SEPA Payment Messages

SEPA messages:

SEPA payment messages are based on ISO20022. You might ask “What is that ??”. Before we go there, I just wanted to recap what we have discussed so far as they are very important for us to understand this article. If you need additional details on these points just read the previous articles.

1. SEPA is an area under which payment are transferred between countries like it is a domestic payment.
2. SEPA payments make transfer of funds between two account in different countries (in Single Euro Payment Area) easy.
3. Payments made within the SEPA area and follows the rules prescribes by EPC are called SEPA payments.
4. PSPs in the EURO zone must follow payment schemes like SCT and SDD Code as it is mandatory.
5. Payment schemes like SCT Inst and SDD B2B are optional in the SEPA area for PSPs.
6. SEPA payments are done in EURO.

In the Introductory set of articles, we have seen that banks send each other payment messages, resulting in the transfer of funds from one bank to another. Customers also initiate payment messages which help them to send payment instructions to their banks. If you have not read them, I highly recommend you to do the same Link.

SEPA has adopted the ISO20022 standard. ISO is the International standards organization and most of you might be familiar with it. They create international standards for various things like country codes eg. IN – India, DE – Germany, Currency E.g. INR – Indian Rupees. They have also created an international standard for financial messaging which is ISO20022. There are close to 800 + messages for different business areas like Cards, Securities, Forex, etc. These messages are classified into different “sets”.

From a payments perspective, 3 ISO20022 message sets are used in SEPA

1. pain – Payments Initiation
2. pacs – Payments Clearing and Settlement
3. camt – Cash Management

All payment schemes in SEPA use messages from any of the above message sets. SEPA used XML syntax of the ISO20022 standards. Another point to note is that for SEPA some market-specific changes are added to the base ISO20022 standards. SEPA standards are a subset of the ISO20022 global standards. We will surely discuss these changes later.

One of the messages used in SEPA is pain.001.001.03 where “pain.001.001.03” is the message identifier. Here is what the identifier (or Name) stands for.

Now, we can dive into a little bit more detail about the above-mentioned message sets

Pain – This set of messages are used in the customer to bank space. They are used by customers to initiate payments and receive status updates from Banks.

Example: In SCT, pain.001.001.03 is used by the customers to initiate a SEPA credit transfer payment.

One more point to note is that the latest version of pain.001 is “pain.001.001.11” but EPC prescribes the use of version 3 of the message as it satisfies the business needs of the user community.

If you are familiar with SWIFT then pain.001 is similar to MT101

Pacs – This set of messages are used in the bank to bank space or interbank space. They are generally used by banks to send funds to another bank.

Example: In SCT, pacs.008.001.02 is used by banks to transfer funds to another bank on behalf of its customer.

Pacs.008 is similar to MT103 of SWIFT

Camt – Cash Management messages are used both in customer to bank and inter-bank space. They are used to report the cash position of customers and to send cancelation requests/responses.

Example: In SCT camt.056.001.01 is used by banks to recall funds of an earlier credit transfer from another bank.

In the next article, we will discuss the various CSMs in SEPA.