Understanding SEPA

SEPA usage rules require the use of BIC, which is assigned by SWIFT, and IBAN (International Bank Identifier Number) to identify the banks and bank accounts of the creditor and debtor in all euro cross-border payments. It is imperative that the IBAN and BIC codes are correct to avoid repair fees that the bank charges due to processing errors. In addition, the validation of the IBAN and BIC codes avoids delays in processing payments and collections due to the time-consuming correction of these errors. IBAN also makes it easier to validate foreign account numbers. The IBAN format is an internationally agreed upon standard that is defined in ISO 13616.

Depending on how the IBAN is formatted for a country, the IBAN can be manually entered or the system will display the code after a user enters the first two check digits of the code.

The BIC value is defined when you select 02 as the DFI Qualifier (Depository Financial Institution Qualifier), which is set up for SWIFT/BIC. Once you select 02 for the qualifier, you can enter the BIC code in the DFI ID field, which can be 8 or 11 characters, where positions 5 and 6 must be a valid two-character country code.

The DFI Qualifier and DFI ID fields and the IBAN fields appear on these PeopleSoft application pages:

• Cash Management > Fees and Transfers > Enter Transfer Template > Destination

  Note: The DFI Qualifier, DFI ID, and IBAN fields only appear for EFT transfer templates.

  See Enter Transfer Templates - Destination Page.

• Cash Management > Fees and Transfers > EFT Request > Destination

  See EFT Request - Destination Page.

• Banking, Bank Accounts, Settlement Instructions, Beneficiary Bank page

  See Defining Settlement Instructions.

• Suppliers, Supplier Information, Add/Update, Supplier, Location, click the Payables link to access the Payables Options page, open the Supplier Bank Account Options section.

  See Defining Supplier Locations.

• Customers, Customer Information, MICR Information, Customer Bank page.

  See MICR Information - Customer Bank Page.

• Employee Self-Service, Travel and Expenses, Review/Edit Profile, Bank Accounts page, click the Bank icon, Pay to Bank Accounts page; or Travel and Expenses, Manage Employee Information, Update Profile, Bank Accounts, click the Bank icon, Pay to Bank Accounts page.

  See Maintaining Employee Bank Account Data.

• eSettlements, Supplier Information, Review Supplier Details, Create a New Supplier, Locations, Add a New Location or Maintain Locations, and click the Update Bank Information link in the Payment Terms and Remitting Options group box on the Maintain Locations page.

See Understanding IBAN.

See Defining External Account Information.

To initiate a SEPA Credit Transfer or SEPA Direct Debit, PeopleSoft Financial Gateway delivers predefined payment layouts in the Layout Catalog.

• Credit transfer initiation layouts for SEPA include these:

  • SEPA_CT (SEPA Credit Transfer, Pain.001.001.02)

  • SEPA_CT_03 (SEPA Credit Transfer V3, Pain.001.001.03; adheres to Rulebook 6.0)

  • SEPA_CT_CH (Swiss Specific Customer Credit Transfer, Pain.001.001.03.ch.02)

  • SEPA_CT_09 (SEPA Credit Transfer Initiation, Pain.001.001.09)

• Direct debit initiation layouts for SEPA include these:

  • SEPA_DD (SEPA Direct Debit, Pain.008.001.01)

  • SEPA_DD_02 (SEPA Direct Debit V2, Pain.008.001.02; adheres to Rulebook 6.0)

  • SEPA_DD_2B (SEPA Direct Debit B2B, Pain.008.001.02, Business to Business Version)

  • SEPA_DD_08 (SEPA Direct Debit Initiation, Pain.008.001.08)

PeopleSoft Financial Gateway also delivers predefined ISO payment formats in the Layout Catalog. ISO 20022 layouts are generic layouts, which are used for credit transfers and direct debits that are not related to SEPA.

