Getting Ready For SEPA

SEPA – the Single Euro Payment Area – promises to standardise the processes of inter-bank payments across the 33 countries (28 EU member states, the four members of the EFTA – Iceland, Liechtenstein, Norway and Switzerland – and Monaco) who will participate in the initiative.

Among other benefits, such as stronger consumer rights, it aims to speed up national and international payments: a SEPA payment today in Ireland should hit a Polish bank account tomorrow, which will make an enormous difference in terms of efficiency, especially when you consider that a payment from a BOI to AIB bank account can currently take nearly 2 days and paying to Poland might take 4 or 5.

As a company heavily involved in ecommerce and in building payment gateway integration solutions for ecommerce platforms, we maintain a lively interest in anything related to electronic payment. When it comes to ecommerce, SEPA should enable customers to make cashless euro payments to anyone located anywhere in the area, using a single bank account and a single set of payment instruments – which will be a very interesting and exciting change and could have a serious impact on the costs of ecommerce transactions to the merchant and consumer. The hype is that SEPA will cut online selling costs, reduce fraud, and remove a barrier to making purchases online.

So, naturally SEPA showed up on our radar at the start of this year, but to be honest much of the ecommerce related change won’t happen for a while and we haven’t had much to do with SEPA until a client of ours asked for advice on converting their EFT files to the SEPA standard XML for processing their direct debits. Having read up on the subject it became clear there was going to be more to SEPA than just converting sort codes and bank account numbers to BIC and IBAN, so I was very pleased to learn of a “Get Ready For SEPA” event run by the Cork Chamber of Commerce.

John Rice from the Central Bank gave a great 15-minute overview of SEPA, followed by a more technical overview of the implications of SEPA for Direct Debit originators presented by Michael Kelsey of Business Software Solutions. Here’s what I took away (please see the disclaimer at the end of this post regarding any errors in accuracy):

Direct Debit vs Credit Transfer

This post is mainly concerned with Direct Debit payments, but SEPA applies to both Credit Transfers and Direct Debits. My understanding is that the bank will handle SEPA requirements for single Credit Transfers made via the bank’s own software and it seems there is a bit more leeway regarding deadlines for Credit Transfers insofar as some banks will have ‘conversion software’ available for a short period of time after the Feb 1st deadline that companies can use to make Credit Transfers while their own software catches up.

However, there is no such ‘fudging’ for Direct Debits – you have comply with the SEPA requirements by Jan 31st… or the light goes off.


The deadline to have moved over to SEPA is February 1st – as John Rice put it, this will be like the Saorview moment we had last year: on February 1st Direct Debits and Credit Transfers as we know them will be turned off and everything will have to be done in the SEPA world.

Michael Kelsey esimated the time required for an SME with a small number of Direct Debits, say 200 or less per month, to take three to six weeks to convert to SEPA assuming their software is ready and upgraded and their data is reasonably clean. John Rice quoted examples of conversion time for larger companies (such as Bord Gais, telcos, and electricty companies) at between 9 and 18 months.

Either way, time is swiftly running out now.

Converting to BIC and IBAN

BIC: Bank Identifier Number
IBAN: International Bank Account Number

One thing you’ll have to do is convert your existing list of sort codes and bank account numbers to BIC and IBAN. IPSO (Irish Payment Services Organisation) have a set of great services for doing just that: IPSO SEPA Services. One very useful service is a facility to bulk generate BICs and IBANs for Irish Bank Accounts. You can also validate IBANs from any country.

Data Cleansing

Once you have converted your list of sort and account numbers to BIC and IBAN you should contact your bank to ensure that the data you now have is clean (not corrupt).

XML File Validation

Part of any software upgrade for SEPA will require you produce an XML file that replaces the EFT file you currently supply to your bank. I’ve looked through AIB’s XML specification for Direct Debits – and to put it politely… it’s comprehensive. Needless to say, getting this file right is crucial and not a trivial task. IPSO also offer a service that validates the XML file. I’m not sure how responsive the banks will be with testing the XML files you produce – so this could be a useful service if your system is bespoke and you are working with your software vendor to generate valid XML.

New scheme rule book for direct debit

Direct Debits in the SEPA world come with an extended set of rules and consumer rights. You can download the rule book here:

SEPA DD Rule Booklet

The highlights are:

Eight weeks no-quibble refunds

A debtor has up to 8 weeks to demand a refund of any payment made by direct debit for any reason. Yes.. the debtor can walk into their bank and ask for the refund no questions asked. The creditor has no say in the matter, the money paid will be returned to the debtor.

This doesn’t mean that the debt does not need to be paid. The debt still exists, but that will be of little comfort to the creditor who will have to pursue other means of collecting any payment due.

As an aside, there is still some confusion regarding how this will work for B2B direct debits. A business could become very exposed to risk when 8 weeks worth of payment can be recalled for any reason at any time.

13 month refunds

The creditor will be required to maintain a valid copy of the direct debit mandate. A debtor can claim a refund of any payment made by direct debit up to 13 months after date of payment, if a valid mandate cannot be produced there will be no contest regarding the refund.

New legalese on the Mandate Form

There are some changes regarding what is considered a valid mandate form, and you should check with your bank to ensure that your mandate forms will be considered valid once signed.

My understanding is that existing mandates are still valid, as long as you have a copy of the mandate forms, if you don’t you will need to get a new mandate signed.

Over-the-Phone Mandates

If your direct debit mandate was taken over the phone, you will probably need to maintain phone recordings to definitively prove the existence and validity of your mandate (should the need arise). Voxpro is a locally based company that may be able to help you in this regard.

You will also need to follow up with “paper” notification of any direct debit mandate taken over the phone.

Unique Mandate Reference (UMR)

Direct debits will need to have a UMR – a unique reference for the mandate. Creditors will need to generate a UMR for each mandate, and track and record transactions associated with these. The debtor may request to have access to information related to any recurring direct debits for the UMR associated with their mandate.

14 day notification and applying direct debits in advance

Debtors need to be advised of bills which will be paid by direct debit at least 14 days in advance unless there is some other prior agreement.

The direct debit file must be applied 3 working days in advance for regular recurring debits and 6 days in advance for new / first time debits.

The Creditor is the Gatekeeper

This one is pretty important: whereas the banks used to be the gatekeeper for direct debit transactions, the creditor is now the gatekeeper. Banks are basically the transmitter or facilitator of the information.

This has an interesting side effect that any direct debit originator can apply a transaction against any account, the bank don’t check it – the DD originator proves the right to debit the account by means of the direct debit mandate. This is presumably why there are strong rules around refunds as mentioned above.

The pain.002 file

I’m sure there will be plenty of muttered jokes about the name of this file format – but the Payments Initiation files report on the transactions and the pain.002 specifically reports the Customer Payment Status, in particular regarding rejected payments. It will be important to check this delay and to keep a record of the status of transactions associated with the UMRs.


If all you have is an EFT file and you don’t know what to do about getting an upgrade, alongside their upgraded direct debits software, Michael Kelsey’s company ( also offer EFT to XML conversion along with UMR generation and tracking. It’s probably not the most ideal solution – but with 4 months to go before the switch it might be a good solution for the medium term.

Further Information


As stated above, these are some notes gathered during an event I attended regarding SEPA – I found the information very interesting so I’m sharing it here – please be sure to check all facts with your bank or financial advisor.

If I’ve got anything wrong please send corrections to and I’ll publish the correction here.

Gerard Keohane
Gerard Keohane |