Consumers to have more control of payments
Special Report The changes are more dramatic than you might think but generally for the better
The way banking is done in Ireland, and across the EU, is about to undergo one of the most significant changes since ATMs were rolled out in the early 1970s and, while many consumers may think the impact of the changes fast coming down tracks are going to have on them will be negligible, the reality is very different and this is something which people would be well advised to sit up and take notice of.
So, what is it? On February 1st next year the Single Euro Payments Area (SEPA) will come into being across the eurozone countries, standardising the cost and complexity of cross border transactions. Over the following two years, until October 2016, it will be brought into force across the EU and five other countries and will give consumers in all 33 states more control over their finances in general, and certain financial transactions in particular, than they have ever had.
It is just the next step in a long line of things which have slowly brought European integration closer. The purpose of the change is to make the banks in the 28 EU member states, as well as Norway, Liechtenstein, Iceland, Switzerland and Monaco, speak the same financial language to allow for faster cross-border credit transfers and debit payments. Speed aside, the best news for Irish consumers is that more streamlined fees will become a reality and the cost of sending and receiving money from overseas will fall – and in some instances it will fall very significantly.
The first, and probably most noticeable, change that will be seen is the one which is likely to be the least popular. From next February, the eight-digit bank account number and six-digit sort code that most consumers are familiar with will be replaced by BIC and IBAN numbers, which are up to 22 characters long.
From early next year the BIC and IBAN will be all that matters to anyone who wants to make an electronic payment or sign up for a direct debit. While a shift of this magnitude may seem complicated, the changeover should go seamlessly, not least because banks have been planning for the switch for several years. As a result, all existing electronic payments will be automatically switched to the new system so consumers will not have to do anything to any transactions that have already been set up.
BIC and IBAN numbers are already attached to all accounts, as they have been for many years, and are easy to find on all bank statements but processes have also been automated for those who struggle to remember the new numbers and if a person is given an account number and sort code and asked to make a one-off payment to another individual or company, a conversion option will pop up as part of the payment process which will allow payments go through unencumbered.
Speed and consistency will be key to the new system. Transferring money will take one business day, whether the cash is going to neighbouring banks in Ennis or from Galway to Genoa. Also, the cost will be the same because under the new system banks will not be able to charge more to transfer money within the SEPA area than they do for a domestic transfer. Inevitably, this will see charges fall in the Republic.