The EU has set a deadline for banks to switch to a more efficient pan-European payment system. But for consumers, the move will require getting used to longer personal account and bank identifier numbers.
The single euro payment area can save consumers billions
The European Commission has said enough is enough. The executive arm of the European Union on Thursday decided to set a deadline to accelerate its unified payment system, known as the single euro payment area (SEPA) after voluntary efforts to introduce the scheme fell short of expectations.
Under a draft law expected to be approved by EU member states and the European Parliament, national credit transfers and direct debit are to be phased out and replaced by SEPA in 12 and 24 months respectively.
Off to a slow start
SEPA was introduced in 2008 to reduce the costs of payments, increase competition and make cross-border payments as easy as domestic ones. A study for the Commission estimated that SEPA would save the EU economy 123 billion euros ($163 billion) over six years.
But by October of this year, only 9.6 percent of eurozone credit transfers were made using the new system.
Banks, including those in Germany, have been slow to embrace SEPA
EU Internal Market Commissioner Michel Barnier said the proposed law would fix "end-dates to make this pan-European system a reality, hopefully as early as 2012."
The common payment area comprises more than 500 million citizens, including some 20 million businesses and European public authorities in the 27-member EU. All of them with euro bank accounts can make and receive payments in euro under the same basic conditions, rights and obligations, regardless of their location.
Under the system, for instance, a resident of the Netherlands working in Belgium would receive his salary from his Dutch bank as quickly as his Belgian colleagues. Or a German family could pay all the utility bills for a holiday home in Spain by simple direct debit from a German account.
New account number twice as long
But to enjoy such comfort in making payments, consumers in most countries will have to get used to writing or typing long bank account number and bank identifier codes.
In Germany, bank account holders will need to type in a 22-character international bank account number (IBAN), consisting of numbers and letters. In many cases, that is twice as long as the number many of them know by heart.
The bank identifier code, known as BIC, is 11 digits long, or three more than German codes. The new bank identifier contains information that identifies the bank, the country and city in which it is located as well as the particular branch office.
Author: John Blau
Editor: Stuart Tiffen