New Euro rules expose businesses to €20 billion payment bill
4 October 2012 — European businesses risk losing billions of Euros as a result of failure to tackle simple payment errors according to a new report from Experian®, the global information services company.
The move to a single SEPA payment system – designed to simplify and streamline processing operations for domestic and international payments – will expose out-of-date account data and other errors that were previously overcome through a patchwork of locally implemented fixes. SEPA becomes mandatory in February 2014 for Eurozone countries and 2016 for businesses in non-Eurozone territories wishing to make and receive payments in Euros.
Experian analysis of over half a million records bank account records held by businesses around Europe has revealed that 12 per cent of electronic payments made to and from businesses in Euros currently contain data errors that could critically block the timely and cost-effective transfer of funds when new SEPA (Single Euro Payments Area) legislation first comes into effect in February 2014. Only 65 per cent of Euro transactions are underpinned by fully accurate destination account data.
It has also found that 45 per cent of new SEPA-compliant International Bank Account Numbers (IBANs) stored by large European businesses do not have the valid corresponding Bank Identifier Codes (BICs) required to enable successful completion of transactions.
Experian has warned that these same error types will lead to payment failure when made through SEPA, costing businesses approximately €50 for each failed transaction, and leaving a total bill of more than €20 billion a year. An average error rate of around one in eight equates to a potential cost of €600,000 for an organisation transacting with 100,000 bank accounts.
Jonathan Williams, Director of Payment Strategy, Experian, comments: “The SEPA initiative is a key component to strengthening the financial foundations of the Eurozone with improved and more efficient end-to-end straight-through processing of payments. While SEPA will undoubtedly benefit organisations trading in Euros, errors in bank account details held by European businesses risk causing significant teething problems as locally implemented fixes – which have largely worked so far – are made redundant by the new common payments system.
“European businesses need to analyse their account data, fix any errors and convert this information to the correct SEPA standard, to ensure suppliers, partners and staff continue to get paid on time when the new rules come into place. Early adoption is crucial. If left to the last minute, the SEPA requirements have the potential to be both disruptive and costly.”
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The findings revealed in this press release are based on analysis of more than 650,000 bank account details and a further 220,000 IBAN (International Bank Account Numbers) records provided to Experian by businesses from around Europe. Insights gleaned from this data were considered alongside figures from European Central Bank indicating that 34 billion euro transactions are made every year within the Eurozone relating to salary, supplier, collection and other business payments, as well as European Commission findings that the end-to-end cost of each failed transaction (including loss of revenue, extra customer service time and increased borrowing requirement) is between €50 and €70.
Chris Owen / Georgia Hart
Octopus Communications for Experian
Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2012 was US$4.5 billion. Experian employs approximately 17,000 people in 44 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
For more information, visit http://www.experianplc.com.