SEPA: IBAN Number & SWIFT BIC – The Definitive Guide

Granted it is a little late in the day to start writing about the IBAN number and SWIFT BIC code. But there will be many SEPA implementations happening over the coming months, and so with that in mind I felt it was important to have a summary guide outlining what the IBAN number is, how it relates to SEPA, and some notes about the conversion from the legacy BBAN (Basic Bank Account Number) to IBAN.

Firstly, we must acknowledge that the IBAN / BIC information are critical components of every SEPA Credit Transfer and SEPA Direct Debit implementation. If there is one thing that is critical leading up to, during and after your SEPA implementation – it is the IBAN / BIC information.

What is an IBAN Number?

• IBAN is the International Bank Account Number
• Your existing bank details are made up of a bank code (or perhaps you call it the transit code or sort code..) and a bank account number – lets refer to the existing / legacy / ‘old’ bank details as the BBAN details
  • The IBAN is made up of these elements
• The IBAN is a way of showing your existing bank account details in an internationally recognised and standardised format
  • IBAN is the ISO 13616 international standard for numbering bank accounts
• The IBAN number is made up of:
  • Country Code – 2 characters
  • 2 check digits – numbers between 02 and 98 – calculated using MOD97-10 — basically a calculation/algorithm used to check the validity of the IBAN
  • Up to 30 alphanumeric characters, which consist of the BBAN
• You should understand that IBAN is not a new bank account number, it is simply a way of internationally recognising your existing bank account based on ISO 13616

We cannot speak about the IBAN number without referring to the BIC Code….

Alright, so what is a SWIFT BIC Code?

• SWIFT BIC Code refers to the SWIFT Bank Identifier Code
• A BIC code is a way of internationally referring to financial institutions
•  The BIC code consists of either 8 or 11 characters:
  • Characters 1-4 – Identify the Bank Code
  • Characters 5-6 – Indicate the Country Code (as per ISO 3166)
  • Characters 7-8 – Refer to a Location Code assigned by the Registration Authority
  • Characters 9-11 – This is an optional code, identifying the Branch Code
• The SWIFT BIC is worldwide Business Identifier Code based on ISO 9362
• The BIC code identifies the bank related to the account (IBAN)
• BIC is also referred to as the SWIFT BIC, the BIC Code, the SWIFT Code, and/or the SWIFT Identifier

IBAN Number / SWIFT BIC Code –  How are they linked?

SEPA IBAN number / BIC code are linked due to Regulation 260/2012, or the SEPA Regulation to you and me! The SEPA Regulation states that the use of the IBAN and BIC is mandatory when making SEPA compliant payments and SEPA compliant direct debits. The IBAN is always mandatory. The BIC requirements are a little complicated, but in short they state (based on the guidelines at the time of writing):

• Domestic (in country) transactions will not have to indicate BIC after 1st February, 2014 – unless a country has opted out of this. Check with your bank for your implementation requirements…
• Cross border payments must indicate BIC up to 1st February, 2016 — after which time, the BIC will not be required
• Banks / countries seem to have specific requirements around the BIC, so I would urge you to check with your bank / payment service provider on their requirements

Check out the EPC (European Payments Council) website for more information about SEPA IBAN and BIC requirements:

http://www.europeanpaymentscouncil.eu/content.cfm?page=international_bank_account_number_and_business_identifier_code_iban_and_bic

Sounds easy so far…. What’s the big Hoo-Haa..?

Well, ‘legacy’ payments and collections generally made use of the national bank code, and bank account number (BBAN details). SEPA requires that you indicate BIC code and IBAN number information – so you need to collect the BIC/IBAN information from a reliable source. By saying ‘a reliable source’ I’m stating the obvious, but if you don’t you’re potentially going to send payments to an invalid IBAN which will either reject since the IBAN is incorrect or worse still pay the wrong person! All the while your supplier will be waiting for his/her payment, and in turn getting very upset with you and your company. If you’re making hundreds or thousands of payments a week and a high proportion of them are failing due to an invalid IBAN, imagine the damage to your company’s reputation.

Another consideration is that your ERP system may not have space and/or fields to hold the BIC / IBAN information. In this case, you need to consider engaging your ERP vendor ASAP! Perhaps you need to go through a system upgrade before you can even consider becoming SEPA compliant… If it is an in-house system, you need to go and talk to your development team……

As a supplier, you need to ensure that your invoices indicate your BIC/IBAN information. Remember under SEPA, your customers must pay you using your BIC/IBAN information. If you’re not telling your customers your BIC/IBAN details, how can you expect them to pay you….

Oh crap, what should I do next…?

My suggestion would be to:

1. Check your existing ‘legacy’ bank (BBAN) details
   1. Get your existing bank details in order
   2. There is no point trying to calculate the BIC/IBAN details for accounts that are already incorrect
   3. Consider rationalising your supplier database, for example, is there value in calculating the BIC/IBAN details for a supplier you last paid in 2000?
   4. Take a look at the SWIFT IBAN Registry document (http://www.swift.com/dsp/resources/documents/IBAN_Registry.pdf ). Its a bit heavy, but by country it highlights the:
      1. Required format of the BBAN so you can validate your existing bank details
      2. An example IBAN for a given country
      3. If the Country is in the SEPA
2. Check your source system / ERP capabilities
   1. Do you have a SWIFT BIC code / IBAN number field
   2. Do you have to upgrade / require in house enhancements ?
   3. How will you upload the BIC/IBAN information into your ERP – often overlooked, but you need to consider the time it will take, and you need to ensure the integrity of the collected data
   4. Ensure that BIC/IBAN becomes mandatory information for any new SEPA supplier/customers that are set up within your ERP system
3. Consider how you will retrieve SWIFT BIC/IBAN information
   1. 1. If you have a few suppliers/customers, you could do this manually and then check the received BIC/IBAN details via an online tool
      2. There are many options here, including DIY ‘free’ offerings – but be careful, you may end up paying in other ways…!!! 🙂
      3. The likelihood is that you’ll have hundreds, even thousands, of suppliers / customers and you’ll need to reach out to a vendor who can convert your legacy bank details into BIC / IBAN. There will be a cost, so shop around and see what options are available and best suit you
         1. More on this soon…..
4. Regarding BIC information, refer to my earlier post – A Must Visit Website for any SEPA Implementation
5. Ensure that any invoices and documents that state your bank details reflect the correct BIC/IBAN information

 

The IBAN number and SWIFT BIC code requirement is a complex consideration and requirement in any SEPA implementation. The planning you put into retrieving the SEPA IBAN/SWIFT BIC, uploading it into your source system and maintaining it thereafter will significantly reduce the number of failed payments/collections and in turn ease your migration to SEPA.

Please share any SEPA IBAN / SWIFT BIC considerations that I may have missed with our readers….