EC Sets 2012 End-dates for Legacy Payment Systems

The European Commission (EC) has proposed to set EU-wide end-dates for the migration of the old national credit transfers and direct debits to the single euro payments area (SEPA) instruments. It will mean that national credit transfers and direct debits are phased out and the recently created pan-European systems take their place, respectively 12 and 24 months after the entry into force of the regulation. This will reduce the costs of payments, increase competition and make cross-border payments as easy as domestic ones. The EC’s proposal now passes to the European Parliament and the Member States for consideration.

Internal market and services commissioner Michel Barnier said: “We have a single market, many countries share a single currency and soon we will move to a single pan-European payment system in Europe. It means that making payments cross-border will become as easy as making them at home. Consumers will only need one bank account and their payments will be faster, cheaper and safer. Businesses will benefit from one set of standards and much simpler processes. The proposal adopted today fixes end-dates to make this pan-European system a reality, hopefully as early as 2012.”

The objective of SEPA is to increase efficiency and competition so that high-quality and competitively priced electronic payment products exist throughout the whole of the EU. This would mean that Europeans can rely on one bank account to make euro payments across 32 countries, while enjoying highly competitive services provided by banks. From 2012 money transfers will reach the beneficiary at least by the end of the next business day or faster and no deductions will be made to the amounts transferred. As a result, the process of paying bills will be even more convenient. SEPA benefits not only customers. Businesses will enjoy common standards, faster settlement and simplified processing for payments that will improve cash flow, reduce costs and facilitate the access to new markets.

Commenting on the announcement, Stephen Hawkes, product manager at Experian Payments, believes that the decision by the EC will help create certainty and stability across the SEPA region, giving both banks and corporates a timeline to work with. “Banks are currently still operating with dual payment processes – one for cross-border and another one for domestic payments – and the introduction of the SEPA payment system for both cross-border and domestic payments will remove costs associated with these dual payment systems. This should accelerate competition in the payments market and corporates should shop around to get the best possible service from their bank. As part of this process, we might see corporates putting pressure on their banks to pass on the cost savings made from changing to a universal payment system. Now that the end-date for migration has been announced, there are some actions that need to take place in order for banks and corporates to meet this deadline,” he said.

As part of the migration to SEPA, banks are required to replace their dual payment infrastructures while corporates need International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) in order to initiate validate payment instructions, as the mandatory international ID for all payments.

“Therefore, if corporates want to be ready for SEPA payments, they need to be able to collect their IBANs and BICs to update their customer and supplier databases. If domestic details are not updated by the set end-date, incorrectly formatted payments might lead to errors in transactions and additional costs. Unfortunately, obtaining the correct IBAN and BIC is up to the corporate and while many banks are happy to provide these details for their own customer accounts, most banks are reluctant to contact other banks in various countries, to obtain and generate the details,” Hawkes said. “However, corporates shouldn’t be thrown in the deep end completely, and banks should be communicating with their customers to familiarise them with the upcoming changes and support them throughout the migration process to minimise correction and rejection charges of failed payments. Ultimately, the more proactive the banks are, the more attractive they are for the corporates – a win/win situation for both parties.”


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