When the Euro was launched in 2002 The planners hoped that the Euro would quickly become easily transferable across borders within the eurozone. This has proved to be for notes and coin and for credit cards. Unfortunately, we must wait some time for the rest. The Single Euro Payment Area (SEPA) project addresses this. From 2008, the system will improve. The rest of this page addresses the current (2007) situation.
To address the options, let's construct a series of scenarios:-
Scenario
Best option
Alternatively
Avoid the following
Sending funds to an individual in a eurozone country
Immigrant in Ireland sending funds home
Parent funding son/daughter in eurozone country
Gift to an individual
Cross-border credit transfer directly into the destination account in the Eurozone country. Under regulation 2560, the bank cannot charge more for this service than for a transfer within the country. In some banks it is free - in others it may cost up to about a a euro (for payments up to €50,000). You will need to have the IBAN & BIC number of the destination account.
If the payee has an account in an Irish bank, lodge funds to it and draw the funds in cash from an ATM in the destination country.
Consider services from An Post, Western Union, etc
Irish Cheque - An Irish cheque will not be accepted for lodgement in another eurozone country. A bank may (reluctantly) accept the cheque for collection. This will lead to delays in payment and high bank charges in the destination country.
Draft - You can get a draft drawn on Dublin or on the capital city of the destination account. However, clearing of drafts is a slow process in many countries and involves high charges to the payee
Purchase goods online
Paypal, if both you and the online retailer have paypal accounts
Credit card
Cross-border credit transfer, if accepted by the online retailer
Any other option
Pay for imported goods/services. You will have an invoice from the supplier.
Cross-border credit transfer directly into the destination account in the Eurozone country. Under regulation 2560, the bank cannot charge more for this service than for a transfer within the country. In some banks it is free - in others it may cost up to about a a euro. You will need to have the IBAN &BIC number of the destination account. The invoice should show the IBAN & BIC number
If you have online banking, you may have a facility to create such a cross-border credit transfer online.
Irish Cheque - An Irish cheque will not be accepted for lodgement in another eurozone country. A bank may (reluctantly) accept the cheque for collection. This will lead to delays in payment and high bank charges in the destination country.
Draft - You can get a draft drawn on Dublin or on the capital city of the destination account. However, clearing of drafts is a slow process in many countries and involves high charges to the payee
Expecting incoming payment from another Eurozone country
If you are exporting goods/services you are obliged to provide your IBAN & BIC to the payer. Ideally you should show this on your invoice. The payer will pay the amount by cross-border credit transfer
If you are a private individual, you should provide your IBAN & BIC to the payer. You will find both of these on your bank statement
Selling goods online into Europe
Become a credit-card acquirer. Consider joining Paypal as a seller
You have a villa in Spain, France, or any other eurozone country. You need to pay the various utility bills, local taxes, etc.
Open an account in the country of your villa. Obtain the IBAN and BIC of that account. transfer funds to the account using cross-border credit transfer.
Cross-border credit transfer
You can create a cross-border credit transfer by completing a paper form at your bank or by completing an online form (not all online banking systems have such capability). At a minimum, you will require the IBAN & BIC numbers and the name of the destination account. For large payments, your bank may require evidence of the purpose of the payment to satisfy money laundering legislation
Effect of Regulation 2560
Regulation 2560 limits bank charges for cross-border transactions denominated in euro in the EU. In effect, the charge for an Irish account holder making/receiving a payment to/from Milan must not be greater than the charge for a similar payment to/from Mullingar, provided that the transaction is under €50,000 (originally €12,500) and the IBAN & BIC is supplied by the payer.
For euro transactions within the eurozone,
The normal charge for a cross-border transaction will be small - usually under €1
The charge for card transactions on Irish-issued cards will be as transactions in Ireland.
The charge to the retailer for accepting eurozone-issued cards will be the same as for similar cards issued in Ireland
For transactions within Europe but not in the Eurozone e.g. transfers to UK, Denmark, etc
If the transaction is denominated in euro and transferred in euro, then the normal charge for a cross-border transaction will be small - usually under €1. There may, however, be a charge for currency conversion at the destination.
If the transaction is not denominated in euro, then regulation does not apply
IBAN and BIC
The following text is reprinted from Irish Payment Services Organisation
IBAN & BIC
Frequently Asked Questions
Q: What is an IBAN?
A: IBAN stands for International Bank Account Number and the concept was developed by the European Committee for Banking Standards (ECBS) and the International Standards Organisation (ISO) and is an internationally agreed standard (ISO 13616: 2003). It was created as a viable and practical international bank account identifier, used internationally to uniquely identify the account of a customer at a financial institution, to assist error-free cross-border payments and to improve the potential for payments STP.
IBANs have been in use for over three years now. EU banks are legally required to provide their customers with an IBAN for each bank account.
Example of an Irish IBAN: IE64IRCE92050112345678
Q: What is a BIC?
