The view of the European Association of Corporate Treasurers on the maximum number of characters in the remittance information, carried with a Credit Transfer transaction
The introduction of harmonised Single Euro Payments Area () payment schemes holds a lot of promise for corporates. The corporate community expects, among other things, improved automatic reconciliation of credit transfers with outstanding payments in account receivables. In the pre- euro payments market, the ability of treasury and accounting systems to automatically reconcile incoming payments is seriously hampered by the following factors:
- Lack of standard structure of the remittance information.
- Limited space in payment messages.
- No guarantee that original remittance information is not modified by clearing and settlement mechanisms (CSMs) or the receiving payment service provider.
- Inability to automatically recognise the sender by a code.
- Different ways of payment reporting in the European Union (EU) Member States.
The roll out of the ISO 20022 message standards developed by the International Organization for Standardization (ISO) partially solved these problems by offering unlimited space in the remittance information carried with credit transfers and a standard structure of the remittance information. The European Association of Corporate Treasurers (EACT) notes that the Credit Transfer () Scheme does not however, take into account some of the options and variations possible within the ISO 20022 message standards.
The Scheme permits the end-to-end carrying of remittance data on a structured or unstructured basis. The scheme rules allow for up to 140 characters to be included with the remittance information. Payment service providers are obliged to pass on the full remittance information through the payment processing chain. The European Payments Council's () rationale underlying these provisions is set out in the information box above.
According to the EACT, the provisions of the Scheme on remittance information fall short of corporate expectations with regard to improved automatic reconciliation of credit transfers in . The limitation to 140 characters in the Scheme may be appropriate with regard to the majority of retail payments, however is problematic for many industries in the area of business to business (B2B) payments in instances where debtors settle multiple invoices at any given time. Using the 140 characters in a structured form only allows one invoice to be listed at a time and does not provide for the possibility to list an invoice and a credit note. The current provisions on the remittance information in the Scheme mean that corporates have to continue existing practice; i.e. separate the remittance advice from the payment. With the introduction of the ISO 20022 message standards and the payment schemes, corporates had however hoped to be able to combine both the remittance advice and the payment therefore simplifying reconciliation.
The EACT has repeatedly proposed to modify the Scheme to extend the remittance information to a multiple of 140 characters. Using the standard ISO 20022 syntax, this would enable corporates to list more than one invoice with the remittance information. To date, no decision has been taken to amend the Rulebook in line with the EACT requests. Only the Finnish banking community introduced an additional optional service1 (AOS) to extend the 140-character remittance field by adding nine repetitions of 280 characters. For more information on AOS, refer to 'related links' below.
EACT standard for unstructured remittance information
The EACT maintains that remittance information should be transported in a structured form. As pointed out above, the Scheme however permits the end-to-end carrying of remittance data either on a structured or unstructured basis. As proposed by the , the EACT has developed a standard for formatting the contents of the unstructured remittance information, which is referenced in the Rulebook versions 5.1 and 6.0. The EACT standard specifies the elements enabling the automated payments processing between business partners. Consequently, the EACT standard allows corporates to make better use of the 140 characters which can be transported with the remittance information.
The EACT standard is inspired by the 'language' used by SWIFT (Society for Worldwide Interbank Financial Telecommunication) in relevant text fields, i.e. a non XML, easily readable syntax which optimises the use of space and fits multiple invoice references. The EACT formatting rules cater to those corporates which normally, or occasionally, make payments settling multiple invoices and who do not wish to have a different procedure for those cases. It has to be kept in mind however, that the EACT standard does not solve the problem of suppliers to large retailers who get paid hundreds of invoices every fifteen days. These suppliers still need to use a separate 'remittance advice', cross referenced to the payment. Suppliers will have to continue to do so until retailers adopt a 'standard syntax' which could be handled by enterprise resource planning (ERP) systems and treasury software. Such a standard syntax however is not likely to materialise in the near future.
For the EACT formatting rules to work in practice, the following needs to happen:
- ERP vendors or their software partners extract relevant remittance information from their database and master tables and populate the 140 character remittance field according to EACT rules. This should be available in all payment formats, i.e. ISO or non-ISO based formats, made available by payment service providers in the Member States offering services. Conversely, on the side of the receiver, the ERP and treasury systems know how to read the field from payment service providers' account statement files. Major ERP systems can easily and inexpensively be adapted to create and read EACT formatting rules.
- Supplier and buyer agree to use the EACT formatting rules.
- Payment service providers offering services and CSMs, subject to the Payment Services Directive, transport the content of the remittance field formatted according to the EACT rules unaltered through the processing chain without checks and report the content of the structured remittance information in full.
For more detailed technical information on the EACT standard, refer to the 'related links' below.
According to the EACT, this standard for unstructured remittance information should however not be regarded as a final solution to the problem on how to reference multiple invoices in a payment and improve automatic reconciliation. The standard provides a temporary solution yet eventually the EACT advocates developing a standard solution for structured remittance information in line with an AOS offered by the Finnish banking community.
Proposals by the EACT aimed at improving automatic reconciliation which are outside of the scope of the
In addition to extending the number of characters which can be included with the remittance information and developing a standard format for structured remittance information, the EACT maintains that optimising automatic reconciliation requires the adoption of a Unique Entity Identifier (UEI) for each corporate in the . The EACT proposes to conduct a related feasibility study based on value added tax codes. Currently there is no global standard for a UEI. Finding a global entity identifier is not in the scope of the , however the indicated that once a solution exists, the will reconsider this issue.
Last but not least, the EACT proposes that corporates paying multiple invoices at the same time should adopt a standard remittance advice received through the same banking channel in the same ISO format as the payment. This item is in a first step addressed in the corporate community.
Gianfranco Tabasso is the Chairman of the EACT Payment Commission and represents the EACT in the Customer Stakeholders Forum (CSF). The CSF specifically addresses the requirements of payment service users with regard to the and Schemes. CSF members represent a wide cross-section of interest groups acting at the European level including consumers, corporates and small and medium sized enterprises. The CSF is co-chaired by a customer representative and the Chair.
Comments or questions with regard to the EACT standard can be posted in this forum on the EACT Website. At the end of each month, experts will gather all comments posted and prepare collective or individual answers. Visitors to the EACT forum are also encouraged to initiate discussions and to comment or respond to questions posted by others.
Related article in this issue:
SEPA Schemes: 2012 Public Consultation is Ongoing. Effective Date of Next Rulebook Versions is 1 February 2014! Stakeholders are encouraged to provide feedback on the evolution of the scheme rulebooks by 13 August 2012
1 The Schemes recognise that individual scheme participants and communities of participants will provide complementary services based on the scheme so as to meet further specific customer expectations. These are described as additional optional services (AOS). Scheme participants are payment service providers which have formally adhered to the Schemes.
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