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October 4, 2012updated 04 Apr 2017 4:13pm

EUR20bn potential loss with SEPA transition

The migration to the Single Euro Payments Area (SEPA) could cost businesses up to EUR20bn (USD28.48bn), according to a report by the data and analytics provider Experian According to the new Experian report, the transition of national credit transfers and direct debits to SEPA the deadline for which is set for February 2014 will expose out-of-date account data and other errors that were previously overcome through a patchwork of locally implemented fixes

By Chiara Francavilla

The migration to the Single Euro Payments Area (SEPA) could cost businesses up to EUR20bn (USD25.88bn), according to a report by the data and analytics provider Experian.

According to the new Experian report, the transition of national credit transfers and direct debits to SEPA – the deadline for which is set for February 2014 – will expose “out-of-date account data and other errors that were previously overcome through a patchwork of locally implemented fixes”. This may lead to transaction failures, and cost businesses up to EUR50 per failed transaction, for a total of EUR20bn per year.

The Experian report analysed 650,000 bank account details and 220,000 IBAN (International Bank Account Numbers) records provided by European businesses. It concluded that 45% of IBAN stored by large European businesses lack a correspondent Bank Identifier Code (BIC), necessary to complete transactions after the migration to the SEPA platform.

Jonathan Williams, director of payment strategy at Experian  said: “While SEPA will undoubtedly benefit organisations trading in Euros, errors in bank account details held by European businesses risk causing significant teething problems as locally implemented fixes – which have largely worked so far – are made redundant by the new common payments system.”

Williams urged European businesses to fix existing errors before the introduction of the new regulatory system. “Early adoption is crucial. If left to the last minute, the SEPA requirements have the potential to be both disruptive and costly,” he said.

European Payments Council chair Javier Santamaría replied to the Experia report saying:  “Costs resulting from out-of-date account data are not related to SEPA payment schemes and technical standards or to the migration to SEPA”.

Santamaria stressed that maintaining quality data is an important objective of any organisation in every context.

“Early movers on the demand side who have successfully completed migration to SEPA Credit Transfer and SEPA Direct Debit recognised that the conversion of customer account data to the International Bank Number (IBAN) and the Business Identifier Code (BIC) is one of the main challenges in the SEPA migration process.

The migration process offers an opportunity to update databases and should therefore support solving any issue related to out-of-date account data. The experience of SEPA practitioners also demonstrates that migration to the SEPA payment schemes is manageable, feasible and that benefits exceed the efforts and resources to get there.

According to the SEPA Indicators compiled by the European Central Bank, some 176m SEPA Credit Transfer transactions were processed in the Euro area in July 2012. We are not aware of any problems related to legacy account data which would have impacted the processing of these SEPA transactions,” he concluded.

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