RF Creditor Reference

RF Creditor Reference Facilitating full end-to-end straight-through payment processing version 1.0, May 2010 RF Expert Group

2 (36) Page RF Creditor Reference... 1 Facilitating full end-to-end straight-through payment processing... 1 1 Introduction... 4 2 Executive summary... 5 3 Benefits of the RF Creditor Reference... 7 3.1 Benefits for the Creditor... 7 3.2 Study on implementation of the RF Creditor- Reference... 8 3.3 Quick business case calculation formula for the Creditor... 9 3.4 Benefits for the Debtor procurement to payment... 9 3.5 Benefits for banks... 10 4 Specifications of the Creditor Reference... 11 4.1 Structure... 11 4.2 Recommendations... 12 4.3 Examples... 12 4.4 Uniqueness of the RF Creditor Reference... 13 4.5 Usage of the RF Creditor Reference for credit notes... 13 4.6 Printing of the RF Creditor Reference... 13 4.7 Constructing an RF Creditor Reference and calculating check digits... 13 4.8 Validating the check digits in an RF Creditor Reference... 14 5 STP in the process from invoice to cash... 16 6 Guidelines for the parties in the payment chain... 18 6.1 Guidelines for the supplier (Creditor)... 18 6.2 Guidelines for the Debtor... 20 6.3 Guidelines for ERP system vendors... 21 6.4 Guidelines for payment systems vendors... 22 6.5 Guidelines for the Debtor s bank... 22 6.6 Guidelines and best practices for the Creditor s bank... 23 7 Introduction of the RF Creditor Reference at local level and migration from local to global... 24 8 Implementation guidelines... 26 Annex I... 28 List of relevant documents... 28 Annex II... 29 The perceived attributes of the RF Creditor Reference... 29

3 (36) Page Annex III... 34 Invoice and credit transfer form example with the RF Creditor Reference... 34 Annex IV... 36 RF Expert Group... 36

4 (36) Page 1 Introduction Achieving end-to-end straight-through processing (STP) of payment instructions remains a major goal on the agenda of both financial institutions and their customers. The European banking industry in particular has taken a number of steps over the past few years geared at standardizing and automating many of the processes in the payment chain, especially those located in the interbank environment. Initiatives such as the Single Euro Payments Area (SEPA) project of the European Payments Council (EPC) have led to faster and cheaper euro payment processing across Europe thanks to the highly integrated new pan-european payment environment they have created. One specific element in the standardization process of the end-to-end payment chain is an international creditor reference standard. For corporate customers issuing invoices, the reconciliation of invoice and related payment is currently still an inefficient and costly exercise as it often requires considerable manual intervention. In many countries as well as in the cross-border space, there has so far not been any standardized creditor reference to optimally support users in carrying out an automated reconciliation process. The ISO Standard 11649 Financial services Core banking Structured creditor reference to remittance information approved by the International Organization for Standardization (ISO) and published on 16 th March 2009 was delivered in order to close this gap and further facilitate STP processing. Labeled RF Creditor Reference, this new standard has been designed to refer to all key remittance information in a structured manner and to also allow for checks aimed at validating the correctness of the reference. The new ISO standard has been endorsed by the European banking industry and adopted as part of its standardization process in the area of euro payments. The EPC issued a guidance document on the RF Creditor Reference standard, which was approved by the EPC Plenary in June 2008, and recognized that the Structured creditor reference to remittance information offers the potential for SEPA wide application for automatic reconciliation between invoices and related payments. The new RF Creditor Reference standard was subsequently integrated in the SEPA Credit Transfer Scheme Rulebook 4.0 and accompanying documentation to be implemented in November 2010. The EPC also recommends that beneficiaries adopt the standard for a structured creditor reference to the remittance information as the preferred remittance data convention for identifying payment referring to a single invoice, and in case the originator of a payment submits a structured Creditor Reference, the originator s bank should check its correctness at the point of capture. In the context of SEPA Direct Debits, the EPC saw no need for action since it is the responsibility of the Creditor to issue the Creditor Reference information as part of the SDD collection. This information then travels to the Debtor and back to the Creditor without

