Because of multiple errors found in many European business’ domestic and cross-border payment data, a migration to a Single Euro Payments Area may prove to be costly as faulty data may accrue fees under the SEPA system, a new research report from Experian Payments suggests.
SEPA is an initiative the European banking industry launched in 2002 to link European Union and other euro-based countries’ separate national payment systems into a standardized debit system using for cross-border transactions.
Experian provides businesses a service that converts domestic bank account formats to the required international bank account numbers and bank identifier codes. The London-based analytics and marketing company, a division of Experian PLC, based its research report on 55 data-conversion scans it performed from September 2009 to August 2010.
All international euro transactions since 2006 have used international bank account numbers and bank identifier codes, according to Experian Payments.
Under SEPA, however, the use of bank codes and bank account numbers eventually will become mandatory for domestic and cross-border payments, Jonathan Williams, Experian Payments director of strategic development of fraud and authentication, tells PaymentsSource. Currently, there is no end date set for the system.
Within the past 20 years, “many banks have repaired faulty domestic transactions when possible without notifying the originator of the transaction,” Williams says. In doing so, banks have “perpetuated poor data quality in business systems used for national payments. SEPA makes little or no provisions for such repairs, and charges for both repaired and rejected payments are a strong possibility, as much as 70 euros (US$98 or £61) per transaction,” he says.
Experian found that more than 20% of the records it analyzed were in an invalid format or contained errors. On average, each business had an error rate of 12.9%, Williams says.
The percentage is surprising because there were not that many errors when settling domestic payments, Williams says. So banks and clearinghouses must be dealing with the levels or errors on their own, he adds.
Europe does not have a standard system for account numbers, “so the data [are] stored differently in each country, which makes it harder to convert to a pan-European system,” Williams says.
Additionally, the quality of data varies by country and industry. For example, 94% of Swedish data contained errors, while 18% of the data from the travel-and-leisure sector did, Williams says. Only 6% of bank-industry records contained errors, he adds.
The most-common problem Experian found was the lack of a bank or branch code, so either the data were not kept up to date as branches closed, or invalid data were supplied at the point of capture, Williams says. Other problems included closed branches, merged banks and transferred accounts.
“As we move to a more pan-European system, banks will lose the local information on how to fix erroneous transactions because the processor may be in another country,” Williams notes.
While SEPA migration has a proposed end date of 2012, “the closure of domestic clearing will be closer to 2013 as long as banks and financial institutions offer data-conversion services to all corporate customers,” Williams contends.
