Single Euro Payments Area (SEPA) is the result of actions taken by the banking industry in 2002, when the industry created the European Payments Council (EPC) to define the standards, frameworks, and rules for Euro payments. SEPA enables citizens, companies, and other stakeholders to make and receive payments in Euros within Europe, whether between or within national boundaries, under the same basic conditions, rights, and obligations, regardless of their location. The political driver behind SEPA is the European Commission along with the European Central Bank.

SEPA applies to all national and cross-border Euro payments within and between the 27 member states of the European Union (EU), the three European Economic Area countries, and Switzerland. All of these countries gradually have to harmonize their payment systems and procedures. This means establishing European standards for processing payments, reducing barriers to market entry, increasing efficiency, and lowering transfer costs. Setting such standards leads to payment format and master data changes — not only for companies in Europe, but also in the US and other countries that send or receive payments from SEPA member states.

SEPA introduces two new payment instruments provided by banks for their customers: SEPA credit transfers and SEPA direct debits. These new payment instruments are identical across SEPA and provide significant payment efficiencies for the daily business of corporations. For example, exporters no longer require expensive, difficult-to-manage, incoming payment accounts at foreign correspondence banks. Companies can set up payment factories and shared service centers for financial operations, enabling them to centralize their financial accounting, cash, and treasury management functions. SEPA affects card payments as well. Holders of EC cards and credit cards can use them within SEPA to make payments at their usual national rates.

Both the SEPA credit transfer and the SEPA direct debit payments are based on International Organization for Standardization (IOS) 20022 payment processing standards and are defined as XML formats. The SEPA credit transfer does not differ significantly from the existing standard credit transfer within the EU, but it eliminates the current 50,000 Euro value limit. The SEPA direct debit is a more complex payment instrument requiring the creditor to receive a mandate from the creditor’s debtors. The mandate is the authorization and expression of consent given by the debtor to the creditor allowing the collection of outstanding receivables from a specified debtor account. Creditors must store mandate information in their systems as proof of legitimate collections, as well as to transfer mandate-related data to their financial institutions.

Both the SEPA credit transfer and the SEPA direct debit payment instruments require the use of the international bank account number (IBAN) and bank identifier code (BIC). Companies have to update their systems to support both IBAN and BIC. SEPA credit transfers are already in use and SEPA direct debits will be gradually introduced to the market by the banking industry. In the medium term, both payment instruments replace the currently existing domestic payment formats such as DTAUS in Germany or Bankers’ Automated Clearing Services (BACS) in the UK. The official SEPA roadmap allows for a transitional period in which both the old and the new formats coexist, which is similar to how it approached the introduction of the Euro.

I’ll explain the SEPA functionality available in the SAP system, including IBAN functionality and some new mandate management features.

SEPA Functionality Delivered By SAP

SAP provides a SEPA package, which includes the main functions to remain SEPA compliant. The SEPA package contains the following features:

• A complete mandate management component
• Support of the new XML payment formats SEPA credit transfer and SEPA direct debit
• An enhanced IBAN transaction that makes it easier to capture and display IBAN data

SAP’s SEPA package supports releases R/3 4.7 and higher, including SAP ERP Central Component (ECC) systems. All features, except for the enhanced IBAN functionality that is only delivered with SAP ERP 6.0, are available in all these releases. The SEPA functions are delivered with Support Packages that belong to the software components SAP_ABA (generic components) and SAP_APPL (logistics and accounting). You have to apply a certain support stack level to implement the SEPA functions. To get the most current status regarding the delivery dates, see SAP Note 1090321.

Let’s take a closer look at the extended IBAN functionality and the mandate management component now.

New IBAN Functionality

The IBAN is part of the customer’s bank details. In the past, you could maintain the IBAN under the Payment Transactions tab in the Create Customer or Change Customer transaction. The system worked under the assumption that an accounting clerk knew all the data for the bank country (key field BANKL), the bank key (BANKS), and the bank account (BANKN). The clerk could then click on the IBAN button with the yellow arrow. Typically, the system automatically generated a new bank account number that needed confirmation on a separate pop-up screen (Figure 1). Then, the system stored the IBAN number in the table TIBAN.

Figure 1

Classical IBAN transaction

One major issue with this approach is that the generated IBAN might be mathematically correct but not necessarily be the correct IBAN of the account holder. Only the account-holding bank can assign the correct IBAN. SAP made users aware of this problem in various notes (e.g., SAP Notes 634191 and 503396) and provides options to suppress the display of the generated proposal.

The new IBAN functionality considers the fact that IBAN plays the dominant role within SEPA and assumes that accounting clerks want to maintain an IBAN without knowing the corresponding bank key or account number. To activate this functionality, follow IMG path Financial Accounting > Accounts Receivable and Accounts Payable > Activate IBAN without Bank Account Number and check off the “IBAN without Bank Account No.” Active check box (Figure 2).

