Companies are seeing considerable benefits from ‘next day’ payments for cross-border transfers which previously took several days – but when it comes to payroll, the more complex processes mean that the transfer of funds like payroll could be spread out over several hours.

Before Sepa, a local bank would receive the data file from a company, and send it to all the banks where employee accounts were held, for example. This could be done within an hour or so, and files sent on Friday could be processed on Saturdays.

However, with Sepa, the process is radically more complex, as the payment must go through an automated clearing house (ACH) and most local banks are not ‘direct participants’ for the ACH, relying on an intermediate entity.

This means files from the company’s local bank must go to the direct participant, then to the ACH and then to the direct participant for each of the banks with employee accounts before finally making it to the employee.

“This is still done within the ‘T+1’ deadline, but it does mean that employees used to getting their pay at a specific time need to be reassured that there is nothing wrong and that they just need to get used to the fact that the money will be in their account a bit later.

“Companies can certainly also help by sending the payroll data files as early as possible, particularly if pay day is Friday. Before Sepa, the payments could be processed on Saturdays but since the ACH is closed over the weekend, we are encouraging them to send the files early enough to ensure that all payments are made by Friday – as otherwise they might be delayed till Monday,” Central Bank of Malta head of payments and banking Herman Ciappara explained.

This issue is one of the very few that has arisen since credit transfers were migrated to the new Sepa system on May 1, three months before the August 1 deadline established by the European Central Bank. The original deadline was February 1, but this had to be postponed because so many member states were far from ready for the migration.

CBM and the Malta Bankers’ Association have been working closely with banks and their customers to ensure that Malta was ready for the credit transfers – but the direct debit transfers were a much harder nut to crack.

“There are only around 20-25 companies which use direct debits and of those only four have a nationwide clientele. They were all preparing for the Sepa migration and we did not expect to see any progress before the end of 2013. Three of these big companies switched over earlier this year and we saw dramatic rises in migration. The last of these companies is expected to migrate next month and we do not anticipate any problems,” he said.