As Europe looks to a future in which instant payments are the norm, and open banking-enabled payments are a mainstream payment method, International Bank Account Number (IBAN) discrimination remains a stubborn challenge.
IBAN discrimination — now both outdated and illegal — refers to the refusal by EU banks located in one EU member state to process payments to or from a bank account in a different EU member state. .
In this post, we explore why IBAN discrimination is a problem, and how it might be solved.
The problem with IBAN discrimination
IBAN discrimination is not just a regulatory concern that challenges the seamless financial ecosystem that the EU aspires to. It’s a genuine problem affecting people across the EU on a daily basis, which prevents consumers and businesses from making payments or getting paid.
First, let’s consider consumers, who are affected by IBAN discrimination when moving to or purchasing services in another EU Member State.
As Magali Van Bulck, founder of Accept My IBAN puts it: “Let’s say you have a German bank account and want to set up a phone contract in Spain, legally speaking you should experience no issues at all. But practically speaking, that experience will be riddled with problems.”
According to data collected by the Accept My IBAN initiative, every month hundreds of people complain that they can’t pay for their phone contracts, rent, newspaper subscriptions, electricity bills, gym memberships, or public transport. In some cases, an IBAN starting with the ‘wrong’ letters can also prevent consumers from receiving tax rebates, unemployment benefits and social security payouts.
IBAN discrimination also affects businesses, preventing companies from scaling across the EU as they are unable to pay their suppliers or receive payments from their customers. For merchants, the refusal of non-domestic IBANs can lead to lost sales and diminished customer trust. While for payment providers, IBAN discrimination disrupts the promise of a unified payments market, creating unnecessary friction in payment journeys.
Ending IBAN discrimination
The Accept My IBAN coalition is an industry-led initiative that has played a key role in spotlighting the important issue of IBAN discrimination. Its goal is clear: to ensure that no IBAN from a SEPA country is unjustly rejected. The campaign seeks to educate and drive awareness, advocating for the rightful acceptance of all IBANs within the SEPA zone, while also collecting data to demonstrate the extent of the problem.
While it is encouraging that some Member States, such as France and Ireland, have made public commitments to tackle IBAN discrimination and are proposing stronger action, further progress is required to make IBAN discrimination history across the EU.
The Accept My IBAN coalition also calls for:
Regular monitoring of IBAN discrimination at both a European and national level
An effective enforcement framework, as well as the provision of adequate powers and resources so national competent authorities can proactively and rigorously fight against IBAN discrimination, are both needed. Despite being prohibited under the Single Euro Payments Area (SEPA) Regulation, enforcement is inconsistent across Member States.
The establishment of a formal forum, where policymakers and regulators regularly discuss the state of fighting against IBAN discrimination
Token.io stands firmly against IBAN discrimination. As a new member of the Accept My IBAN coalition, as well as a founding member of the Open Finance Association (which is also a member of the coalition), we encourage our partners and customers to report any instances of this practice.
What can you do?
What can you do to help make IBAN discrimination a relic of the past?
Stay informed
Report any discrimination you encounter
Support initiatives like Accept My IBAN
Together, we can create a truly fair and frictionless European payment ecosystem.
For more information on how to report IBAN discrimination and to join the cause, visit: Accept My IBAN.