SEPA: Euro Payments Are Changing for the Better … and We Best Be Prepared

With active vendors throughout Europe we – like others worldwide – are facing the Euro Zone standardization initiative for cross-border payments called SEPA, Single Euro Payment Area. The challenge for many of us will be to meet the February 1, 2014 deadline so that vendor payment satisfaction is not impacted by our failure to confirm to these new regulations. Terms to Know SEPA – Single Euro Payment Area. An initiative affecting EU (and select other) countries that will simplify Euro-based payments between countries. SEPA processes are available for use today and will be required starting February 1, 2014. SWIFT – Society for Worldwide Interbank Financial Telecommunication. This network provides a standardized means of communicating financial transactions worldwide. BIC – Business Identifier Code. These codes are either 8 or 11 characters in length and identify countries, banks and branches. Each BIC is registered with SWIFT and is commonly referred to as a SWIFT Code. IBAN – International Bank Account Number. A code string of up to 34 alphanumeric characters used by SEPA as a means of uniformly identifying specific bank accounts, regardless of the participating country. The Requirement Currently, Euro Zone cross-border payments leverage an IBAN code which is communicated with the payment instructions for each vendor. This number incorporates the account number and other bank-specific information for routing the payment to the proper vendor bank account. SEPA will eliminate all of the local Clearing Systems within the affected countries and will standardize all payments for participating countries to a SWIFT-BIC/IBAN combination number. So, active vendor files expecting future SEPA-process payments must be updated to include the SWIFT-BIC and the IBAN numbers specific to that vendor’s country, bank, branch and account number. Financial transmissions must then include the SWIFT-BIC/IBAN information in order to process through the IBAN clearing system. And, there’s no need to wait … properly formatted and transmitted SEPA-compliant payment instructions can be processed today. Of note is that the SWIFT-BIC coding will be dropped by February 2016, relying solely on the IBAN number going forward. The Advantages SEPA-transmitted payments will not distinguish between in-country and cross-border payments. Participating countries will discontinue the use of national clearing systems and utilize the unified IBAN system for processing financial transactions. This is expected to improve bank competition, drive business efficiency, and boost the European GDP. Next Steps There is no one right answer to the vendor data update process, but the conversion choices range from internal to external resource deployment and from individual to mass conversion approaches. It depends on the size of your active vendor file, the capabilities of your internal systems, and cost-benefit considerations – including the ‘cost’ of delayed compliance. Certainly, European vendor forms, portals, or other data collection devices should now require IBAN information to be maintained going forward. I recently obtained a snapshot of what other major companies from across the globe are doing to address their SEPA conversion through a poll administered within the Peeriosity for Shared Services professional network, with the composite results now shared with their permission (see below; click to enlarge). Thirty-three percent (33%) of the respondents indicated that SEPA requirements will ‘extensively’ affect their origination, with 39% indicating a ‘moderate’ impact. Regarding the approach to conversion, you can see that half the reporting companies are making the data conversion with help from internal IT resources, with the balance split between relying on external technical resources and performing the vendor data updates one by one with each vendor update. Key Resources A Google of ‘SEPA’ will turn up scores of hits. While the Solar Electric Power Association is tempting, my favorite is the Southeastern Psychological Association … but don’t let your mind wander: it’s payment perfection we seek. You’ll discover online tools, advice, and services for hire. Tapping the resources of your European banking partners is a great starting point as well since – as we all know – successful international settlements is a team sport. One-off calculations of IBANs can be done at: https://www.ibancalculator.com/iban_and_bic.html Significant conversion documentation and definitions are located at: https://en.iban-bic.com/soap0.html Plus, a myriad of commercial sites and other online research is available – just a few clicks away. Conclusion Regardless of our states of preparation, or the magnitude of impact on our organizations, when we say Euro, from now on we need to speak SEPA. Note: Mark Seethaler will be contributing a regular column to SSON's website covering global payments. If you have any areas you'd like him to address, please ask your question in the comments box below or send an email.

SEPA: Euro Payments Are Changing for the Better … and We Best Be Prepared

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