The clock’s ticking as new Euro rules expose businesses to €20 billion payment bill

European businesses risk losing billions of Euros as a result of failure to tackle simple payment errors according to a new Experian report

The switch to a single SEPA payment system – designed to simplify and streamline processing operations for domestic and international payments – will expose out-of-date account data and other errors that were previously overcome through a patchwork of locally implemented fixes.

SEPA becomes mandatory in February 2014 for Eurozone countries and 2016 for any businesses in non-Eurozone territories wishing to make and receive payments in Euros.

Experian analysis of more than 500,000 bank account records held by businesses around Europe revealed that around one in eight (12%) electronic payments made to and from businesses in Euros currently contain data errors that could critically block the timely and cost-effective transfer of funds when new SEPA (Single Euro Payments Area) legislation first comes into effect in February 2014.

Only around six out of 10 (65%) Euro transactions are underpinned by fully accurate destination account data.

It also emerged that less than half (45%) of new SEPA-compliant International Bank Account Numbers (IBANs) stored by large European businesses do not have the valid corresponding Bank Identifier Codes (BICs) required to enable successful completion of transactions.

Experian has warned that these same error types will lead to payment failure when made through SEPA, costing businesses approximately €50 for each failed transaction – leaving a total bill of more than €20 billion a year.

An average error rate of around one in eight equates to a potential cost of €600,000 for an organisation transacting with 100,000 bank accounts.

Jonathan Williams, Director of Payment Strategy at Experian, says the SEPA initiative is a key component to strengthening the financial foundations of the Eurozone with improved and more efficient end-to-end straight-through processing of payments.

While SEPA will undoubtedly benefit organisations trading in Euros, errors in bank account details held by European businesses risk causing significant teething problems as locally implemented fixes – which have largely worked so far – are made redundant by the new common payments system.

European businesses need to analyse their account data, fix any errors and convert this information to the correct SEPA standard, to ensure suppliers, partners and staff continue to get paid on time when the new rules come into place. Early adoption is crucial. If left to the last minute, the SEPA requirements have the potential to be both disruptive and costly.