5 (36) Page being altered. Through its measures and recommendations, the EPC has laid the practical foundation for a standardized handling of the Creditor Reference in the interbank space and at the point of acceptance of payment orders. The present document is aimed at explaining the composition of the RF Creditor Reference as well as its benefits for all players involved in the end-to-end payment process. Furthermore, the document provides guidelines geared at ensuring that users are able to fully reap the benefits offered by the new standard. Finally, the document also includes recommendations for different migration scenarios geared at facilitating the transition process towards the RF Creditor Reference. 2 Executive summary Benefits of the RF Creditor Reference A fully automated reconciliation process where only exceptions are handled manually should entail several benefits for the Creditor (payee). The reconciliation process is carried out more efficiently, becomes less prone to errors and binds fewer resources, i.e. the Creditor gains cost savings. In best practise cases, over 96% of the incoming payments can be reconciled automatically. A simple business case for putting in place a standardized creditor reference can be calculated by estimating the average time and cost of a manual payment reconciliation process. According to a study, this process takes 3-5 minutes per payment, which amounts to a per item cost of EUR 3.33, under the assumption that the cost of a man hour is EUR 50. Thus, if the investments required for implementing the RF Creditor Reference would, for instance, be EUR 5,000, fewer than 1,500 incoming payments would be needed to recover this cost. The RF Creditor Reference also brings benefits to the Debtor (payer) as it simplifies the payment process and reduces the number of errors and inquiries from the Creditor. Currently, most of the payments are local and thus, if no local creditor reference is in use, migrating local payments to the RF Creditor Reference standard would entail the highest benefits. Structure of the RF Creditor Reference The RF Creditor Reference is of variable length and features a maximum of 25 characters, starting with the letters RF and two check digits. As an example, the reference may consist of the combination of a customer number and an invoice number. The check digit algorithm is the same as the one used for account numbers in the IBAN format. The RF Creditor Reference is generated by the Creditor and is unique for each invoice.

6 (36) Page Circulation of the RF Creditor Reference through the invoice-to-cash chain The above picture illustrates the process between buyer (Debtor) and seller/supplier (Creditor) from the point where the invoice is issued by the seller to the point where the payment is received by the seller. In order to reap the full end-to-end benefit of the Creditor Reference, all parties in the value chain need to be able to handle the Creditor Reference. Implementation of the RF Creditor Reference A Creditor issuing an invoice generates a unique RF Creditor Reference for this invoice and includes it in the invoice. It is important that the Debtor is aware that the RF Creditor Reference should be provided on a payment instruction as the remittance information for the beneficiary (Creditor). In circumstances where the Debtor is not familiar with the creditor reference, an additional instruction could be used, such as Please include the creditor reference indicated on this invoice in your payment order. It is recommended that the Creditor should pilot the RF Creditor Reference and ensure the support of its bank(s) before large scale adoption to ensure the quality of remittance information in incoming payments. Guidelines for local communities To ensure STP and a high quality of the payment data travelling through the payment chain, some conventions and best practices regarding the implementation of RF Creditor Reference should be agreed by a local community. The integration of the RF Creditor Reference into an existing data format is not an issue in an environment based on ISO 20022 message formats, as the standard fully supports the RF Creditor Reference.

7 (36) Page It is recommended that organizations such as national bankers associations help to ensure a smooth roll-out of the RF Creditor Reference in a step-by-step approach to be agreed by the different communities. 3 Benefits of the RF Creditor Reference 3.1 Benefits for the Creditor Enables automated reconciliation and cost savings Reduces errors Improves liquidity forecasts and cash management Supports centralized reconciliation and in-house bank Makes it possible to relieve customer sales limit faster Supports direct debit, e-invoicing, e-payments Can be implemented both for B2B and B2C invoices An automated reconciliation process is a crucial requirement for an end-to-end STP processing of payment instructions. Reconciliation process means that an incoming payment can be matched with the corresponding invoice at the receivables ledger. The receivables ledger is a listing of detailed accounts that shows how much the customer who received the invoice owes to the company that issued the invoice. A fully automated reconciliation process where only exceptions are handled manually should entail the following benefits for the Creditor: The reconciliation process is carried out more efficiently, becomes less prone to errors and binds fewer resources; The collection and reconciliation process can be carried out centrally since it becomes easier to allocate invoices to receiving entities in accordance with the corporate structure. This centralization of incoming funds improves the Creditor s liquidity management and further increases the efficiencies of corporate in-house banks; Both the centralization of the reconciliation process and the fact that this process takes up less time due to the increased efficiency will help to provide a comprehensive picture of the company s liquidity situation and of the customers account status more quickly. This in turn leads to improved liquidity forecasts and to a quicker relief of customer sales limits, which facilitates an increased sales turnover; The creditor reference allows to reconcile the incoming payments and the outgoing invoices more easily, irrespective of the country of the Debtor;