• Generic credit transfer initiation layouts include these:

  • ISOV2 (ISO 20022 Credit Transfer V2, Pain.001.001.02)

  • ISO_CT_03 (ISO 20022 Credit Transfer V3, Pain.001.001.03)

  • ISO_CT_05 (ISO 20022 Credit Transfer V5, Pain.001.001.05)

  • ISO_CT_09 (ISO 20022 Credit Transfer Initiation, Pain.001.001.09)

• Generic direct debit initiation layouts include these:

  • ISOV2_DD (ISO 20022 Direct Debit, Pain.008.001.01)

  • ISO_DD_02 (ISO 20022 Direct Debit, Pain.008.001.02)

  • ISO_DD_08 (ISO 20022 Direct Debit Initiation, Pain.008.001.08)

For a complete list of delivered payment layouts, including SEPA, ISO, and miscellaneous formats:

See Understanding the Layout Catalog.

These SEPA layouts dispatch payments electronically as XML messages from PeopleSoft Financial Gateway using the Credit Transfer Initiation Message or the Customer Direct Debit Initiation Message. The PeopleSoft payment methods ACH (Automated Clearing House), WIR (Treasury Wire), and EFT (Electronic File Transfer) support the SEPA credit transfer layouts and the direct debit payment method supports the SEPA direct debit layouts.

To enable PeopleSoft Financial Gateway to perform SEPA credit transfers and direct debits, you must access the Bank Integration Layouts page and associate each layout with an existing bank. Once the layouts are set up for a selected bank, they can be used with any bank accounts associated with that bank. You must access one or more external bank accounts that you want to set up to perform SEPA credit transfers or direct debits and attach the layouts to the bank account.

For example, you might access the Collections page of a bank account associated with a French bank, select Direct Debit as the Payment Method, and select SEPA_DD as the payment layout. This is also where you indicate that you want to dispatch the direct debit transaction electronically using PeopleSoft Financial Gateway.

Process flow for payment layouts

SEPA schemes, rules, and standards enable the providers of payment services to offer credit transfer services throughout SEPA for single, bulk, and repetitive payments. The standards for the scheme facilitate payment initiation, processing, and reconciliation based on straight-through processing. The scheme permits the end-to-end carrying of remittance data on a structured and unstructured basis appropriate to the nature of payment.

The SEPA credit transfer scheme defines a common set of rules and processes for credit transfers denominated in the euro currency. The scheme defines a common service level and a time frame under which financial institutions participating in the scheme must, at a minimum, conduct SEPA credit transfers.

To enable a SEPA credit transfer to occur, PeopleSoft does this:

• Predefines SEPA credit transfer layouts, which adhere to ISO 20022 credit transfer standards and are in compliance with SEPA rules.

• Provides the functionality to initiate an input message with SEPA compliant information to PeopleSoft Financial Gateway.

• Provides the functionality to accept the SEPA format for rejecting and returning a message and store the format in PeopleSoft Financial Gateway.

SEPA credit transfers begin with the initiation of SEPA credit transfer payments by the payment originator. To transfer the funds, the payment originator instructs the bank in which the originator holds a bank account to move the funds to the account of the beneficiary. The originator's bank then processes the SEPA credit transfer payment instruction according to the SEPA credit transfer scheme and transfers the funds using clearing and settlement mechanisms to the beneficiary's bank. The beneficiary's bank then credits the account of the beneficiary.

The initiation process of the funds transfer typically affects PeopleSoft Payables, because payments are most often triggered by the purchase of goods and services. However, this process may also be initiated from PeopleSoft Cash Management if funds are transferred between accounts or payments that are made to a Treasury counterparty or from a third-party application.

The XML message, which is sent by the payment originator to the bank, contains all of the relevant information related to the payment instruction. Based on SEPA, the bank and customer can agree on how to transfer payment instructions and in which format. However, the banks will typically follow the EPC recommendation.

Message structure for a SEPA Credit Transfer

The SEPA direct debit instrument is designed to act as a local collection instrument for SEPA regions that transcend national borders. SEPA implementation guidelines for direct debits are based on the adoption of the ISO 20022 or UNIFI standard. A SEPA direct debit pulls funds from the debtors bank account into the creditors bank account. The pull is based on a direct debit mandate provided by the debtor to the creditor.

