The use of IBANs is an integral part of payment processing within the Single Euro Payments Area (SEPA), one of the busiest payment markets in the world, and beyond. If you don't abide by the IBAN usage rules set out by the European Payments Council (EPC), you run the expensive risk of incurring a multitude of payment message repair fees, which can really increase operational costs.

IBANs are essential to a SWIFT MT103+ message and serve to identify the account number of the payee, the national routing code of the account holding bank and the institution identifier of the bank. One would think that quoting an IBAN on a payment means it will get straight to the beneficiary without any repair charges. Unfortunately, this is not quite the case as some account holding branches are not always connected to the SWIFT Network even if they have a BIC address.

When this particular situation occurs the payment message will require repair. This means that the correspondent bank of the Ordering Customer or Ordering Institution must insert a SWIFT-connected BIC that has a relationship to the “Account With Institution’ (such as a regional or national head office) to automatically channel the funds to the non-SWIFT connected account servicing branch. Given that, it would seem that remitting organizations are facing a no-win situation — even when adhering to IBAN rules payment repair charges can still be incurred.

But have hope — it doesn't have to be that way. Accuity has seen a growing trend where institutions hold a database of SWIFT-connected BICs to override the IBAN non-connected BICs. By inserting the BIC override data into the appropriate field (tag 57) within an MT103+ before sending the payment message, a significant increase in payment STP rates and a dramatic reduction in IBAN-related repair charges can be realized.

Thus, even given the EPC's strict STP rules surrounding SEPA payments and the use of IBANs within an MT103+, our market analysis categorically confirms that, with comprehensive BIC-related IBAN data and validation tools, repair fees can be all but (I)BANished.