8 (36) Page The automated reconciliation process can be applied equally well to paper invoices and e-invoices, to invoices for consumers and corporate customers, to direct debits, credit transfers and other types of payments. In order to enable the Creditor to fully reap the above-listed benefits, the creditor reference that carries the remittance information and is at the heart of this automated reconciliation process has to fulfil the following requirements: The creditor reference has to be unique for each invoice; It has to be possible to carry the creditor reference through the whole payment chain; The creditor reference must have a standardized structure that can be easily understood and efficiently handled by the parties involved; It has to be possible for the Creditor to fit all vital remittance information into the creditor reference; among others, the creditor reference has to enable the inclusion of data allowing an easy identification of the receiving corporate entity; The creditor reference should include a checking mechanism geared at preventing/remedying human errors that might occur during a manual handling of the remittance data; The creditor reference has to facilitate a fully automated reconciliation process both in a local and in a global payment collection process and regardless of the type of invoice (paper/e-invoice, B2B/B2C etc) or payment transaction (credit transfer/direct debit etc) involved. The RF Creditor Reference has been designed to fulfil these key requirements and is therefore ideally suited to be used as a standard in those countries where there is no standardized creditor reference in place today as well as in the cross-border environment. 3.2 Study on implementation of the RF Creditor- Reference An academic study concerning the adoption of the RF Creditor Reference standard was established in May 2009 in order to conduct research into the potential advantages and disadvantages of the RF Creditor Reference for Creditors. Aleksi Aalto s study was initiated by Markus Hautala of Tieto, and led by Assistant Professor Esko Penttinen of the Aalto University School of Economics in Helsinki, Finland, as a part of the Real-Time Economy project. The study shows the relative advantage of the RF Creditor Reference as the most important adoption factor. The most cited sources of relative advantage were cost and time savings, as well as the reduction of mistakes in the reconciliation of payments. A summary of the study is enclosed in Annex II of this document.

9 (36) Page 3.3 Quick business case calculation formula for the Creditor Notable investments required for implementing the RF Creditor Reference are an upgrading of the invoicing system and the sales ledger system. The service provider or the vendor can give an estimate of the necessary investments in case they are not included in any general payment system upgrades. The cost savings can be calculated by estimating the average time and cost of a manual payment reconciliation process. According to the study mentioned in the previous chapter, this process takes 3-5 minutes per payment, which amounts to a per item cost of EUR 3.33, under the assumption that the cost of a man hour is EUR 50. Thus, if the investments required for implementing the RF Creditor Reference would, for instance, be EUR 5,000, fewer than 1,500 incoming payments would be needed to recover this cost. 3.4 Benefits for the Debtor procurement to payment Increases efficiency of payment process (only RF Creditor Reference is required as remittance information) Reduces errors Reduces reconciliation inquiries from the Creditor (payee) Enables cost savings Can be easily integrated because the necessary space is available in almost any domestic or international payment format. Due to lack of globally, and in many countries also of nationally or locally agreed procedures, the Debtor has traditionally provided a variety of remittance information with the payment instruction settling an invoice. Today s remittance information mostly still is an individual combination of data elements accompanying the invoice, such as the customer number, the invoice number, the invoice date, the agreement number etc. This non-standardized data provision is often based on a manual selection process at the level of the Debtor. As it leads to unstructured remittance information, it additionally requires manual intervention at the level of the Creditor. By using the RF Creditor Reference, the Debtor reaps the following benefits: The process of settling an invoice gains in efficiency at the level of the Debtor, since the RF Creditor Reference should become the one and only remittance information element to be provided to the Creditor for any type of invoice at national and global level; The RF Creditor Reference can be validated during the manual key-in process unlike, for instance, customer numbers or invoice numbers. This increases the certainty that the payment can be handled in an efficient and speedy process at the level of the Creditor; Due to the highly automated reconciliation process facilitated by the RF Creditor Reference, Debtors receive fewer inquiries related to the payment of invoices and should experience a quicker relief of their sales limit at the

