IBANs and BICs to become mandatory for Euro cross-border payments

Rugby, UK : 18 October 2005

Eiger Systems, Europe’s leading provider of validation and payment solutions for automated banking and e-commerce, is urgently advising organisations to prepare for the mandatory use of International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) in all cross-border Euro transactions. To assist banks and organisations with meeting this new regulation, Eiger Systems has enhanced its international bank account validation product, BANK WIZARD, to verify IBANs and BICs for all the countries involved.

According to a European Payments Council resolution passed in June this year, and as part of the development of the Single Euro Payment Area (SEPA), banks and their customers will be required to supply valid IBANs and BICs in their European cross-border Euro credit transfers from 1 January 2006. This will affect all cross-border payments in Euros within the EU countries plus Norway, Iceland, Liechtenstein and Switzerland.

This drive to harmonisation started with EC Regulation 2560/2001, which came into force in June 2003. In return for banks reducing the cost of cross-border Euro payments in line with domestic charges, the regulation mandates that such transactions for Straight Through Processing (STP) within the EU have to use valid IBANs and BICs. Initially this applied only to payments benefiting from CREDEURO conditions3 which limits the cost of a cross-border Euro payment within the EU to that of a corresponding domestic payment.

The EPC resolution extends this requirement for IBANs and BICs to all such cross-border credit transfers and from 1 January 2006 formalises the existing mechanism of repair charges to correct and/or supply valid details. Even more significantly, from 1 January 2007 the resolution also allows the outright rejection of any payment that does not contain a valid IBAN and BIC.

Jonathan Williams, Senior Product Manager for Eiger Systems takes a pragmatic view of the new regulation. "Whilst this mandatory requirement may seem draconian, the industry has had four years to prepare with the use of IBANs and BICs becoming increasingly widespread. The aim of the resolution is laudable, to reduce the price of intra-EU payments simply by supplying the right information at the start of the payment process. Given repair charges for high-value payments can, in some cases, reach several thousand Euros, it's clear that investment in systems now could significantly reduce the cost to both corporates and banks, even ignoring the customer service costs of rejected payments from 2007."

Jonathan believes the overhead for banks and corporates to prepare for mandatory IBAN and BIC is relatively small. "The implication for banks and their customers is twofold: firstly, to enhance systems that capture bank details for cross-border payments to include IBAN and BIC and to validate them and, secondly, to ensure that IBANs and BICs can be supplied to existing systems and databases."

Eiger Systems has anticipated this change, enhancing its BANK WIZARD product line to handle payments data for all the countries involved and acquiring the necessary BIC data. "Even before the EPC made IBAN and BIC mandatory, we realised that our corporate and Financial Institution customers could benefit from reduced charges and costs simply by ensuring their data is accurate" says Jonathan. "By using our enterprise payment validation solution, customers can more swiftly respond to this edict and make substantial savings".

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