Payments Views


IBAN the Terrible and Other EU Payment Issues

As the summer holiday period close, I find myself in a back to school mode even though I haven’t been enrolled for nearly twenty years. Europe is especially on my mind as we prepare for the Glenbrook Payments in Europe workshop next month. What are the big payments issues in Europe today, what’s the context behind them and how are things different here in the US.

One overarching point is that even as the Euro serves as a common currency in 18 countries, you really can’t think in terms of “European payment preferences”. Rather, there are German payment preferences, French payment preferences, and so on. Germans are not keen on credit cards while the French still use the paper check more than their continental counterparts. Perhaps one high level, regional trend that we can describe is that cards, especially credit cards, are not as popular among consumers and generally less widely used by corporates than they are here in the US. From a US perspective, I ask myself, how does anyone buy something off the Internet?

Of course, that’s not really a problem as different countries have different payment methods that they prefer for e-commerce. On a more serious note, what are some key payment issues across Europe today? Well, it depends on whom you ask!

If we ask a bank in Europe today, their number one concern is likely to be regulation. No surprise there except that folks on this side of the Atlantic may not realize the breadth and depth of regulatory developments underway in Europe. The multi-year transition to the Single Euro Payment Area (SEPA) formats has just been completed and there are now fundamental changes being debated by the European Payments Council on card handling as well as formal guidelines for handling mobile payments. Standardization is a big theme in the European payments arena.

On top of this, there are proposed regulations coming out of the European Parliament to cap interchange levels. (Did I mention that profitability is likely the next biggest concern for banks across Europe?).

If you’re a corporate located somewhere in Europe, you’re likely breathing a sigh of relief, having just completed the migration to the new SEPA payments formats. You’re also deep into the process to update your records to include new payment info for your payees to reflect the mandatory use of the IBAN (International Bank Account Number) in all payment transactions. The IBAN is a standardized account numbering structure that is being adopted around the world and it’s composed of a country code, a check digit code and your account number.

Finally, consumers are also struggling with “IBAN the Terrible”. They also have to update their account information with billers, and others like employers they may receive payment from. Depending on where you live, this can be a difficult task. While the Bank Identifier Code or BIC is only between 8 and 11 characters, the IBAN itself can be up to 34 characters. Norwegians have it the easiest as IBANs in that country only go to 15 characters. Hopefully the Maltese have superior memories because their IBANs can go up to 31 characters!

Certainly we have our own set of key payment issues – depending on whom you ask. Concern about regulatory fatigue is nearly a universal theme for banks and I would say that corporates in the US are most concerned about the cost of payments or security. But I’m glad to not have to update all my financial records with new account information, which gives me more time to worry about the security of my payment transactions.

This PaymentsViews post was written by Glenbrook’s Elizabeth McQuerry.  Elizabeth and Manfred Schuck will be leading Glenbrook’s Payments in Europe Insight Workshop on October 9 in Mt. View, CA.  Join them to find out what the European landscape portends for the US.

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