10 (36) Page Creditor, which helps them to improve their buying processes and reduces their administrative overhead cost. 3.5 Benefits for banks Makes it possible to transfer the full payment information with the payment Supports customers cash management process, thereby improving the service offered to corporate customers Enables automated processing of payment initiations e.g. bar code or scanning As key facilitators in the payment chain, banks will reap the following benefits when they support the introduction of the global RF Creditor Reference standard: By passing on all key remittance information through the RF Creditor Reference, which is part of the actual payment instruction, banks will be seen as strong contributors to an optimized reconciliation process at the level of the creditor and to a more efficient handling of invoices at the level of the debtor; Banks will contribute to a significant improvement of their customers cash management process by supporting the adoption of the RF Creditor Reference standard: o In countries where there is no jointly agreed creditor reference, the RF Creditor Reference would be a viable solution for the banking community and their clients to adopt. o In countries where a local creditor reference is used, customers with cross-border invoices and payments would gain from the efficiency of the RF Creditor Reference in reconciliation. o For those corporate using multiple reconciliation sites in various countries, a concentration of their activities facilitated by the new creditor reference standard would increase internal efficiencies. Once the RF Creditor Reference has been adopted for filling the remittance information field on standardized credit transfer forms, the processing of paperbased payment instructions (e.g. via bar code or scanning) can be more easily automated by the banks.

11 (36) Page 4 Specifications of the Creditor Reference Structure Recommendations Examples Uniqueness Usage for credit notes Printing the RF Creditor Reference Constructing an RF Creditor Reference and calculating check digits Validating the check digits in an RF Creditor Reference 4.1 Structure A company issuing invoices (Creditor) adds a unique reference for each invoice. The customer (Debtor) making the payment uses the same reference with the payment to be transferred to the Creditor. The payment is reconciled with the invoice carrying the same reference. By applying a globally standardized structure to the above-mentioned reference, the reconciliation process itself can become more standardized and hence be significantly improved. Most importantly, a standardized creditor reference structure allows the parties involved to implement the reference in the systems and messages related to invoices and payments, enabling end-to-end automation of the payment and reconciliation processes. Furthermore, it is possible to include check digits in a structured creditor reference, which allow to automatically validate the correctness of a each reference. The RF Creditor Reference, the ISO 11649 Structured Creditor Reference to Remittance Information, has been approved as the global standard for creditor reference. In order to combine all the benefits a structured creditor reference may hold, the RF Creditor Reference has been given the following structure: RFnn cccc cccc, where RF is an identifier for RF Creditor Reference; nn are two check digits calculated using algorithm ISO/IEC 7064 (the same algorithm as the one that is used for IBAN-formatted account numbers);

12 (36) Page cccc cccc constitute a maximum of 21 characters of proprietary creditor reference information. Numeric characters are recommended because they make the key-in process more user-friendly. 4.2 Recommendations Length of the RF Creditor Reference For the sake of user-friendliness for the Debtor and to avoid typing errors, it is recommended that the string of characters to be included in the RF Creditor Reference should be kept short. Note: The RF Creditor Reference is of variable length and includes letters and numbers. Leading or filling zeros cannot be used when populating a field of fixed length. Content of the RF Creditor Reference The creditor reference may consist e.g. of the combination of a customer number and an invoice number. In a corporate with different subsidiaries and/or business units; a centralized collection process but separate sales ledgers; the RF Creditor Reference may additionally include an identification code for the entity concerned, in order to facilitate the selection of the correct ledger for reconciliation. 4.3 Examples Example 1. Running invoice number The number of an invoice is 101. The corresponding RF Creditor Reference would be RF90 101. Example 2. Customer number and invoice number. The customer number is 123456 and an invoice number 112233. The corresponding RF Creditor Reference would be RF79 1234 5611 2233. Example 3. Business unit identification number, customer number and invoice number. The business unit ID is 789, the customer number is 123456 and an invoice number 112233. The corresponding RF Creditor Reference would be RF86 7891 2345 6112 233.

