The payment schemes rely on global open standards to ensure that all stakeholders exchange data that is commonly understood.
The provides the data formats for all its schemes: these formats specify how the data of a transaction (credit transfer or direct debit) has to be presented in IT systems in order to be universally processed by different players. Data formats are like languages – they can make or break the success of communication between people, or in this case, the players in a financial transaction. Both sides need to be able to understand one another for it to work.
The SEPA data formats are detailed in the Implementation Guidelines of each scheme.
The SEPA data formats rely on the global open standard ISO 20022 developed by the International Organization for Standardization (ISO). Not only is ISO 20022 increasingly used among financial institutions worldwide, it has also become the true language of payments in Europe. European payment service providers () have pioneered the widespread adoption of ISO 20022, which made the migration to SEPA possible.
Before that, dozens of different standards were used in Europe. Significant increases in efficiency in payments were made possible by the adoption of ISO 20022.
ISO 20022 is not just a set of message standards but also a recipe proposed by the ISO to develop message standards for all domains of the financial industry. ISO 20022 is a standard for developing standards, so to speak. A broad range of standards covering a number of financial messages are based on ISO 20022. They are frequently updated to meet industry requirements, and new standards are regularly created to answer market needs (including those of the schemes), in a collaborative manner.
Further information about ISO 20022 is available in the online publication ISO 20022 for Dummies, created by SWIFT Standards and ISO.
Two important elements to make payments, familiar to all consumers who have ever made euro SEPA credit transfers or direct debits, are also based on ISO standards:
- The International Bank Account Number (IBAN, which is ISO standard 13616). It is composed of a country code, check digits, and a Basic Bank Account Number (BBAN).
- The Business Identifier Code (BIC, which is ISO standard 9362). It is made up of several characters identifying a (including a country code) and potentially its branch.
These identifiers allow the identification of any account in any country. Their use in SEPA transactions and the deadlines for to comply with related rules were defined in the SEPA Regulation.
Since February 2016, the ‘IBAN only’ rule has been in force, and makes payments even easier for consumers and corporates. When they make euro credit transfers or direct debits in SEPA, they are no longer asked to provide the BIC of the payer or payee because the IBAN is sufficient to process the transaction. can consult databases provided by various suppliers in order to link the IBAN to the BIC.
The European Central Bank provides links to national websites dedicated to SEPA, including information about IBAN and BIC.
This video, The IBAN – your new best friend, provides additional information.
When making a credit transfer, a payer may populate a ‘remittance information’ field that provides the beneficiary with basic information identifying the transaction (such as the reference of an invoice). It appears in the account statements and, depending in which country it originates, it can either be ‘structured’ or ‘unstructured’. The European Association of Corporate Treasurers (EACT) has developed a standard, designed for corporate organisations, for formatting the contents of the unstructured remittance information.