Single Euro Payments Area

Europe is on the way to a single payments market, the Single Euro Payments Area (SEPA). When this single payments market is in place, businesses and consumers will be able to pay everywhere in the same manner.

In order to ensure that euro payments in this area take place in the same manner everywhere in future, new standards are being introduced in payment transactions for the account number, payment instruments and processing of these payment instruments. The IBAN account number, transfers, direct debits and payment cards will be able to be used both for domestic and cross-border euro payments in future.

A single payments market has advantages for businesses and individuals who make payments abroad or receive payments from abroad. Companies that do business internationally will be able to pay out salary to both domestic and foreign employees easily and in the same way, for instance. The new standard also makes it possible to collect from foreign clients.

SEPA (Single Euro Payments Area) encompasses all 27 countries in the European Union, plus Norway, Iceland and Liechtenstein (who are members of the European Economic Area) and Switzerland and Monaco. In total it includes the following 32 SEPA countries: Belgium, Bulgaria, Cyprus, Denmark, Germany, Estonia, Finland, France (including French Guyana, Guadeloupe, Martinique, Réunion), Greece, Hungary, Ireland, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, the Netherlands, Norway, Austria, Poland, Portugal (including the Azores and Madeira), Romania, Slovenia, Slovakia, Spain (including the Canary Islands, Ceuta and Melilla), Czech Republic, United Kingdom (England, Scotland, Wales, Northern Ireland), Sweden and Switzerland.

Countries that do not have the euro as currency are also part of SEPA therefore. The new technical standards and products only apply for payments in euros, however, and not for payments in other currencies.

Payments are mainly arranged on the national level at the moment. This has resulted in a variety of technical standards, infrastructures and types of payment instruments throughout Europe. The new (SEPA) standards put an end to the differences between payment systems, which means euro payments will take place in the same way everywhere. Account numbers (IBAN), transfers and direct debits for domestic and cross-border payments will be able to be used throughout SEPA.

IBAN stands for International Bank Account Number. This account number is now mainly used for cross-border payments, but in future will also be used for all domestic payments.

The IBAN is put together in a similar way in every country. The number consists of the account number currently used preceded by the country code (NL for the Netherlands), a control number (two digits), a code corresponding to the bank (in the Netherlands this is four letters) and one or more zeros. In the Netherlands the IBAN has 18 characters; in other countries this ranges from 15 to maximum 34 characters.

All account numbers issued by Dutch banks are, in principle, included in the IBAN BIC Service. In some cases the account number may not be able to be found. This could be the case for some savings accounts, foreign currency accounts or account numbers that were recently issued, for instance. In this case contact the person, company or agency whose IBAN you want to know.

It is important that you inform your clients about your IBAN on time. Also make sure to update your invoices, stationery and other correspondence containing these details.

The number of characters in the IBAN can vary, but the structure is the same everywhere so it can be easily processed in the payment system. The difference is due to the bank account numbers that each European country currently issues individually. These bank account numbers differ in length. In addition, some countries already work with national bank codes, which is standard in the IBAN. This is new for the Netherlands. The national bank code in the Dutch IBAN consists of the four letters of the current bank.

The BIC (Bank Identifier Code) of the banks in the Netherlands has eight characters: four letters for the bank code, two for the country code and two for the city code. For instance, KAS BANK's BIC is KASANL2A, Rabobank's BIC is RABONL2U and ING's is INGBNL2A. The BIC and the IBAN together are needed to enable payment transactions to take place between banks.

The European Regulation stipulates that businesses and consumers can suffice by providing an IBAN when issuing a payment order to the bank. For domestic payments this applies from 1 February 2014, for cross-border payments from 1 February 2016. The bank will then add the BIC in order to be able to properly process the payment order.

Before the European legislation became definitive, it was assumed that commercial parties would supply bulk payment orders with IBAN and BIC. The banks' systems have also been set up for this. The banks will further work out the changes to these systems together with the commercial parties involved.

With the new standard for transfers, SCT (SEPA Credit Transfer), payments can be made uniformly to parties in the Netherlands and to parties in the other SEPA countries. The changes are:

• The IBAN will be used instead of the account number used currently. The IBAN may be maximum 34 characters.
• A notification accompanying the transfer may consist of maximum 140 characters, 44 more characters than can currently be used for transfers, therefore.
• The payment reference is being expanded from 16 to 35 characters.
• The format for companies for delivering bulk transactions will be ISO 20022 XML. The new standard for transfers has existed since 2008.
  

