03 December 2013

SEPA will soon bring a lot of changes to your payment transactions management. SEPA stands for Single Euro Payments Area or a common Euro payment area. These are European standards which aim at harmonising the conditions, rights and duties for money transfers within Europe. All payments within Europe will then become “internal payments”.

The European Single Market has been fact already since January 2002. The deadline for this integration is 1 February 2014. Every bank transfer and direct debit needs to be SEPA compliant by that date. Even though the harmonisation merely concerns payments in Euro, the SEPA zone goes beyond the EEA (EU+Norway, Iceland, Liechtenstein). Switzerland and Monaco also take part in it.

According to recent reports, a transition period of 6 months will be provided (ultimately untill 1 August 2014), allowing payments under the former scheme. But still, the date of commencement is 1 February.


You will perhaps not be unfamiliar with the IBAN number and BIC code. The IBAN number comprises 16 characters. The letters “BE” come first, followed by a double figure en then the 12 digit numbers of the former national bank account number. The number of characters varies from country to country but never exceeds a maximum of 34.
The BIC code identifies the bank branch. From 1 February 2014 the BIC code is no longer required for national payments and from 1 February 2016 it will also disappear for international payments.

By 1 February 2014 each credit transfer will require the use of the IBAN number (and a BIC code for international payments). From that date onwards bank transfers or direct debits can no longer be executed under the old format.

Direct debits: be prepared!

In the case of a direct debit the debtor provides a mandate to the creditor. This allows the creditor to take the initiative to collect one or several encashments from the debtor’s bank via his own bank. The debtor’s bank debits the debtor’s bank account. The bank is in charge of the control over this mandate. From 1 February 2014, it will no longer be the bank, but you as an entrepreneur who will be in charge of the management of your mandates.

A distinction is made based on whether you are making payments or whether you receive payments via direct debit. In particular, the control over payments received will become a challenge after 1 February 2014. That is why we provided for a separate section (cf. hyperlink at the end of this article).

Making payments

When you make direct debit payments as an entrepreneur or as an individual, little or nothing will change for you. Direct debits remain to exist. As your supplier in a business relation may want to formalise a business to business mandate (below indicated as ‘B2B’), you may have to provide for a signature. Apart from that, direct debits continue to exist as they are.

Receiving payments: Core and B2B

Core is the European direct debit scheme applying to everyone: entrepreneurs, individuals and governments. B2B is the scheme for transactions between professionals. The existing direct debit scheme between individuals and their creditors remains to exist and will be transferred to the new European direct debit scheme. For professionals, the direct debit scheme will not automatically be transferred to the new European direct debit B2B scheme. Hereto a new mandate will have to be signed.

Core and B2B: particularities

In Core, a consumer can request the refund of a direct debit payment up to 8 weeks (and in some cases even up to 13 weeks) after the debit. This request for reimbursement does not necessarily mean that the debt expires. From 1 February 2014 onwards, consumers will be able to inform their bank of the creditors for the benefit of which they cannot accept any direct debit collections on their accounts. Consumers will also be able to indicate the creditors who are entitled to a direct debit collection on their account. As from 1 February 2014, consumers will also be able to inform their bank of the maximum amount and or periodicity of the collection. In a B2B relation, the debtor (professional) signing the mandate and providing confirmation hereof to his bank will no longer be able to request a refund of the direct debit which was processed under the European direct debit B2B scheme.

Tips for businesses

As mentioned, bank transfers or direct debits can no longer be made under the old format as from 1 February 2014. This amendment can be far reaching, especially in cases where payments within the company have been automated. Therefore, there is no time to lose.Depending on the size of your enterprise, it would even be advantageous to appoint a project manager of coordinator, to map out all changes and to proceed with an action plan.

1. Adjust your means of communication

Mention your IBAN number and BIC code in your letter headings, on your invoices, proposals, contracts and your website. It could also be helpful to inform your customers and suppliers personally in a direct mailing.

2. Adjust your databases, programs and electronic payment tools

Convert your suppliers’ bank account numbers and adjust all relevant files. Do not forget the payslips. The migration towards European bank transfers implies the use of the XML standard for a company’s outgoing payment orders to be sent to the bank. An upgrade to XML requires for most organisations their accounting software or ERP system to be adjusted. It is recommended to also adjust your payment applications. Not only the IBAN number changes, but also the way in which your payment orders are delivered to your bank.

3. Proceed with SEPA direct debits

If you receive payments through direct debit, you will have to provide for a mandate administration. Via the following link you will find practical guidelines for an efficient administration of your mandates.