We get a couple of questions asked quite regularly: “How can I make my ERP system SEPA compliant” and a more basic one “What is SEPA? And how does this affect my daily work?” With this blog entry I’ll try to answer these questions.
SEPA is short for Single European Payment Area – which is set up by the European Commission as a political agreement to reinforce the Economic Monetary Union. The goal is to form a single market for payment transactions within the European Economic Area. One of the ways to do this is to create a set of standards for electronic payments using ISO20022 XML format together with a set of rules and guidelines as to how Euro payments must be handled. With SEPA fully implemented, all electronic payments in Euro within the SEPA area will be regarded as domestic payments - even if they are cross-border payments.
With a common standard it will be easier to process payments, which will lead to more efficiency in the banking system and hopefully lower prices. It will also make it possible for companies that have business activities in many countries to only interact with one bank, since the cross-border payment is assumed to be the same as the domestic payment. The long term vision is that this standard can expand and also be used in other areas such as e-invoicing and e-reconciliation.
The SEPA implementation is still in its early stages. In January 2008, the SEPA instruments for Credit Transfer became available to be used. The Credit Transfer standard will be initially used for interbank relationships with regards to cross boarder euro payments within the SEPA Countries. Banks which talks about SEPA compliant refer to this fact, meaning that they are able to create these kinds of transfers. It is important to note that right now it is only required that banks can use this format when dealing with each other; it is not required that customers adhere to these standards in either customer-to-customer or customer-to-bank situations. It is also important to note that the SEPA only covers Euro transactions – not other currencies.
Looking forward it is expected that national instruments for credit transfers, direct debits and cards are replaced by the relevant SEPA instruments by 2010 and that customers will be able to use the standards for creating electronic payments.
This will affect Microsoft Dynamics NAV customers that have banking relationships within Europe. Short term there will not be a big difference – it will not be required that customers use the SEPA standard, when they interact with their bank. Furthermore it is also only a few banks that can accept the format today. It will be possible to ask the bank for a SEPA Credit Transfer, but it will be the bank that creates the file in the proper format. It is anticipated that many of the banks within the SEPA region will be able to receive a SEPA Credit Transfer in the near future, but it is expected that there will be a transition period where they accept the old electronic formats.
One thing to prepare for is that both Bank Identifier Code (BIC) and the International Bank Account Number (IBAN) is a crucial part of the SEPA standard. These two identifiers are needed to process a SEPA Credit Transfer. This mean these numbers will have to be correct when an electronic payment is created and is something that the customers can prepare for by requiring that these fields are used and updated when a customer or a supplier is created or updated in Microsoft Dynamics NAV.
One question that we also hear and want to comment on is “If I want to make a SEPA payment, am I required to create an ISO 20022 compliant XML file”? The answer to this is both Yes and No:
There are many places on the internet where it is possible to get more information on what SEPA is and what it means to businesses in EU and to banks. Many banks are also aware of the changes to come and what effect it has to their customers. I hope that the points above indicate that SEPA is an interesting new standard that potentially can make it possible to make interactions between Microsoft Dynamics NAV and banks more effective. From our perspective a common standard will make it possible for us to create bank integration that can serve more than one country or one bank – given that the banks stick to one schema! In the short term the thing to keep in mind is that it is possible to prepare for this by updating the data on supplies and customers, so that the creation of a SEPA compliant credit transfer can be created when it is required.
Some facts around SEPA
From the European Payment Council
From the European Central Bank
From the European Commission
- Rikke Lassen
We get a couple of questions asked quite regularly: &#8220;How can I make my ERP system SEPA compliant&#8221; and a more basic one &#8220;What is SEPA? And how does this affect my daily work?&#8221; With this blog entry I&#8217;ll