Payment Reason Codes, R-Transactions, R-Messages

Most corporates focus on getting their payments to the banks in a controlled, secure and efficient manner. Once at the bank, corporates want to ensure that their payments STP – Straight Through Process. The objective is firmly on the connectivity from the corporate to the bank, and then ensuring that the payments data and format is correct. In and amongst this, we forget that their is a bank to corporate process which tells us the status of the submitted payments. This is typically in the form of a Payment Status Report (or PAIN.002) and the bank statement (MT940, BAI2 or other). This is really important. You need to understand the formats and the details of the information that is being transmitted to you. Typically if you see the debit/credit on the statement for the intended value, there is a sigh of relief. If you don’t see the debit/credit you need to understand whats has gone wrong. That is where Reason Codes, and the R-transactions come in…..

What is a Reason / Return Code?

• Reason or Return code is the SEPA way of telling us why our payment failed
• Reason code is what we traditionally refer to as the reason for rejection
• There is a standard set of reason codes that should be used by all banks / countries to indicate the reason for payment failure

What are R-Transactions?

• These are similar to the above, but specific to SEPA direct debit collections
• For direct debit collections, these ‘R’ codes indicate that the collection cannot happen due to one of the following:
  • Refund, Refusal, Reject, Returns, Reversals, Request for cancellation, Revocation
  • Note: they all start with R, hence the name R-transactions…Clever, eh? 🙂

Ok, so how will this help me?

• When you review the returned credit/debit entry on your bank statement, you will see a 4 digit Return Code
• You will also see these codes on the PAIN.002 (Payment Status file)
• Take a look at some of the most commonly used Return Codes at the end of this post, and cross reference them on the returned item on your bank statement / PAIN.002
• With this information you will understand why the return/rejection has happened
• Be aware that some banks will use the numeric value, others will use the alpha-numeric value
• The below only indicates some return codes, a more comprehensive list can be found here

Alright, thats simple enough…

• Not quite! Not all banks are following the above standards. If they’re not, you need to chase them up and get them to fix it. Otherwise you might see a generic return message such as “no reason” which doesnt help you or your SEPA implementation
• You may need to speak with both the European SEPA team at the bank and your local contacts at the bank to get this fixed. Some local / in-country banks may have local return code rules in place which override the banks European SEPA solution

Please share this with your cash management team, and payments team. They will love you!!!!

SEPAReason Code	SEPA Statement Reason Code	Description
AC01	901	Incorrect Account Number
AC04	902	Closed Account Number
AC06	903	Blocked Account
AG01	904	Payment Type not allowed
AG02	905	Invalid Bank Operation Code
AM04	906	Insufficient Funds
AM05	907	Duplicate Collection / Entry
BE04	908	Missing Creditor Address
MD01	909	No Valid Mandate
MD02	910	Missing Mandatory Inform
FF01	911	Invalid File Format
MD06	912	Refund Request By End Customer
MD07	913	End Customer Deceased
MS02	914	Not Specified Reason by Customer
RC01	915	Invalid BIC
TM01	916	Cut-off Time
SL01	918	Specific Service offered debtor bank
FOCR	919	Return due to a Recall
DUPL	920	Duplicate Payment
TECH	921	Payment in Error (technical reason)
FRAD	922	Fraud
AGNT	923	Incorrect Agent
CURR	924	Incorrect Currency
CUST	925	Recall by Customer
CUTA	926	Recall due to Investigation Request
UPAY	927	Undue Payment
BE05	928	Unrecognised Initiating Party
AC13	930	Invalid Debtor Account Type
FF05	931	Invalid Local Instrument Code
DNOR	932	Debtor Bank is not Registered
CNOR	933	Creditor Bank is not Registered
RR01-04	917	Regulatory Reason