Single Euro Payments Area

[tabbs]

Today the EU member states (Ecofin Council) agreed on the "Payment Services Directive" which means that various cashless payments should become easier. A short press release is here: http://www.consilium.europa.eu/ueDocs/c ... /93332.pdf The Payment Services Directive is the EU's legal framework for the Single Euro Payments Area (SEPA). If the European Parliament approves of the draft directive (EP session on 23 April), the Council's formal OK could follow in May.

That means that money transfers are to become faster, but - for those who still use paper forms - new standardized transfer forms will be introduced as from 1 January. (I think that future transfers will require the use of IBAN and BIC even for payments within the same member state, but I am not sure about that.) Also, direct debit payments will be possible within the entire payments area, and any ATM in the EU should accept any (?) bank card.

Hmm ... sounds basically good. But that could reduce the amount of cash (including euro notes ) needed in the future.

Christian

[GorazdR]

It is inevitable. For the single currency to work at it's best, all monetary mechanisms have to be implemented. The barriers between eurozone countries (and EU as a whole) have to come down.

[Ewri]

SEPA has been introduced as from today here.

From now on, banks should not discriminate between transfer of funds from one bank to another in the same country, and those between countries in the SEPA, and IBAN Nos and BIC are mandatory now.

[tabbs]

Yes, SEPA was launched in all EU member states today, plus a few neighboring countries such as Norway or Switzerland. But I guess the transition period will be fairly long. Here in Germany, for example, bank customers can choose whether they want to use "SEPA style" banking or not. If they don't switch, they can still make domestic transfers using the account number and the BLZ bank code, as well as transfers to accounts elsewhere in Euroland using the BIC and the IBAN at the same price.

For businesses it may be more attractive to use SEPA payments sooner rather than later. For many others ... well, SEPA will be more interesting for me when it also means broader cross-border use of debit cards, or when can pay, say, a company in Malta via direct debit. That will take some more time though.

Besides - my BLZ and account number I know by heart. The BIC and the IBAN? Umm, lemme see, I have it written down somewhere ...

Christian

[Dakkus]

According to the current plans, there will be no international direct debit. Actually, what they are planning is to completely abolish the direct debit system even in countries where it is currently actively used (such as Finland and Germany). It will be replaced by the so-called "electronic bill".

If these current plans make it through, it will be a total disaster for all the help organizations such as Unicef. Currently half of Unicef's income from the Finnish donors come through direct debit systems from people's bank accounts after they have agreed to do that (that's the most efficient way of monetarily supporting such organizations, BTW, because that way the money collection costs are extremely low and it also gives a possibility for better long-term planning than the other ways of donating).
Now, the new electronic bill would require the person to accept the payment each time in his internet bank. That will not only be very annoying for the person who's used to the money transfers being easier, but it will also dramatically lower the amount of money the help organizations get.

If Unicef loses 50% of its income because of a change like this, then... *Shudder*

Luckily these are still mere plans and can still be cancelled, but they sure do frighten me!

[tabbs]

Well, I hope such problems will be dealt with properly by the end of next year; as far as I know, direct debit or rather its SEPA successor requires a new legal framework which just is not there yet.

Another problem is that with SEPA transfers, numbers become more important than names. This may already be the case in parts of the EU but so far it has been a little different in Germany: If you want to transfer some money to Joe Blow's account and enter his name but, accidentally, Sam Smith's account number, you can get your money back if the banks "sends" the payment to Sam's account. With a SEPA transfer, the account number has a higher priority according to recent press releases of consumer organizations. So when you enter a IBAN (which can have more than 30 chars/digits) be extra careful ...

Christian

[helloggs]

Why would anyone want to use IBAN for domestic transfers if it is not mandatory? Apart from the fact described by tabbs ('another problem') it is inconvenient (far too many digits) and I doubt very much that all vendors issue invoices that contain all the necessary information. So once you 'switched' to SEPA you'd always have to inquire about the IBAN #... So no wonder that banks don't communicate this new option a lot (one could also say they keep it as a secret... )

Personally I don't have an advantage anyway as transfers to the Euro area are offered free of charge by my bank since a long time now. (of course with IBAN)

[Ewri]

Here there's quite some publicity for SEPA, although it is still not working to its full capacity.

As for IBAN Nos, they have been available on our bank statements for over 2 years now.

