SEPA Migration Checklist
Single Euro Payments Area (SEPA) standards become mandatory across 17 Euro member states on 1 February 2014. If your organization initiates Euro ACH payment or direct debits, action needs to be taken to ensure compliance. This email series is intended to provide you with relevant information and practical guidance.
Do I need to use ISO 20022 XML for SEPA transactions?
SEPA and XML
- The key aim of the SEPA Regulation is to ensure that the European payments markets move from legacy domestic formats and standards for credit transfers and direct debits in the low value payment space to the harmonised SEPA standards. As such, the regulation included a number of points to drive further adoption of SEPA and harmonisation of the SEPA schemes.
Bank to Bank
- The SEPA schemes have been designed to be standardised on basis of ISO 20022 XML, with banks being required to send and receive ISO 20022 XML when exchanging SEPA messages. While the infrastructure of most banks is ready to process ISO 20022 XML, there are still some banks that are not yet fully ready. The Regulation reaffirms that for payments that fall under its scope, all banks should use the ISO 20022 XML message formats when transmitting payments on behalf of customers, by the migration date of 1 February 2014. Citi itself is already fully ISO 20022 XML compliant.
Customer to Bank
- As certain legacy domestic formats are unable to fully support the SEPA schemes and also to encourage the general use of ISO 20022 XML, the legislation states that banks need to be ready to accept ISO 20022 XML from their clients by latest 1st February 2014. Should a client wish to initiate SEPA payments using ISO 20022 XML, all SEPA adherent banks will need to be ready to accept ISO 20022 XML by this date.
- Regarding the mandatory use of ISO 20022 XML by organizations (e.g. corporates), a provision was included stating ISO 20022 XML should be utilised when file based SEPA payments are sent or received by clients. Of course, clients who wish to do so are free to adopt the use of ISO 20022 XML in respect of their SEPA payments.
- Importantly, the rules of the SEPA Regulation apply directly to Payment Service Providers (PSPs), e.g. banks, and only indirectly to users, including corporates.
- After the publication of the Regulation, the European Banking Federation in coordination with the European Payments Council – and following close negotiation with the European Commission itself - published implementation guidance for PSPs relating to SEPA message (file) formats and a number of other points in the regulation, clarifying that the use of conversion services could be employed to meet the requirements of the SEPA regulation coming into force on 1 February 2014.
- This guidance clarified that Payment Service Providers (e.g. Banks) or other third parties can provide conversion services to Payment Service Users (e.g. clients) to support the processing of SEPA payments utilising certain existing file formats. Here it has to be noted that clients are required to provide the mandatory SEPA data set (in line with the SEPA Regulation), when submitting their payment file instructions to their bank. There was no end date set for the provision of conversion services, however conversion services should take place prior to processing through a bank’s payment processor.
- Further details of this industry guidance can be found on the European Payments Council website: http://www.europeanpaymentscouncil.eu/knowledge_bank_detail.cfm?documents_id=580
- Citi itself is fully ISO 20022 XML compliant and is ready to support clients in their transition to SEPA. Regardless of legislation, Citi recommends clients consider utilising ISO 20022 XML as a global messaging format given its richness and flexibility. As an XML market leader, we have the experience, technology and coverage (90+ countries) to enable you to use XML as your SEPA and global payment format. Utilising an engaging and consultative approach, Citi can ease your transition to XML. However Citi also provides the flexibility to allow clients to continue utilising certain existing file formats to initiate SEPA transactions.
SEPA has the ability to deliver real value to your organization. Citi is committed to delivering solutions that enable you to capitalise on the benefits that SEPA offers.
To put our expertise to work for you today, please contact your Citi representative or visit our SEPA website at www.transactionservices.citi.com/SEPA
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