SEPA 2.0

I’m not entirely sure we all agreed on what SEPA 1.0 was, but now talk has turned to SEPA 2.0.

From the recent e-mails I’ve received and articles I’ve read there are several different angles as to what constitutes SEPA 2.0. For me most of these are actually just a continuation of how SEPA was originally conceived rather than a ‘new version’ however I’ve picked out 3 main themes that are being termed “SEPA 2.0”:

1. Gaining advantage from SEPA – particularly for corporates.

Complying with SEPA was necessary and mandated, but many corporates understood their obligations rather late in the day.  Even though the end dates for the SEPA migration were pushed back by as much as six months, this wasn’t universal and, out of necessity, compliance became a rush to the deadline.

SEPA, however, is supposed to offer benefits, but more than mere compliance is required to achieve them. With a little time to reflect corporates are now looking to take advantage of their investment. With a level playing field for in-country and cross-border payments, can they consolidate bank accounts? Do they need a banking partner in each country? Many corporates have said that SEPA can support moves to a shared financial service centre. Then there’s the data standardisation and richness that ISO20220 XML supports: what can that help them with? Perhaps reconciliation or harmonised customer support and accounting processes.

2. Migrating ‘the rest’

SEPA as implemented in 2014 had some notable exceptions, these included countries which make Euro payments but don’t use the Euro as their primary currency and certain niche, national payment schemes. For these outliers SEPA compliance comes into force in 2016. To comply, those affected will need to go through the same processes as those already migrated. At least they’ll have a model to follow and indications are that they are ahead of the curve.

3. IBAN only and the intra-bank space

As implemented today, SEPA has a need for a BIC (Bank Identifier Code) as well as an IBAN (International Bank Account Number) in a significant number of SEPA countries. To use a simile: if the IBAN is an address the BIC is the postcode. When submitting payment files both IBAN and BIC are provided.  In the SEPA schemes, BICs are required in order to route payments to the correct receiving bank. From 2016, payment service users in any EU country can choose to submit IBAN-only for payments. This means that their bank or PSP will need to find the right BIC to correctly route the payment. Solutions are available allowing a BIC to be derived from a valid IBAN, the key point here is that the IBAN must be valid. In the relatively short time IBANs have been in common use, a 2.2%* error rate relating to outdated bank codes has already been accrued. When deriving BICs, a solution must be chosen that caters for invalid IBANs and this must happen consistently across the SEPA zone to ensure continued smooth flow of payments.

Experian IBAN and BIC

Bank Wizard from Experian offers multi-level validation for international bank account data, data is validated at both domestic (BBAN) and IBAN level and the corresponding BIC is provided. To find out more about Bank Wizard click here to take a free trial.

For further information on bank solutions for IBAN-only payments, please click here to send me an e-mail.

*2.2% derived from analysis of data submitted to Experian for IBAN validation