A mandate is a form given by the debtor to the creditor that authorizes the creditor to initiate collections on a debt. The mandate allows a debit from the debtor's specified account and enables the debtor's bank to comply with the instructions in accordance with the SEPA Rulebook. The collections are separate transactions from the underlying contract on which they are based. The underlying contract is agreed on between the creditor and the debtor. PeopleSoft Financial Gateway enables the creditor to print the mandate form with a reference number assigned by the system.

Process flow for using mandates

The debtor can be a Treasury counterparty or a customer. After the debtor completes and signs the mandate form, the debtor must return the completed mandate to the creditor. The creditor must enter the mandate information from the paper form in PeopleSoft Financial Gateway on the Direct Debit for Counterparties page if the debtor is a Treasury counterparty, or on the Direct Debit Mandate for Customers page if the debtor is a customer. The mandate must be signed by the debtor.

The debtor can amend the mandate form by informing the creditor of any necessary changes and state the reason for the amendment. The creditor selects a reason code on the amendment section of the form, which appears when the creditor makes the change and saves the change to the form in the system.

You can amend an approved mandate. Once you have amended the mandate, it must be approved again. Each mandate line must be approved. If you amend a mandate before it is approved, then two lines must be approved—the original line and the amended line.

You set up these pages to assist in performing SEPA direct debits:

• Transfer Template page: Identify the SEPA Direct Debit layout where the payment method is Direct Debit, select an external account that supports direct debit, and fill in the mandate information.

• EFT Transfer page: Select the SEPA Direct Debit Transfer Template, or you can identify payment method as Direct Debit and an external account that supports direct debit collection, and fill in the mandate information.

• Treasury Counterparties page: View direct debit mandates and their status.

The initiating party sends the Customer Direct Debit Initiation message to the forwarding agent or creditor agent using PeopleSoft Financial Gateway. The message requests a single or bulk collection of funds from one or more of the debtor's accounts for a creditor. A prenotification of the collection must be issued fourteen days before initiating the direct debit.

Message structure for a SEPA Direct Debit

SEPA direct debits can be initiated from PeopleSoft Receivables or by creating an EFT request in PeopleSoft Cash Management, which treats direct debits as collection items. Both products must identify the SEPA direct debit layout and euro (EUR) as the currency, and capture the BIC/IBAN and mandate information.

PeopleSoft predefines layouts in the system to handle cancellations and reversals for SEPA credit transfers and direct debits.

• SEPA layouts:

  • SEPA_RVSL (Payment Reversal, Pain 007.001.01)

  • SEPA_RVS_2 (Payment Reversal, Pain 007.001.02)

• ISO 20022 layouts: (generic)

  • ISO_CNCL (ISO Payment Cancellation Layout)

  • ISO_RVSL (ISO Payment Reversal, Pain 007.001.01)

  • ISO_RVS_2 (ISO Payment Reversal, Pain 007.001.02)

See Understanding the Layout Catalog.

These layouts are used to cancel or reverse payment messages electronically as XML messages from PeopleSoft Financial Gateway.

These layout properties will be attached to the existing SEPA layouts to help identify the layouts to use for cancellation or reversal messages electronically as XML messages from PeopleSoft Financial Gateway.

In PeopleSoft Payables, you can cancel a SEPA cash transfer payment and reverse the cancellation. However, in PeopleSoft Receivables, you can reverse a SEPA direct debit, but you cannot cancel it.

Users can define their own reason codes and reasons for payment cancellation and reversals.

Statuses for AP and AR payment cancellations and reversals

You must run the Payment Cancellation process to send the cancellation message to the bank, which will change the current status to Cancelled with Message for PeopleSoft Payables SEPA cash transfer transactions.

You must run the Payment Reversal process, which will change the current status to Reversed with Message for PeopleSoft Receivables SEPA direct debit transactions.

SEPA Payment Cancellation and SEPA Payment Reversal messages can be sent for payments received from third-party systems into Financial Gateway.