Figure 2

Activate the new IBAN functionality

If you decide to activate the extended IBAN functionality, you should not forget to use transaction OBVCU and validate the configuration of the relevant payment methods per country. You should pay special attention to set the two check marks IBAN Required and Account Number Required. In the case of the payment methods SEPA credit transfer and SEPA direct debit, you need to make sure that the check mark is set for IBAN Required and not set for Account Number Required (Figure 3). If you haven’t checked the Account Number Required box, the payment method in the system can be used even if you haven’t maintained a domestic account number for the bank details of the business partner.

Figure 3

Configuration of payment methods

After activating the extended IBAN functionality, the user can still click on the IBAN button but the pop-up screen won’t allow him or her to generate an IBAN any more if the check box Acct Number Unknown is set (Figure 4). In this case, the user can simply press Enter and save the IBAN without keying in any additional bank data.

Figure 4

New IBAN transaction

The extended IBAN functionality saves an 18-digit technical bank account number in the domain BANKN of the table TIBAN. This technical bank account number, which consists of the attributes BANKL and BANKS, has no business relevance and won’t be visible on any user screens. You should be aware of some technical limitations of the extended IBAN functionality when it comes to automated processes. For example, bank details without bank account numbers won’t be transferred via Application Link Enabling.

After having introduced the new IBAN functionality for both the SEPA credit transfer and the future SEPA direct debit, I want to explain the other important configuration that you will need so you can be compliant with the upcoming SEPA direct debit. To make use of the new payment instrument, creditors need to maintain mandates in their systems.

New Mandate Management Functionality

One of the major changes of SEPA is the need for creditors to manage direct debit authorizations of their customers. Direct debits are quite popular in many European countries and SAP’s new mandate management functionality enables you to manage the direct debit mandates that SEPA requires. You can find the new mandate management functions via menu path Accounting > Financial Accounting > Accounts Receivable > Master Records > SEPA Mandates. SAP provides dedicated transactions to create, display, change, and analyze SEPA mandates. You can also use the report RF_CONVERT_XEZER_TO_MANDATE to generate mandates in a mass transaction.

In addition to these dedicated SEPA mandate transactions, users can also manage SEPA mandates directly in customer master data. If you have activated the SEPA mandate management component in your system, a new column called Mand. is visible under the Payment Transactions tab of the customer. There are three different options for the display:

• If there is no IBAN maintained for the bank details of the customer, no mandate icon is visible
• If there is an IBAN maintained for the bank details of the customer, then there is a mandate icon (same design as the IBAN button) visible, but it doesn’t have a colored background
• If there is an IBAN maintained for the bank details of the customer and a mandate for the respective bank account exists, then the mandate icon is visible and has a colored background

Figure 5 shows as an example of one customer master record with three bank connections. The first and third records have an IBAN assigned because the arrow has green in the background, but only the third record has a mandate maintained. As you have probably noticed, there is no separate visual information showing that there are actually two mandates available for this bank account.

Figure 5

Display of SEPA mandates

To configure the SEPA mandate management component, follow IMG path Financial Accounting > Accounts Receivable and Accounts Payable > Business Transactions > Incoming Payments > Management of SEPA Mandates.

In the first customizing view General Settings, you can activate the SEPA mandate management component in your system. During the design of the mandate management, SAP paid special attention to support various SAP components (Accounts Receivable [FI-AR], SAP Banking, and SAP Contract Accounts Receivables and Payables [FI- CA]). Therefore, you are able to decide for which application (e.g., FI-AR) you would like to activate SEPA mandate management (Figure 6). An application is a business attribute of the mandate master data. If you have activated multiple applications within one SAP client, you can switch between them. If you want to avoid selecting an application every time, you can also set the parameter SEPA_ANWND under your user profile settings.

Figure 6

Activation of Financial Accounting for SEPA

In addition to activating SEPA mandate management and assigning an application, you can configure a couple of additional items in the General Settings section (Figure 7). This allows you to adapt the new SEPA functionality to your specific needs. You can maintain a sub-screen to display additional master data in the detail view of the mandate (which requires ABAP programming skills) and assign Smart Forms or Adobe Portable Document Formats (PDF) to print out SEPA mandates. You would have to design these forms using the SAP system tools. This configuration depends very much on the company-specific environment.

Figure 7

General settings of SEPA mandate management

In addition, you can assign your own customer-specific ABAP function modules to enrich mandate data or execute data entry checks. There are six function modules pre-delivered by SAP that you can activate and adapt to your needs. Table 1 presents information about the six function modules.

Juergen Weiss

Juergen Weiss works in the functional area of SAP Financial Supply Chain Management. As part of SAP’s product management team, he was globally responsible for the Financial Supply Chain Management applications, including Electronic Bill Presentment and Payment, Dispute Management, Collections Management, Credit Management, Treasury and Risk Management, Bank Relationship Management, and In-House Cash as well as Accounts Payable and Receivable.

You may contact the author at juergen.weiss@sepa-now.de.

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