coming to the end of its own journey to Sepa compliance. “We started our project a long time ago and we just have to make changes to some line of business systems.”
He said that countries are starting to create penalties for non-compliance.