4.4 Uniqueness of the RF Creditor Reference 13 (36) Page It is important that the RF Creditor Reference is unique for an invoice and for a period of time. The period should be long enough to avoid duplicate transactions with the same RF Creditor Reference referring to more than one invoice within e.g. two years. 4.5 Usage of the RF Creditor Reference for credit notes It is recommended to also use the RF Creditor Reference when issuing credit notes. Thus, if a payment (batch initiated) consists of the net amount of an invoice and of a credit note, the remittance information including the RF Creditor References of both the invoice and the credit note can be automatically reconciled. 4.6 Printing of the RF Creditor Reference The RF Creditor Reference is printed on paper in groups of four characters starting from left and each group should be separated by a blank space. 4.7 Constructing an RF Creditor Reference and calculating check digits The check digits consist of two numeric characters. The check digits are calculated for a reference by following the below steps: Convert upper and lower case letters to digits according to the following conversion table: A = 10 G = 16 M = 22 S = 28 Y = 34 B = 11 H = 17 N = 23 T = 29 Z = 35 C = 12 I = 18 O = 24 U = 30 D = 13 J = 19 P = 25 V = 31 E = 14 K = 20 Q = 26 W = 32 F = 15 L = 21 R = 27 X = 33 Add the numeric value of the character RF, 2715, and 00 to the right-hand end of the creditor reference; Calculate modulo 97, i.e. the remainder of the division of the numeric character string cccc 271500 by 97; Subtract the remainder from 98 and, if the result is less than 10, insert a leading zero. The result is the two check digits. In order to correctly represent the complete RF Creditor Reference on an invoice, the code RF and the check digits should be inserted at the left-hand end of the creditor reference.

Examples of how to calculate the check digits 14 (36) Page Example 1: A creditor reference is 2348236. The method to determine the check digits is the following: Add to the right-hand end 2715 and 00 - the number becomes 2348236271500; After dividing by 97, the remainder is 65; Subtract the remainder from 98 - the result is 33. The letters RF and the check digits 33 are inserted at the left-hand end of the creditor reference and the resulting RF Creditor Reference is RF332348236 (electronic format) or RF33 2348 236 (print format). Example 2: A creditor reference is R763386. The method to determine the check digits is the following: Convert the letter R to digits 27 according to the table above; Add to the right-hand end 2715 and 00 - the number becomes 27763386271500; After dividing by 97, the remainder is 75; Subtract the remainder from 98 the result is 23. The letters RF and the check digits 33 are inserted at the left-hand end of the creditor reference and the resulting RF Creditor Reference is RF23R763386 (electronic format) RF23 R763 386 (print format) 4.8 Validating the check digits in an RF Creditor Reference In order to validate the check digits in an RF Creditor Reference, the following steps need to be taken: If the RF Creditor Reference is in print format, delete all blank spaces; Move the first four (4) characters from the left-hand end to the right-hand end of the creditor reference;

15 (36) Page Convert upper and lower case letters to digits according to the following conversion table: A = 10 G = 16 M = 22 S = 28 Y = 34 B = 11 H = 17 N = 23 T = 29 Z = 35 C = 12 I = 18 O = 24 U = 30 D = 13 J = 19 P = 25 V = 31 E = 14 K = 20 Q = 26 W = 32 F = 15 L = 21 R = 27 X = 33 Apply modulo 97, i.e. calculate the remainder of the division of the numeric character string cccc ccc by 97; If the remainder is 1, the check digits are correct. Note: Modulo 97 is the very same algorithm as the one used in the IBAN check digit calculation. Example1 on how to validate the check digits: The RF Creditor Reference to be validated is RF712348231. The method to validate the check digits is the following: Move the first four characters from the left-hand end to the right-hand end of the reference: 2348231RF71; Convert the upper case letter to digits in line with the above conversion table: 2348231271571;Divide the number 2348231271571 by 97. The remainder is 1, thus the check digits are correct. Example 2 on how to validate the check digits: The RF Creditor Reference to be validated is RF23R763386. The method to validate the check digits is the following: Move the first four characters from the left-hand end to the right-hand end of the reference: R763386RF23; Convert the upper case letters to digits in line with the above conversion table: 27763386271523;

