Generating SEPA / ISO 20022 (Credit Transfer) Payment File using D365 Finance

Hi Guys,

Payment to vendors and payment from customer are always 1st priority of any business. in current world our banking system is so strong that we almost forget about using “Paper Cheque” for payment, Electronic payment is now part of our life. Today I want to discuss and show the process of one of the way of Electronic Payment method and how we can use Dynamics 365 Finance to get it done.

Iit’s SEPA – Single Euro Payment Area, let’s first understand something about SEPA. ISO 20022 Credit transfer

Basics of SEPA:

SEPA payments are electronic payment transfers between bank accounts in the euro countries that participate in SEPA.

SEPA defines a common set of standards and rules for any organization or individual making or receiving payments in euro. With SEPA, all bank accounts are uniquely identified by the International Bank Account Number (IBAN), and the banks related to the accounts are uniquely identified by the Business Identifier Code (BIC). These standards improve the ability of consumers to transfer money, for example, from the home bank account to an account in another country that participates in SEPA.

History:

The story of SEPA began in 1999 when the banking industry through the Euro l Bank argued that a monetary union should also have a single payments area. The view was that it would lead to further integration of EU economies. However, it was not until 2007 that the European Union passed the Payment Services Directive. The Directive formed the legal basis for the establishment of the Single Euro Payments Area.

In 2011, SEPA payments replaced national payments. Later, in 2017, SEPA unveiled a program whereby participating banks would transfer up to 15,000 euros in ten seconds.

In 2018, the European Commission proposed to extend rules forbidding banks to charge extra cross-border transaction fees to non-EU countries as well. This proposal dictates all people in the EU have the right to transfer euros across borders at the same cost as they would pay for a domestic transaction. The new rules will also require that consumers are informed of the cost of a currency conversion before they make a payment abroad in a currency different than their home currency.

In 2019, Vatican City and Andorra join SEPA. (Source: Investopedia )

ISO 20022 : A single standardization approach (methodology, process, repository) to be used by all financial standards initiatives

ISO 20022 is an ISO standard for electronic data interchange between financial institutions. It describes a metadata repository containing descriptions of messages and business processes, and a maintenance process for the repository content. The standard covers financial information transferred between financial institutions that includes payment transactions, securities trading and settlement information, credit and debit card transactions and other financial information.

The repository contains a huge amount of financial services metadata that has been shared and standardized across the industry. The metadata is stored in UML models with a special ISO 20022 UML Profile. Underlying all of this is the ISO 20022 metamodel – a model of the models. The UML profile is the metamodel transformed into UML. The metadata is transformed into the syntax of messages used in financial networks. The first syntax supported for messages was XML Schema.

ISO 20022 is widely used in financial services. Organizations participating in ISO 20022 include: RippleFIX Protocol Limited (Financial Information eXchange), ISDA (FpML), ISITCOmgeoSWIFT, and Visa. (Source : Wikipedia)

How to use Dynamics 365 Finance to Generate SEPA / ISO 20022 file (Credit transfer) to upload in Bank’s software?

Lets list out the Process first. Following are the steps we gonna follow for generating SEPA / ISO 20022 Payment File.

  • Importing ISO 20022 Electronic Report Configuration
  • Setup of Method of Payment
  • Setup of Bank master
  • Creation of vendor Payment Journal
  • Generation of Payment

Let’s begin:

Importing ISO 20022 Electronic report File format from LCS.

I am using Contoso Data base and DEMF Legal entity for explaining the process.

Go to Electronic Reporting Workspace and Click on Repository. Select Either LCS or Operational Resource to Open Global Generic Document Library / configuration repository.

Find ISO 20022 Credit Transfer and import relevant file.

Configuration Repository

Setup Method of Payment in Accounts Payable Module

Go to Accounts Payable > Payment Setup > Method of Payment.

Create new method of Payment with any name (Such as – SEPA CT) and configured in following way and Select the export format as imported from LCS:

Method of Payment

once Method of Payment configured, make sure you have bank master with Sift Code and other relevant details.

Setup Bank Master

Configure bank master in Cash and Bank module and make sure you have provided Sift Code Details.

Bank Master

Once All configuration done, it’s time to start processing payment.

Create Vendor Payment Journal

Go to Accounts payable and create one payment journal. Go to the line view select Vendor to whom you need to make payment. Click on Settlement and select relevant invoices or transactions against which you are making payment. After that select Bank Account and Method of Payment which we have created before (in my case it’s “SEPA CT”).

Vendor Payment Journal

Now, it’s time to generate “Payment File”.

Generate Payment File

Now click on “Generate payments”.

Generate Payment-1

on Click system will open one Dialogue Box as below:

Generate Payment -2

Fill up require details and desired name of file, and click “Ok”

After that following dialogue will open.

Generate Payment -3

Update require details and click “ok” and system will generate one ZIP file which will contain payment file, which you have to upload in bank software.

Generate Payment – 4

I hope it will hep you for making Payment procedure in system and help to reduce manual work.

Let me know if you need any help in configuring this process.

Thank you,

Gaurangkumar Jani

(Senior Finance Functional Consultant)

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