SEPA Migration: how will it affect my business?

The Single Euro Payment Area (SEPA) harmonises the way how payments are effected in euro. The SEPA project started in 2001 and we have now reached another phase in this project whereby by 1 February 2014 all retail credit and direct debit transfers in the euro area have to fulfil the requirements of SEPA.

There are 33 SEPA countries and the aim is that in all of these countries there will be a harmonised legal framework, common standards and same payment instruments. Such standardization will make it easier to achieve monetary integration in Europe. It will also benefit persons and companies in all SEPA who make or receive payments within or outside their own country since there will be the same basic conditions, rights and obligations in all countries.

From 1 February 2014 all bank transfers will be made using the full IBAN (International Bank Account Number) and BIC (Bank Identifier Code). In Malta these are currently not required for local transfers since the domestic account number is sufficent. As from 1 February domestic account numbers will have to be replaced by the IBAN number and the use of the BIC will also be necessary until the year 2016. The use of these numbers were already a requirement when making cross border transfers. These numbers will now require to have the same format and standardization in all SEPA countries.

Small businesses which use cheques or internet banking to effect payments will not be facing many changes. Such businesses need to obtain the IBAN and BIC of their employees and suppliers if they pay these by bank transfer. It is also important to provide the IBAN and BIC to clients so that there will not be any problems to receive payments. Where bank account numbers are disclosed on sales invoices and statements, these have to be revised to include IBAN and BIC.

Other businesses who use bundled data when making payments or receive payments through direct debits need to make more changes as follows:

  • Direct Debit mandate forms need to be changed to be in line with SEPA format
  • Credit transfer files will need to be changed to the new format.
  • Credit transfers and direct debit transfer batch payments file formats need to be based on ISO 20022 XML standards for sending payment instructions to banks and also for receiving rejected payments information.
  • Accounting, payroll and payment systems need to be updated to incorporate and understand IBAN and BIC formats and also to read and generate XML formats.