Divide the number 27763386271523 by 97. 16 (36) Page The remainder is 1, thus the check digits are correct. 5 STP in the process from invoice to cash The above picture illustrates the process between buyer (Debtor) and seller/supplier (Creditor) from the point where the invoice is issued by the seller to the point where the payment is received by the seller. In order to reap the full end-to-end benefit of the Creditor Reference, all parties in the value chain need to be able to handle the Creditor Reference. This requires the full support by the acting parties of the following sub-processes: I. The Creditor must be able to generate an invoice with a RF Creditor Reference. This will in most cases be generated automatically by the ERP system or a similar A/R system. II. The interface between Creditor and Debtor must be able to support the RF Creditor Reference, regardless of the format used for the paper-based invoice or e- invoice. III. The Debtor must be able to retrieve and upload the RF Creditor Reference together with other relevant invoice information to the ERP system or a similar A/P system, either manually or automatically. IV. The Debtor must be able to generate payments including the RF Creditor Reference. This is done via the ERP system or a similar A/P system, typically through an automated process. V. The Debtor s bank must be able to support the RF Creditor Reference at the level of all its payment initiation channels, e.g. Internet banks, file services, paperbased services etc. This applies to either corporate and retail channels since the Debtor may be a corporate or a private customer.

17 (36) Page VI. The Debtor s bank must be able to support the processing of the RF Creditor Reference at the level of its payment platform/engine from the receipt of the payment to the outgoing clearing channel, whether it is domestic or international. VII. The clearing mechanism in question must be able to support the RF Creditor Reference. VIII. The Creditor s bank must be able to receive the RF Creditor Reference through the incoming clearing channel and process the reference through its payment platform/engine from the receipt of the incoming payment to the provision of remittance information to the Creditor through relevant channels, such as corporate Internet bank, file services and paper-based services (if relevant). VIII. The Creditor must be able to retrieve and upload the RF Creditor Reference to its ERP system or a similar A/R system, automatically or manually. The system must be able to provide a reconciliation service on a RF Creditor Reference level. The service should contain a reporting on matched and un-matched invoices. Extended reconciliation services, automated reminder service etc. would be natural value-added services offered by the ERP system or by a third party. In order to enable full end-to-end processing of the RF Creditor Reference, system changes must be foreseen in different areas: ERP and similar A/R systems ERP and similar A/P systems Purchase invoice workflow systems Banking platforms/engines Clearing systems Since it cannot be ensured that the end-to-end processing of the RF Creditor Reference will be in place at the same time for all involved parties, a phased implementation of the usage of the RF Creditor Reference must be supported by the ERP systems or similar systems used by the Debtor and Creditor.

18 (36) Page 6 Guidelines for the parties in the payment chain 6.1 Guidelines for the supplier (Creditor) Inclusion in invoice and credit transfer form Providing instructions for the Debtor Conducting the reconciliation process EPC recommendations Including the RF Creditor Reference in the invoice and credit transfer form A Creditor issuing an invoice adds a unique RF Creditor Reference for the invoice. The Debtor making the payment uses the same reference with the payment to be transferred to the Creditor. The payment is reconciled with the invoice carrying the same reference. The Creditor is free to create the RF Creditor Reference according to the standard structure. Constructing an RF Creditor Reference and calculating the check digits is described in chapter 3 of this document. The maximum length of the RF Creditor Reference is 25 characters. It is recommended that the RF Creditor Reference should be kept short. The RF Creditor Reference is printed on the invoice and on the potential credit transfer form and positioned in a specific field named creditor reference. The RF Creditor Reference is printed in groups of four characters and each group should be separated by a blank space. Providing instructions to the Debtor It is important that the Debtor is aware that the RF Creditor Reference should be provided on a payment instruction as the remittance information for the beneficiary. In circumstances where the Debtor is not familiar with the creditor reference, an additional instruction could be used such as Please include the creditor reference indicated on this invoice in your payment order. In case the Creditor joins a payment order form to the invoice, the RF Creditor Reference should already be included in that form. In circumstances where the Creditor issues several invoices to the same Debtor, an additional instruction could be used. The Creditor could, for instance, add a note to the invoices on a separate leaflet reading Please pay each invoice via an individual payment order and please include the creditor reference of the respective invoice in the payment order. In circumstances where the common practise between a Debtor and a Creditor has been to group and settle several invoices on one payment, the RF Creditor Reference can be used as the remittance information and the Debtor s current practice for delivering the details of the payment to the Creditor can be continued.