A: The BIC or Bank Identifier Code (also known as the SWIFT address) is a unique address, which, in payment messages, identifies precisely the bank involved in financial transactions. When used in conjunction with the IBAN it identifies the bank at which the account is held.
Example of an Irish BIC: IRCEIE2D
Q: Why are they Important?
A: The IBAN is the standard format for bank account numbers in cross border payments within Europe. The BIC allows for easy identification of the beneficiary bank. From 1st January, 2007 all cross border payments to the Single Euro Payments Area (SEPA) - the EU25 member states, Norway, Iceland, Liechtenstein and Switzerland, in Euro, must include both the BIC and IBAN of the beneficiary’s account. Using both will allow your bank to process your cross-border in an efficient manner and ensures that your payments are processed at the lowest possible price. Payment instructions that do not include the beneficiary’s IBAN and the beneficiary banks BIC code will not be accepted by Irish Banks.
Q: Does the IBAN replace my existing account numbers?
A: No, your IBAN does not replace your existing account number. It is important to remember that IBAN is not a new account number, but simply a new format for an existing account number that will be recognised internationally. However, the development of a Single Euro Payments Area in Europe will lead to increased usage of the IBAN format for national Euro payments.
Q: Who will need to use IBAN / BIC?
A: All Irish businesses and individuals making or receiving cross border payments in Europe will need to use the new mandatory pan-European banking codes (IBAN / BIC) from 1st January 2007. There is a risk of a delay to payments if this change is not adopted. Those making payments will be required to provide the IBAN and BIC of the beneficiary on their payment instructions. IPSO members will not accept outgoing payments to the SEPA area without a valid IBAN and BIC. Receivers of payments from abroad will need to provide their IBAN and BIC to those making payments to them. Failure to do so could result in foreign banks refusing to accept these payments resulting in delay for the receiver of the funds.
Q: Why is this change being made?
A: It is the European Commission’s objective to create a Single Euro Payment Area (SEPA) with no frontiers for cross border payments in Euro. Traditionally cross border credit transfers are generally more expensive and difficult to process. This is due to the fact that national payment standards in Europe are not compatible and necessitates costly manual intervention by banks to complete. Therefore the European Commission implemented legislation, EU Regulation 2560, requiring banks to charge the same price for cross border Euro transfers in Europe as for equivalent national Euro transfers. The EU recognised that the banks could only offer such a service if cross border payments could be processed as efficiently as national payments and therefore supported the banks in the development of the IBAN and BIC standard.
Q: Which countries does this obligation refer to?
A: The affected countries are the 25 EU member states as well as Norway, Iceland, Liechtenstein and Switzerland.
Q: Can you use IBAN/BIC for payments all around the world or is it just Europe?
A: While the IBAN concept was developed as an account number standard to facilitate the creation of the SEPA, other countries have also adopted the IBAN standard.
Q: Will I still be able to receive in payments from abroad to my account number and NSC?
A: From January 1, 2007, the European Banks will require the IBAN and BIC details to make Euro payments. Payments from outside Europe may continue to be received with the account number and sort code, however, it is recommended that your IBAN and BIC details be supplied to your payers worldwide as this will be required once the SEPA project is implemented at a national level. It is important to remember that IBAN is not a new account number, but simply a new format for an existing account number that will be recognised internationally. An IBAN contains additional characters in front of a country’s normal domestic account number. These characters consist of a 2-letter country code (IE is the Irish country code), followed by a 2-digit check number. Ireland have incorporated a bank code in front of the standard domestic account number to clearly identify the account holding bank. Therefore, your IBAN will incorporate your account number and sort code number. However, if you do not provide your full IBAN / BIC to those within the affected countries making payments to your account you run the risk of delays in receiving payments.
Q: If I receive in payments from abroad, is there any recommendations for me, to ensure no interruption to any inbound transfers to my account?
A: To ensure that your payments reach your account on time, receivers of payments from abroad will need to provide their IBAN and BIC to those making payments to them. This can be achieved easily and without fuss by ensuring that your IBAN and BIC are clearly printed on all invoices issued.
Q: What happens if I don’t use the IBAN and BIC?
A: If you do not use IBAN and BIC by the deadline of 1st January, 2007 outgoing payments will not be accepted by banks within SEPA.
Q: Will I still get charged if I use IBAN/BIC?
A: Yes, however for payments within 28 of the SEPA countries (Switzerland being the exception) banks can only level the same charge for cross border payment in Euro (up to €50k) as they do for an equivalent domestic transfer. Customers using IBAN and BIC in Ireland have been benefiting from reduced payment charges for cross border Euro payments, since July 2003.
Q: Where would I find out the IBANs/BICs of my own accounts?
A: Your IBAN and BIC are printed on your bank statement, you can also request them from your bank, who will be delighted to assist you.
Q: Where should I go to find out more information on this?
A: You can ask your bank for more information or contact the Irish Payment Services Organisation (IPSO), tel: 01 6636740, email; or logon to www.ipso.ie
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