The dire state of SEPA compliance across the EU could cost the Eurozone up to €20 billion. Despite the fact that just a year remains for businesses to migrate to SEPA standards, only 30 per cent of credit transfers and two per cent of direct debits are now SEPA-compliant, according to research from Experian.

This also shows that only 65 per cent of Euro transactions are underpinned by fully accurate destination routing data and 12 per cent of electronic payments made to and from businesses in Euros currently contain data errors.

Given the streamlining of the new data format under SEPA, full migration should involve a comprehensive validation process in order to ensure payments are successful going forward. If businesses fail to check the underlying banking data prior to migration to the IBAN format, pre-existing errors inherent to the current system are likely to jeopardise future payments. Those which currently use International Bank Account Numbers (IBAN)-format account numbers have reduced error rates (4.6 per cent) in comparison with those using domestic account numbers (12.7 per cent), although these error rates are still problematic. Also, 45 per cent of SEPA-compliant IBANs stored by large European businesses do not have the valid corresponding Bank Identifier Codes (BICs) required to enable successful routing of transactions.

Jonathan Williams, director of payment strategy, Experian, comments: “Migrating existing customer records to the IBAN standard will be a huge challenge given the sheer number of accounts, and, as a result, large businesses face notable challenges to migrate and maintain SEPA-compliant mandate information in time for the 2014 deadline. Businesses must look to use, leverage and embed data validation within their systems and processes if they are not to incur significant costs as their operating countries move to SEPA, due to the error levels inherent in the data which the SEPA system is liable to expose. These types of error, as we’ve found in alarmingly high numbers will lead to payment failure when made through SEPA clearing, costing businesses approximately €50 for each failed transaction. Given an established average error rate of around one in eight, an organisation transacting with 100,000 bank accounts would expect a potential cost of €600,000, which leaves a total bill for the Eurozone of more than €20 billion. All businesses should work to comply now to avoid such unnecessary costs.”

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