October 31, 2012 // By: Andreas Schmitz
European Payment Zone
It all began in March of this year: The EU agreed on the start date for the Single Euro Payments Area (SEPA). As of February 1, 2014, all of the European Union (EU) member states and the four members of the European Free Trade Association (EFTA) – Norway, Switzerland, Liechtenstein, and Iceland – will be required to facilitate transfers and direct debit payments “without differentiating between domestic and cross-border payments.” So says the official gazette of the EU, ordinance number 260/2012.
This means that every European money transfer from that date onwards will be processed via the International Bank Account Number (IBAN) – a bank account identifier up to 34 characters long containing a country code (such as DE for Germany), the account number, and bank routing number – as well as the internationally standardized Bank Identifier Code (BIC). This guideline for implementing SEPA was already established five years ago but was not binding for companies. The implementation rate is quite low as a result.
The Federal Association of German Industry (BDI) surveyed small and medium-sized companies (SMEs) as well as large companies in August of this year regarding their banking habits. Four out of five companies said that using the IBAN and BIC was “a matter of course” for them, yet only 27% of large companies used SEPA for at least half of their transfers. Just 16% of all SMEs felt adequately equipped to do the same. Forty-seven percent of all SMEs and 31% of large enterprises did not conduct any transfers via SEPA at all. And then there are the direct debit transactions. Rainer Böhle, spokesperson for the SEPA working group in the German-Speaking SAP User Group (DSAG), currently estimates the SEPA implementation rate here at 0.1%.
There was a lot of uncertainty regarding SEPA at this year’s annual DSAG congress in Bremen. DSAG’s SEPA working group, also founded in March of this year, is still far from having all the answers. In theory, the EU expects SEPA to speed up the processing times of payments within the EU. Transfers and direct debit payments to traditionally “slower” regions like southern Italy, where transactions currently take around a week to process, are anticipated to be completed within a day. Even Spain, where payments via direct debit are not currently possible, will be able to enjoy this convenience as of February 1, 2014.