[Dave Birch] There is a looming deadline for SEPA compliance in the cards business: by 31st December 2010, all payments cards and ATM cards in the EU27 plus Norway, Switzerland, Iceland, Liechtenstein and Monaco must be EMV-compliant and all POS and ATM terminals in those countries must support EMV applications. This is extremely unlikely to happen as far as I (and other observers) can see. Currently Germany, Portugal, Italy and Slovenia have less than 80% of their cards converted and Romania, Greece, Bulgaria, Hungary, Spain, Portugal and Malta have less than 40% (according to Banking Automation Bulletin for September 2010). Apart from the UK & Ireland, France and Luxembourg, no countries have 100% POS compliance (in Germany it's not even 10%). Additionally, many countries do not have ATM compliance, including Germany, Belgium, Italy and Portugal.

Why the slow progress? And what does it mean for the future? Well, I was invited along to a meeting of experts to discuss the progress towards SEPA and eSEPA (SEPA for the internet and mobile payments), but unfortunately I've been told by the Commission that the discussions were confidential and so I can't comment on them here.

I can make a general point, though. This stuff isn't academic: pan-European standardisation would have real benefits to consumers and businesses, and would reduce the cost of payments. Here's an example of the kind of standardisation that is need to make payments more cost-effective on a pan-European basis. In SEPA bank accounts, are identified by an International Bank Account Number (IBAN). the replacement for the different national bank account numbering schemes, a straightforward standardisation and simplification.

The logic behind the IBAN (International Bank Account Number) is actually very straightforward. In Germany it is comprised of 22 characters, starting with the country code (DE). This is followed by a two-number check digit, which validates the account number and sort code before the payment is carried out.

[From DB Research –]

A triumph for European standardisation. So we'll all be switching to IBANs of the form CC-XX-123456789012345678 then? Of course not! Our good friends at Innopay note that that in their home country, this will mean that bank account numbers will now be twice as long, but…

The length of an IBAN differs for each country. In The Netherlands, for example each IBAN will have a length of exactly 18 positions. What?!. Yes, “Europe” has decided that a bank account will have twice as many digits. How can such a system be as easy and efficient as currently available national payment instruments? The Dutch are better off than most. In Germany each IBAN bank account will have 22 digits, in France 27 while Malta tops the list with 31!

[From Innopay – Payment Consultants – home]

Oh, wait… I've just checked my Barclays statement and this shows an IBAN of GB-XX-12345678901234 (ie, 14 digits). If we can't even achieve a standard bank account number, how on Earth are we going to have standard, Europe-wide internet or mobile payments?

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

1 comment

  1. Great post – the fact is that while moving to SEPA does provide significant benefits to corporates and customers across Europe, there are still some hurdles that need to be overcome to realise these benefits. On top of the inconsistencies that you’ve highlighted around IBANs in different countries, corporates will also need to collect Bank Identifier Codes (BICs). Currently, awareness of IBAN and BIC details and where to find them is still relatively low, so any organisation seeking to collect new bank details may need to educate the beneficiaries, which is likely to add to the overall confusion.
    The bottom line is that invalid payment instructions may incur additional costs of up to €80 per incorrect transaction, so corporates will need to implement a rigorous validation and data cleansing service that generates valid IBANs and BICs and replaces existing domestic Basic Bank Account Numbers (BBANs) to save a lot of time, resource, cost, sweat and tears.

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