[tabbs]

Personally I don't have an advantage anyway as transfers to the Euro area are offered free of charge by my bank since a long time now. (of course with IBAN)

Same here. Guess that in this first phase - for several years - it will be mostly companies and public bodies that use this feature. Other SEPA aspects will probably be more attractive for the "average consumer", e.g. we should soon be able to use our EC/Maestro debit cards for payments, ideally in all 30+ participating countries. Currently they work for cash withdrawals from ATMs, and for POS payments in some countries only ...

Some more info in German:
(Bankenverband) http://www.bankenverband.de/sepa
(Verbraucherportal) http://www.infos-finanzen.de/sepa

Christian

[tabbs]

Since the BIC and the IBAN are not used much for "domestic" payments, the European Commission plans to fully implement these SEPA instruments within the next few years. http://europa.eu/rapid/pressReleasesAct ... anguage=en" onclick="window.open(this.href);return false; Well, the German IBANs for example have 20 digits plus the leading "DE". Awfully long, and in some recent articles I have seen the term "IBAN The Terrible".

What I don't understand is: A German IBAN is basically a combination of the bank code (BLZ, 8 digits) and the account number (10 digits), plus four extra characters/digits. If we have a "number" which identifies the bank anyway (the BIC), wouldn't those four, maybe five, extra characters be sufficient for routing purposes? This way we would have account numbers with, say, 15 digits instead of 20+ ...

Oh well, too late, I assume. Maybe I will, instead of transferring money, use my credit card more often. 16 digits only, hehe.

Christian

[Dakkus]

In Finland you don't need to write the BIC if you are transferring the money inside Finlan. The IBAN is enough for that and the banks fill the BIC automatically according to the IBAN. Another way of making it easier.
Thus, the bank account numbers haven't actually gotten that terribly much longer.

Earlier they looked like this:
123456-78901234, where the first part tells the bank and the second part is the account number.
The current system looks like this: FI1012345678901234, thus it first tells the bank with the first four digits, then the more precise bank information with the next six digits and the account number with the eight last digits.
I wouldn't say things have gotten much more complicated in Finland. All in all there are now four more characters in the number than there used to be.

[tabbs]

In Finland you don't need to write the BIC if you are transferring the money inside Finlan. The IBAN is enough for that and the banks fill the BIC automatically according to the IBAN. Another way of making it easier.

Indeed; maybe that could be an option for DE as well. Also, it should be possible (at least for online banking and at least for some transitional period) to enter the bank code (BLZ) andf account number in the "classical" format and the bank then does some automatic conversion. "Should" as in: I hope it can be done ...

Christian

[Dakkus]

Also, it should be possible (at least for online banking and at least for some transitional period) to enter the bank code (BLZ) andf account number in the "classical" format and the bank then does some automatic conversion. "Should" as in: I hope it can be done ...

Christian

This is currently done at least by Nordea's internet bank in Finland and at least if the minus between the bank part and the account part is left away (thus 121212-34343434 is written as 12121234343434).

EDIT: I happened to have a bill I had to pay, so I tried it by writing the old style number with the minus in the correct place. And it got changed to IBAN+SWIFT.

[tabbs]

The European Parliament agreed to the SEPA "migration deadline" of 1 February 2014 yesterday. By that time, all payments within the euro area (domestic or cross-border) will be SEPA payments and use the International Bank Account Number (IBAN).

(news article) http://www.fx-mm.com/12365/news/meps-vo ... -deadline/" onclick="window.open(this.href);return false;
(EP press release) http://www.europarl.europa.eu/news/en/p ... r-payments" onclick="window.open(this.href);return false;
(EP interview) http://www.europarl.europa.eu/news/en/h ... c-payments" onclick="window.open(this.href);return false;

After Feb-2014, banks may still allow their customers to use older account identifiers (in Germany, for example, that would be the BLZ bank code and the account number) for another two years when making a payment. But then the bank needs to "internally" convert the data to the IBAN system. This transition phase will end in Feb-2016.

Current both the BIC and the IBAN are needed when making a cross-border transfer in the euro area. As from Feb-2014 the IBAN alone will be sufficient for domestic payments; two years later the BIC will not be necessary for other euro area payments either.

Christian

[Ewri]

Thanks for thus update, Tabbs.

I wonder when will the Italians realise that the IBAN No is necessary, and not the old ABI & Cab as they usually supply their customers.