Sepa will give customers greater control over banking

It’s banking Jim, but not as we know it. Whether you’re a bachelor with a bit in the bank in Ballaghaderreen or a blue-chip company with billions in accounts all over Europe, the way you bank is about to change.

From February 1st next, Sepa, or the Single Euro Payments Area regulatory initiative, comes into force. Introducing common standards and rules across 33 countries, the aim is to simplify and reduce the cost of cross-border electronic payments.

But what does it mean for you? Well, for a start, your bank account and sort code numbers are about to go out the window.

"At the moment, your account number and your branch's national sort code are on your bank statement, but you also have what they are being replaced with – your BIC and your IBAN number," says John Rice, Sepa programme manager with the Central Bank.

“After February 1st, if someone is making an electronic payment to you, or if you are signing up for a direct debit, those are the numbers you will need to quote.”

Your new, longer bank account details will have both numbers and letters.

"The challenge for the man on the street is that you are going from an eight-digit account number and a six-digit sort code to an IBAN – which is 22 characters long," says Stephen Foley, head of personal banking with Danske Bank.

Consumers however don't need to worry about changing the codes of existing direct debits or other regular payments – their bank should automatically do that for them. In fact, some like Dankse Bank and AIB already have.

"From an AIB perspective, we are trying to absorb any pain for our customers so we are doing a mass conversion of all national sort codes and account numbers into BIC and IBAN," says AIB head of payments Peter Vance.

Conversion option
For new one-off payments from February 1st, like using your AIB online banking to pay a plumber, if the plumber provides an account number and sort code, a conversion option will pop up during the payment process converting these to BIC and IBAN numbers enabling the payment to go through.

This change of banking codes across the 28 EU member states and further to Norway, Liechtenstein, Iceland, Switzerland and Monaco means that banking systems in all these countries will at last speak the same language.

This will make for faster cross-border credit transfers and debit payments and more streamlined fees.

“Sepa makes banking systems compatible so that once you make a payment, or anybody in the 33-country area makes a payment, it’s guaranteed to arrive in the beneficiary’s account the next day,” says Rice.

“If I want to make a payment to someone in Mullingar, from February 1st, 2014, there will be exactly the same terms and conditions as if I want to make a payment to someone in Munich.

“Whether it’s Munich or Mullingar, the money will be in the recipient’s account the next day. And the bank can’t charge 28 cent for the domestic payment and €2 for the Munich payment. The cost will be exactly the same.”

So while different banks can currently charge different fees for electronic transfers, under Sepa, they cannot charge more to transfer money within the 33-country area than it does for a domestic transfer. In fact, these charging structures are in regulation already ahead of the switchover, but next February will see the start to solidify across the zone.

Cross-border payment
Another Sepa feature is that when you receive an electronic euro payment, you must receive the full amount into your account, says Foley.

“Previously when you sent a cross-border payment, the receiving bank would deduct a fee for receiving that as an incoming foreign payment, but they can’t do that any more.” The sum will arrive intact into your account.

So what else does Sepa mean for Irish consumers? Well, for those with an overseas property who, till now, had been told they needed a bank account in that country from which to pay electricity or property management fees, they can now ditch that account.

“If you have a house in France and are required to pay a direct debit in France, traditionally you had to go to a French bank and open up a French bank account, get French online banking and a French bank statement, and all the costs that go with that,” Foley says .

“Under Sepa, for euro countries collecting euro, it will become mandatory from February 1st that they use the Sepa direct debit scheme to collect those.”

“So, if you go to Spain next year and decide to buy an apartment,” he adds, “you will have the capability to give your Irish bank account details and they will be able to collect direct debits from your Irish bank account.”

Pay into Irish account
The change will also bring ease to students or workers in the 33-country area who, under Sepa, will no longer be obliged to set up an in-country bank account. They can simply pay their bills from, or have their wages lodged to, their Irish bank account.

Of course, the reverse is also true. Students and workers from the 33-country area living in Ireland will no longer need to set up an Irish bank account, says AIB’s Vance.

“What was happening was that a Polish person working for an Irish company would have their wages paid into an Irish bank and then they might repatriate some of the money to their home account,” says Vance. “Now, workers can ask their employers to pay their wages into a foreign bank account.”

All going well, the changes should shake up the market, Rice says. “There’s nothing stopping you from paying your Irish electricity bill from an account in Portugal if you think the Portuguese bank is better value.

“As consumers realise there is more choice, you could see the cost of banking coming down. It all depends on people switching.”

Just make sure you can read that Portuguese bank statement.

There are other pro-consumer elements too, Rice adds, including a provision allowing individuals to restrict the amount of a direct debit.

“You will be able to say to your bank about direct debits coming from a particular provider, ‘I don’t want that debit to go above €200’.”

Rice says this is a little-known right that consumers have but which Sepa makes clear. “You’ll still owe the money, but you’re managing your cash flow a bit more aggressively. It’s putting the power back into consumers’ hands.”

Right to revoke
Probably the biggest power for Irish consumers will be the right to revoke a transaction for up to eight weeks after a direct debit. "So if your electricity bill lands on July 1st, for up to eight weeks you can go back to your bank and say I want that money back, no questions asked," says Rice.

He says while the rule has applied in France and Germany for years and hasn’t caused great difficulty, it is causing some concern here.

“The notion that you can consume goods and services, pay for them and then unpay is probably a bit over the top, so we’ll have to see how it plays out here – but that’s what banks and businesses are now building their systems around.”

Sepa will allow Irish consumers to bank wherever it suits them and wherever they can get the best terms. For those with a beef with Irish banks, February 1st won't come fast enough.


What's new? Get to know Sepa
The Single Euro Payments Area, or Sepa, will simplify and reduce the cost of cross-border electronic payments. Some 33 countries have signed up to Sepa. The 17 euro currency countries will switch on February 1st, 2014, and the rest by October 31st, 2016.

Get familiar with your BIC and IBAN number. You’ll find them on your paper or electronic bank statements.

From February 1st, you can pay utility bill direct debits and charges in participating countries from your Irish bank account. There is no need for an overseas account.

Those working anywhere in the Sepa zone can have their wages paid directly into their Irish bank account, while wages in Ireland can be paid into an account in those countries.

Remember, payments in currencies other than euro to or from non-Sepa countries, including the UK, may still attract foreign exchange charges and higher transaction fees.