SEPA Credit Transfer
ISO 20022 Message Standards
In the world of payments processing, the role of the data format used to exchange information between banks can be compared to the role of language in communication between people. In the pre-Single Euro Payments Area (SEPA) euro payment market, dozens of different data formats are in place to process payments across different national and European clearing systems in the European Union (EU). The realisation of SEPA therefore requires agreement on a common set of data to be exchanged in a common syntax.
The SEPA data formats
The SEPA data formats, as specified by the European Payments Council (EPC), for the exchange of SEPA payments such as direct debits and credit transfers, represent such a common data set. The SEPA data formats are detailed in the SEPA implementation guidelines released by the EPC with regard to the SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) Rulebooks. To view these implementation guidelines, refer to the following pages on the EPC Website: SEPA Credit Transfer and SEPA Direct Debit.
It is important to note that the SEPA data formats do not constitute an exclusive European standard. Rather, the SEPA data formats are based on the global ISO 20022 message standards developed by the International Organization for Standardization (ISO). For more details refer to the EPC publication 'Shortcut to the SEPA Data Format' (see below).
The ISO 20022 message standard
ISO 20022 is not only a suite of message standards but a recipe proposed by ISO to develop message standards for all domains of the financial industry. ISO 20022 is a standard to develop standards, so to speak. The most innovative characteristic of ISO 20022 is its modelling methodology, which decouples the business rules from the physical message formats. The models evolve with the business, while the formats evolve with the technology to benefit from the latest innovations. This results in the highest possible degree of automation, ease of implementation, openness and cost-efficiency. The ISO 20022 recipe, therefore offers a more efficient and faster way of developing and implementing message standards that serve as the basis for long-term financial services solutions.
The growing catalogue of ISO 20022 standards covers a host of messages for the financial supply chain, designed to enable communication between players across all financial markets.
ISO 20022 reflects the global nature of the financial services industry, bringing together diverse commercial and financial needs. ISO 20022 creates a level playing field empowering a broad group of stakeholders including end-users, suppliers and IT service providers to express their interests in a common work product whilst ensuring maximum transparency in the process. Furthermore, this cooperative and inclusive approach avoids a situation where multiple standards are developed by different groups in response to the same business need that may materialise in different areas or domains across the globe. At the same time, ISO 20022 supports multiple languages and character sets.
ISO 20022 is based on modern tools for scheme creation, publication and use, allowing for even more efficient updates. The standard is aligned with internet technologies and targeted to address increasing industry requirements for application integration.
Re-engineering financial services based on the global ISO 20022 message standards, drives forward standardisation, automation and dematerialisation. Upgrading the payment architecture to comply with ISO 20022 also allows banks and their customers, such as businesses and public administrations, to realise the efficiency gains resulting from the implementation of the SCT and SDD Schemes.
SEPA Regulation details use of ISO 20022
In February 2012, the European Union (EU) co-legislators, i.e. the European Parliament and the Council of the EU representing EU governments, adopted the 'Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009' (see below) (the SEPA Regulation). It defines 1 February 2014 as the deadline in the euro area for compliance with the core provisions of this Regulation. In non-euro countries, the deadline will be 31 October 2016. For further information on the SEPA Regulation, refer to this dedicated page on the EPC Website: SEPA Legal and Regulatory Framework.
The SEPA Regulation details, among other things, the use of the ISO 20022 message standards by payment service providers (PSPs) and payment service users (PSUs). Article 2 (17) of the SEPA Regulation defines the meaning of the ISO 20022 XML message standard as follows: "ISO 20022 XML standard means a standard for the development of electronic financial messages as defined by the ISO, encompassing the physical representation of the payment transactions in XML syntax, in accordance with business rules and implementation guidelines of Union-wide schemes for payment transactions falling within the scope of this Regulation."
The 'implementation guidelines of Union-wide schemes' referred to in this definition are, for example, the implementation guidelines published by the EPC with regard to the SCT and SDD Schemes. These guidelines are available for download on the EPC Website (see links to 'SEPA Credit Transfer' and 'SEPA Direct Debit' below). When carrying out credit transfer and direct debit transactions, PSPs must use the ISO 20022 message standards (see Article 5 (1) b and point (1) (b) of the Annex to the SEPA Regulation).
Article 5 (1) d of the SEPA Regulation states that PSPs "must ensure that where a PSU that is not a consumer or a micro-enterprise, initiates or receives individual credit transfers or individual direct debits which are not transmitted individually, but are bundled together for transmission, the message formats specified in point (1)(b) of the Annex are used". Point (1) (b) of the Annex to the SEPA Regulation specifies that the message formats referred to are the ISO 20022 XML message standards.
Article 16 (5) of the SEPA Regulation however allows EU Member States to waive the requirement to use the ISO 20022 message formats for PSUs until 1 February 2016. Information on transitional arrangements in EU Member States permissible under the SEPA Regulation is published by the European Commission (see link below).
Selection of articles from the EPC Newsletter and other sources
- Regulation (EU) No 260/2012 establishing technical and business requirements for credit transfers and direct debits in euro and amending Regulation (EC) No 924/2009
- European Commission Website: Information on Transitional Arrangements in EU Member States Permissible Under Regulation 260/2012 (the SEPA Regulation) and List of Competent Authorities Responsible for Ensuring Compliance
- EPC Publication: Shortcut to the SEPA Data Format
- 'ISO 20022 For Dummies': this book developed by SWIFT Standards together with ISO follows the well-known 'For Dummies' formula of informal, easy-to-use knowledge reference books
- EPC Website: SEPA Credit Transfer (see EPC technical documents / implementation guidelines)
- EPC Website: SEPA Direct Debit (see EPC technical documents / implementation guidelines)
- EPC Newsletter: Articles Published in the Section ‘Focus: ISO 20022 in the SEPA Context’