Should you care about BICs and IBANs?

Okay it is the end of the day here in Australia and I am really flagging, so I am going to keep it short and sweet. In another demonstration of the banking industry's predilection for presuming that everybody knows it is talking about, the message about including BICs (Bank Identifier Codes) and IBANs(International Bank Account Numbers) on cross-border payments does not appear to have sunk in.

According to Jonathan Williams of Eiger Systems, which provides software for managing BICs and IBANs, the banks presumed that everybody knew about BICs and IBANs when they were first mentioned as a means of reducing the cost of cross-border payments in euro as part of the European Commission's 2001 Cross-border Payments Directive.

From 1 January this year, BICs and IBANs were made mandatory for European cross-border euro credit transfers, but according to one payments vendor, there are few payments within Europe that carry the requisite details, and therefore are not processed as cheaply as a domestic payment.

The upshot of all this however is that since 2003 when the Cross-Border Payments Directive took effect, banks have been charging extra to process payments that do not contain the correct BIC and IBAN details. "There are examples of companies being penalised £20 per transaction," says Williams.

However, he gives the Royal Bank of Scotland a pat on the back for being explicit about the charges it will levy on customers that don't include BICs and IBANs. Meanwhile, in the US it seems that companies there and banks doing business with Europe, do not give a monkeys about BICs and IBANs. "There is a lot of misunderstanding in the US about IBANs," says Williams. Quite frankly neither do corporates it would seem with one French corporate stating it had yet to be convinced of the business case and cost of implementing them.

Given the pressure on banks' revenue streams from competition and regulation, it would appear that not informing their customers adequately about BICs and IBANs is one sure way of making up dwindling revenues, until the banks can think of something better, like adding value.