Let me start by stressing out an important point about the EPC documents: the messages exchanged in the Customer-to-Bank space are recommended. It means that they are not mandatory. The Banks and their customers are not obliged to use them as they are specified in the Implementation Guidelines. And furthermore, a bank and his customer can agree to add specific rules or tags to the messages. That is under their discretion. The practice shows that it is better to stick to the standard. Bringing in specific rules and requirements that are not compliant with SEPA recommendations increases the complexity and the costs on the long term. We will now consider the two pain messages used in the customer to bank space of the SEPA Credit Transfer Scheme: Pain.001 and Pain.002.
Pain.001.001.03 (SCT orders)
The pain.001 message is used for transmitting customer credit transfer instructions to a Bank. The purpose is to request movement of funds from the debtor account to one or multiple creditor accounts. As private individual, you don’t send a pain.001 message to your bank. In general, you will go to your bank website or to a branch and no one will ask you to provide the pain.001 message. Who then uses pain.001 messages? Enterprises, associations, non-governmental organizations and similar institutions do. In short, any company or institution that needs to initiate a sizable number of payment orders. Solutions for individuals are not suitable for them.
Let us consider a large telecommunication company with thousands of employees. Manual entry of payment instructions for the salaries through an e-Banking website will take a huge amount of time. In addition to that, the probability to make errors is very high. To avoid all those problems, the telecommunication company will create the pain.001 message directly from its ERP or treasury system and send it to the Bank. It requires the setting up of a secured connection to the bank since the information exchanged is very sensitive. We will come back to that later. For now, just keep in mind that pain.001 message is used by corporations to send customer credit transfer orders to their Banks.
Another interesting point about the pain.001 is that two versions are used in SEPA: Pain.001.001.02 and Pain.001.001.03. If you go to the ISO20022 website, you will see that there is already a version 8 of the pain.001 message (pain.001.001.08). It means that the standard ISO 20022 has evolved since the version 3. Obviously, the EPC has not recommended the use of recent versions because previous versions still respond to the needs of corporations for SEPA payments pretty well.
Pain.002.001.03 (Payment Status Report)
The pain.002 message is sent by the Bank to the customer to inform him about the positive or negative status of customer credit transfer orders. When Banks receive orders, they perform checks to ensure that they can accept and process the orders. If something goes wrong and the order cannot be accepted and processed for one reason or another, the customer has to be informed. This reporting is critical for the customer. If he receives nothing, he can assume that the bank has correctly executed the orders. And if that assumption is wrong and your own salary was in the instruction, it will not be funny at all for you. 🙂
In the next articles we will consider the camt messages in the customer to bank space.