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Overview

When the Euro was launched in 2002 the planners hoped that the Euro would quickly become easily transferable across borders within the Eurozone. Each country has its own banking systems, clearing systems, and legislation.  The effect of these differences is that although notes and coins of one Eurozone country are easily used in any other Eurozone country, other forms of payment may not always operate quite so easily – but that situation is changing fast:-

  • Regulation 924/2009 (which replaced Regulation 2560/2001) controls charges for cross-border transactions under €50,000 such that the charge for a cross-border transaction between Eurozone countries should be the same as an equivalent domestic transaction.  In simple terms, the cost for a transfer of funds from Dublin to Milan should be the same as for a transfer from Dublin to Mullingar.
  • The Payment Services Directive has harmonised legislation across Europe. It set out rules for conduct, and it set a time limit of end of business next day for delivery of credit transfers to the destination account ( with effect from Jan 2012)

There are various situations in which an individual or business might want to make payments across borders within the Eurozone.

Scenario 1:- Sending funds to an individual in a eurozone country e.g.

  • Immigrant in Ireland sending funds home
  • Parent funding son/daughter in eurozone country
  • Gift to an individual

Best option

Use a Cross-border credit transfer directly into the destination account in the Eurozone country. Under regulation 924, 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 euro (for payments up to €50,000). You will need to have the IBAN & BIC number of the destination account.

Alternative option

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.

Worst option

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

Scenario 2:- Purchasing goods online

Best option

Paypal, if both you and the online retailer have paypal accounts, alternatively credit card

Alternative option

Cross-border credit transfer, if accepted by the online retailer

Scenario 3:- Pay for imported goods/services. You will have an invoice from the supplier. 

Best option

Cross-border credit transfer directly into the destination account in the Eurozone country. Under regulation 924, 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.

Worst option

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

Scenario 4:-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

Scenario 5:- Selling goods online into Europe

Best Option

Become a credit-card merchant. Consider joining Paypal as a seller

Scenario 6:- Pay utility bills, taxes, etc of your villa in Spain

Best Option

Open an account in the country of your villa. Obtain the IBAN and BIC (see below) of that account. transfer funds to the account using cross-border credit transfer.

Emerging alternative

SEPA Direct Debit is gradually becoming available – make enquiries

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 924

Regulation 924 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 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 the same 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

BIC and IBAN - Frequently Asked Questions

Q: What is 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 of the beneficiary is held.

Q: What is 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 straight-through payment processing. EU banks are legally required to provide their customers with an IBAN for each bank account. An example of an Irish IBAN is: IE64IRCE92050112345678.

Q: Where can I find the BIC and IBAN for my accounts?

A: Your BIC and IBAN are printed on your bank statement. You can also request them directly from your bank.

Q: Why are they important?

A: The BIC allows for easy identification of the beneficiary bank. Since 1st January 2007, all cross-border payments to the Single Euro Payments Area (SEPA) 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 payments in an efficient manner. Payment instructions that do not include the beneficiary’s IBAN and the beneficiary bank’s BIC code will not be accepted by Irish banks. The IBAN is the standard format for bank account numbers in cross-border payments within Europe.

Q: Does the IBAN replace my existing account number?

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 which is recognised internationally. Development of SEPA in Europe has lead to increased usage of the IBAN format for national euro payments.

Q: Who will need to use BIC and IBAN?

A: All Irish businesses and individuals making or receiving cross-border payments in Europe are required to use the mandatory pan-European banking codes since 1st January 2007. There is a risk of a delay to payments if the numbers are not used . Those making payments will be required to provide the BIC and IBAN of the beneficiary on their payment instructions, banks will not accept outgoing payments to the SEPA area without a valid BIC and IBAN. Recipients of payments from abroad will need to provide their BIC and IBAN to those sending the payments. Failure to do so could result in foreign banks refusing to accept these payments, thus resulting in a delay for the receiver of the funds.

Q: Why has this change been made?

A: It is the European Commission’s objective to create a Single Euro Payments Area (SEPA), with no frontiers, for cross-border payments in Euro. Traditionally cross-border credit transfers were generally more expensive and difficult to process. This was due to the fact that national payment standards in Europe were not compatible and necessitated 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 BIC and IBAN standard.

Q: Can you use BIC and IBAN 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 SEPA, other countries have also adopted the IBAN standard.

Q: Will I still be able to receive payments from abroad to my account number and NSC?

A: Since 1st January 2007, the European banks require BIC and IBAN details to make euro payments. Payments from outside of Europe may continue to be received with the account number and sort code, however it is recommended that your BIC and IBAN details are supplied to your Payers worldwide as these are required since the SEPA project was implemented. 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 characters additional to a country’s domestic account number. These characters consist of a two-letter country code (IE is the Irish country code), followed by a two-digit check number. Ireland has incorporated a bank code in front of the standard domestic account number to clearly identify the account holding bank. Your IBAN will incorporate your account number and sort code number. However, if you do not provide your full BIC and IBAN to those within the relevant countries when making payments to your account you run the risk of delays in receiving the payments.

Q: If I receive payments from abroad, are there any recommendations for me to ensure there is no interruption to 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 BIC and IBAN to those making payments to them. This can be achieved easily and without fuss by ensuring that your BIC and IBAN 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 BIC and IBAN outgoing payments will not be accepted by banks within SEPA.

Q: What happens if I input correct details for the recipient (e.g. name) but enter an incorrect but valid IBAN on a payment instruction?

A: It is crucial that the correct IBAN is used when instructing your bank to make a payment. Providing an incorrect but valid IBAN could result in the payment being delayed, not being received at all, or being processed to an account relating to the incorrect IBAN provided. While the financial institutions concerned will attempt to resolve any issues, there is a risk of Payers incurring a loss if incorrect information is provided, so it is vital that the correct details are provided.

Q: Where can I find out more about this?

A: You can ask your bank for more information.