Migration under the SEPA Migration Regulation: next steps
Published on 2nd Dec 2015
The next key migration date under the SEPA Migration Regulation (Regulation 260/2012) is approaching. From 1 February 2016, payment service providers (PSPs) that are located in the Eurozone, and their payment service users (PSUs), will be required to use SEPA compliant account identifiers when initiating and processing credit transfer and direct debit payment transactions. For UK (and other non-Eurozone) based PSPs, the deadline is 31 October 2016.
The SEPA Migration Regulation was adopted in 2012, in line with SEPA’s mandate to simplify and harmonise payments in the euro area. Before it came into force, each EU Member State used country-specific bank account numbers for identifying bank or payment accounts when processing credit transfers and direct debits. The SEPA Migration Regulation introduced technical requirements for PSPs and PSUs when carrying out or initiating such payment transactions. Certain of these technical requirements were required to be implemented by 1 February 2014. This included that PSPs must use, and PSUs must provide and use, an international payments account number (IBAN) for the identification of accounts when initiating a payment transaction.
Under a derogation available under Article 16(1) of the SEPA Migration Regulation, PSPs were permitted to provide consumers (but not corporate PSUs), until 1 February 2016, with a conversion service for national payment transactions, allowing those PSUs to continue using the basic bank account number (BBAN) to which they had become accustomed. Using a conversion service, PSPs could convert payment instructions received from non-corporate PSUs using the BBAN to identify the relevant payer and payee accounts, into SEPA compliant instructions using the IBAN as the payment account identifier.
In accordance with the derogation, as of 1 February 2016 PSPs will no longer be able to provide such BBAN to IBAN conversion services and PSUs will be required to use the IBAN to identify accounts when initiating payment transactions.
What is the significance of this?
Prior to the harmonising measures introduced by the Regulation, there was no common EU or other standard unifying the account number identification. The measures in the Regulation, including the introduction of the IBAN, will help to standardise international fund transfers so that all payment users in the EU are able to receive payments under the same basic conditions, rights and obligations, regardless of their location.
As a further derogation from the requirements to use SEPA compliant account identifiers, PSPs located in, and PSUs using a payment service in EU Member States that do not have the euro as their currency (for example, the UK), do not have to comply with the requirements to provide/use the IBAN until 31 October 2016.