SEPA UK, the deadlines are approaching – what does this mean?

For the majority of the Eurozone, domestic SEPA (Single Euro Payments Area) became a reality by August 2014. For those Euro bank accounts not held in the Eurozone, SEPA deadlines are due to be enforced from October 2016. So what does this mean for UK companies?

SEPA refers to Euro currency payments

SEPA transactions are by definition those involving the Euro. The aim of SEPA is to provide standardised payments routing of Euros, at a standardised cost. This helps to remove barriers in making payments to, from and within Europe, and makes it easier.

The majority of UK payments are in Sterling and therefore not affected by SEPA. Of those that are affected, the most significant types of retail payment affected (by value) are Direct Debits and Credit Transfers.

SEPA is for domestic as well as cross-border payments

For cross-border payments in Euro currency, SEPA actually went live in 2008. UK companies making Euro payments to SEPA countries should have been complying with SEPA rules since then. The 2016 SEPA deadlines do mean some changes for all Euro payments, particularly around the use of BIC (see below). If you are sending Euro payments from a UK based bank account, to a recipient in the UK you will now need to adhere to SEPA from October 2016.

SEPA means changes to bank account data

SEPA means that you will need to submit payments with the bank account data in the appropriate format: the IBAN (International Bank Account Number). If you are storing bank account data in domestic or BBAN (Basic Bank Account Number) format e.g. bank account number and sort code, you will need to convert it to IBAN, preferably validating it first to avoid payment failures. click here for information on bank account data validation and conversion.

Payment files need to be submitted in ISO2022XML format

As well as the change of bank account data to IBAN, banks are obliged to accept payment files only in ISO2022 XML format. Companies affected may, therefore, need to change how they build payment files or will have to convert payment files to ISO2022XMLformat prior to submission. Those businesses that have already migrated payments made from Eurozone accounts may already have made this change.

SEPA and the BIC

From October 2016, changes are being introduced that will affect all SEPA payments from UK accounts, including cross-border. Until then, SEPA payment instructions require payers to include a BIC (Bank Identifier Code). From October, banks must accept payment instructions containing only IBANs.

BICs provide additional routing information; where this is supplied by the payer it can help route a payment when the IBAN is not completely correct. Any organisation looking to submit IBAN-only payments needs to be sure of the validity of those IBANs.While banks will be appending a BIC in order to route payments to the receiving bank, if the IBAN is incorrect they will not be able to do this and, therefore, the payment would not be successful.

So although the UK is not in the Eurozone, there are changes which organisations based in the UK but doing business in Europe will need to prepare for.

For more information on SEPA please email sepa@uk.experian.com

To find out if an IBAN is valid or convert a BBAN to IBAN click here to try Bank Wizard