Just as for transfers, there will also be new standards for direct debits, deDD (SEPA Direct Debit). These provide room for the IBAN. This means that it is possible to authorise a supplier abroad to debit funds or to issue international debit authorisations one's self. The new standard for direct debit has existed since 2010, in addition to the current direct debit standard, but is still only used on a very limited scale. The new standard will be fully introduced by 1 February 2014 at the latest.
 
The new standards for direct debits entail quite a few changes for businesses: different delivery periods apply for direct debit batches at the bank, for instance. There are also guidelines on informing debtors in advance about the amount and moment that direct debit will take place (pre-notification). The administration and authorisation management will also require the necessary changes in your operations. The file formats for delivering bulk transactions will change to ISO 20022 XML.

There are two types of direct debits: the standard direct debit and the commercial direct debit.
 
The standard direct debit is used for payments from private individuals, but can also be used for direct debit payments between businesses (in that case the standard transaction reversal period of 56 days naturally also applies). The current authorisations will remain in effect and do not need to be obtained anew. In a few years authorisations will also be able to be given digitally (e-Mandate).

Companies must add a number of pieces of information to the authorisations:

• Collector ID - Every company receives this from its bank.
• Authorisation reference – Every existing authorisation will be given a unique reference of maximum 35 characters. This reference may be determined by the company itself. This could be the debtor number, contract number or just a serial number, for instance.
• Debtor's IBAN – This can be found using www.ibanbicservice.nl, a temporary transitional service offered by the banks.
• Date the authorisation was signed – The date of signature has not always been recorded up to now. That is why it was decided that the date of 1 November 2009 will apply for all current authorisations in existence. The actual date of signature will apply for new authorisations.

 
The commercial direct debit is the new variant of what is now the business direct debit. Companies can use this to issue and receive authorisations from Dutch and European companies. The major difference is that there is no transaction reversal right (the current business direct debit has a period of five working days). New authorisations will be needed for the commercial direct debit therefore.

KAS BANK will inform you about the changes in due time.

The Payment Association will provide technical documentation and specific guidelines for the various payment instruments. For the time being you can find these documents at www.sepanl.nl.
 
Soon all this information will be published on the Dutch Payment Association's new website (www.betaalvereniging.nl).

The bank-specific details from KAS BANK will follow at the end of the 2nd quarter of 2012.

Your current software supplier can inform you best about the changes needed in order to be able to introduce the new standards. If, for example, you use an accountancy package, you will have to make a number of changes. The format for supplying files is changing to XML ISO 20022, for instance. You will also need to gather additional details for your records from your clients and other business relations, including their IBAN.

Contact your software supplier in a timely manner therefore. Also ask whether any changes are needed for reports and the automatic reconciliation.

Nothing will change with the giro collection form for the time being. A decision will be taken in the first half of 2012 on whether any changes will be made to the giro collection form after 1 February 2014 and if so, how its function will be carried out.

KAS BANK will continue to offer its current clients the giro collection form pending this decision. This service will no longer be offered after this point.

Until 1 February 2014, the current and new payment systems will exist alongside each other: one for the account numbers currently in use and one for IBAN. Until that time, businesses and consumers will be able to use either their account number or their IBAN.

The introduction date of 1 February 2014 is set down in European legislation. At that point, all 32 countries in SEPA (Single Euro Payments Area) must have changed over to IBAN. An end date provides clarity for all providers and users of the payment system. An end date also keeps the transitional period in which the two systems must be used alongside each other as short as possible.

Consumers and businesses have time to get used to the IBAN as account number. And businesses can prepare to adapt their administrations, systems and software to the new standards.

No. Both consumers and businesses have until 1 February 2014 to change over from the account numbers currently in use to the IBAN. Until that time, the 2 payment systems will remain in use alongside each other and either the account number currently in use or the IBAN can be used. This also applies for transfers and direct debits. The National Forum for the SEPA migration (NFS) has set up a national migration plan reporting the timelines for the various groups of providers and users of payment transactions.

The migration in the Netherlands will be guided by the National Forum for the SEPA migration (NFS). The NFS was established to properly organise the transition to SEPA together with all the parties involved. In this forum, Dutch providers and users of payment transactions exchange information, discuss the desired approach and make agreements on the migration in the Netherlands. The Forum has set up a National SEPA Migration Plan, for instance. This is necessary because a smooth transition requires good cooperation and coordination. The NFS is chaired by De Nederlandsche Bank (DNB).

The account number currently in use and the current standards for transfers and direct debits will no longer be able to be used from 1 February 2014. If you have not changed over by then, pursuant to European legislation no use can be made of the national payment transactions any longer.