The checklist to becoming a SEPA indirect participant

From issuing its own BIC and IBANs to cutting its payment costs by 10, there are many advantages for a regulated fintech company to become a SEPA participant. However, it represents a significant project for a growing company and is a decision that should not be taken lightly.

In this article, we explore the steps for a regulated payment institution (PI), electronic money institution (EMI) or credit institution (CI) to become a SEPA indirect participant.

Regulatory and administrative tasks

In addition to holding customer accounts and sending and receiving payments on their behalf, which are regulated activities, becoming a SEPA indirect participant means accessing interbank communication systems. Different entities manage and oversee such systems with which candidate SEPA indirect participants have to interact.

Local regulator

Even if the candidate SEPA indirect participant is already a regulated PI, EMI, or CI, they need to declare their intention to become a SEPA indirect participant to their local regulator.

Request BIC from Swift

To issue its own IBANs and to be reachable from other SEPA participants, a SEPA indirect participant needs its own BIC. The body managing BICs worldwide is Swift. Swift ensures that:

• BICs follow international standards

• BICs are unique to each entity, to prevent routing errors

• BICs country code, location code and branch node correspond to the applicant SEPA indirect participant

SEPA indirect participant candidates can order a “non-connected BIC”, i.e., a BIC not connected to the Swift network, directly from Swift’s website.

Declare BIC to the EPC

The European Payments Council (EPC) provides the technical framework for SEPA payment schemes. To access SEPA, candidate SEPA indirect participants need EPC validation. This validation is requested by declaring a BIC to the EPC.

It also implies providing the EPC with a legal opinion from a lawyer, which is required to guarantee the EPC that the SEPA indirect participant has completed all the necessary regulatory steps to become SEPA indirect participant.

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