GUEST BLOG: SEPA extension – use this additional time wisely

By Kevin Murphy, managing director of Colthurst Card & Payment Solutions

Following delays in some EU member states, the European Commission has extended the SEPA deadline by six months to August 1st. This means that Irish businesses now have more time to get organised and ready for this payments changeover. It’s a valuable time for those who still have work to do to make their payment systems compliant.

Although SEPA has formally come into existence from February 1st, payments made in other formats will be accepted for another six months but it’s worth using this time wisely.

Firstly, it’s worth auditing your current systems to understand the overall impact for your business. If resources allow, it’s a good idea to nominate somebody within your company who is responsible for SEPA so that there is a constant internal focus on the strategic options and implications.

Under SEPA, banks are now required to apply stricter data quality and data completeness checks in processing existing payment files so keeping on top of compliance is essential.

There are a few key elements to look at to get this process started:

• Companies will now need to familiarise themselves with the BIC and IBAN’s of their own business and that of their suppliers. Equally, when making electronic payments from the business you will need to use your suppliers BIC and IBAN.
• This has ramifications in a few different ways, for example, for electronic payments coming in to your business, suppliers will need to know the BIC and IBAN of business accounts. (Basically SEPA will affect how people pay you or how you get paid).
• Likewise the branch number and account number data on internal systems and spreadsheets has to be upgraded to BIC and IBAN. This will therefore affect processes like your invoice systems, payroll, and direct debit arrangements.  Failure to comply with this may result in items being returned unpaid.
• However the BIC/IBAN conversion may not be straightforward as some branch numbers are actually ‘redirected’ branch numbers and so they don’t have a direct conversion. For your business, this means a thorough validation of the existing database.

Furthermore, the whole area of direct debits requires particular attention. SEPA Direct Debit brings with it a number of important business changes: new file submission time frames, new customer file formats and new automated process for rejected/returned transactions. SEPA Direct Debit now allows you to collect payments in euro from domestic and cross-border debtors throughout SEPA.

So this means the following considerations for your business:

• Customers now have additional rights and revised time-frames to return DDs – there is a no quibble return available to them.
• In future, the company will also need to hold mandates so it’s key to properly verify these when taken.
• The notion of foreign bank accounts may be rendered unnecessary in the future as with SEPA payments can now be made from and to anywhere in the Eurozone. (SEPA will cover the 28 EU member states plus Iceland, Liechtenstein, Monaco, Norway and Switzerland when fully operational.)

This next deadline will be the final one – governments and regulators are closing in on this and pressing ahead so get yourself up to speed and ensure you are ready when August 1st rolls around.

The impact of SEPA will affect us all, consumers and business owners alike.  I’ll be monitoring this progress, and covering more on this over the coming months on my blog.