19 (36) Page There are also community-wide practises and additional optional services 1 provided by banks to deliver additional remittance information attached to a payment. It is recommended to pilot the RF Creditor Reference as the only remittance information before large-scale adoption to ensure the quality of remittance information in incoming payments. Conducting the reconciliation process The RF Creditor Reference is included in the account reporting provided by the Creditor s bank to the Creditor. The Creditor can reconcile its accounts receivables based on the RF Creditor Reference received as part of the payments reaching the Creditor. As the RF Creditor Reference is unique for each invoice issued by the Creditor, no other information than the Creditor Reference, the amount of the payment and the date on which the payment has been credited to the account is required for an automated reconciliation of the payment against the corresponding invoice. EPC recommendations for Creditors and other parties The European Payments Council (EPC) has included the following recommendations in the SEPA Credit Transfer Scheme Rulebook 4.0, which was issued on 30 th October 2009 and will become effective by 1 st November 2010: It is recommended that beneficiaries adopt the ISO Standard (ISO 11649, RF Creditor Reference) for a structured creditor reference to the remittance information (identified in the rulebook as structured creditor reference ) as the preferred remittance data convention for identifying payment referring to a single invoice. The remittance data supplied by the Originator in the Credit Transfer Instruction must be forwarded in full and without alteration by the Originator Bank and any intermediary institution and CSM to the Beneficiary Bank. When the Originator provides a Structured Creditor Reference with a Credit Transfer Instruction, it is recommended that the Originator Bank checks the correctness of the Structured Creditor Reference at the point of capture by the Originator. The Beneficiary Bank must also deliver received remittance data in full and without alteration to the Beneficiary. 2 If all parties in the payment chain, starting with the Creditor, respect the above recommendations, the Creditor will receive the RF Creditor Reference it issued with its invoice as part of the structured remittance information included in the payment relating to this invoice. By successfully completing this round trip in line with the above recommendations, the RF Creditor Reference will enable the Creditor to automatically reconcile invoice and payment. 1 see Annex I List of Relevant documents, Finnish implementation for SEPA Credit Transfers / www.fkl.fi AOS2: Bundling several invoices and credit notes to one payment 2 EPC125-05: SEPA Credit Transfer Scheme Rulebook, version 4.0, chapter 2.7 ( Remittance data ), p. 17.

6.2 Guidelines for the Debtor Optimising the purchase ledger process 20 (36) Page Including the RF Creditor Reference in the payment order Populating the payment messages with the RF Creditor Reference Optimising the purchase ledger process In circumstances where the Debtor (business) dematerialises paper invoices for its purchase ledger, it is recommended that the Debtor s ERP system checks the correctness of the RF Creditor Reference to detect typing errors. The process that needs to be carried out in order to validate the check digits is described in chapter 3 Specifications of the Creditor Reference, section 3.8 Validating the check digits in an RF Creditor Reference. Including the RF Creditor Reference in the payment order Whenever a creditor reference is detailed on an invoice or on the related credit transfer form, it should be used as the (only) remittance information for the payment order settling this invoice. Whenever the Debtor has several invoices to be paid simultaneously to the same Creditor, the Debtor should pay each invoice through a single payment and include the creditor reference of the invoice in the payment instruction settling this invoice. In circumstances where the common practise between a Debtor and a Creditor has been to group and settle several invoices in one payment, the RF Creditor Reference can be used as the remittance information and the Debtor s current practice for delivering the details of the payment to the Creditor can be continued. There are also community-wide practises and additional optional services provided by banks to deliver additional remittance information attached to a payment. 3 By applying the practices described above, the Debtor will help to significantly reduce the number of inquiries by the Creditor related to the payment reconciliation process. For Debtors, potential channels for initiating payments are e.g. file-based services, Internet banks, ATMs, bank branches and envelope services. The Debtor keys in the RF Creditor Reference in the interactive payment initiation channels as it is presented on the invoice or on the form for credit transfers, in the same way as the local creditor reference is keyed in today. For the initiation of a payment via an ATM, the bar code of the credit transfer form may be used as today, provided the ATM service provider and the bar code standard support the RF Creditor Reference. The Debtor may also pay the invoice in any branch office or use a payment service (envelope) for sending the invoice/credit transfer form to its bank. 3 see Annex I List of Relevant documents, Finnish implementation for SEPA Credit Transfers / www.fkl.fi AOS2: Bundling several invoices and credit notes to one payment

21 (36) Page Thus, as far as the initiation of the payment via interactive channels is concerned, the use of the RF Creditor Reference implies no changes for the Debtor compared to the use of the current local creditor reference. Populating the payment messages with the RF Creditor Reference Many data formats and user interfaces currently available in the customer-to-bank space support remittance information data for payments. In many cases, there are also recommendations on how to populate these data formats and user interfaces with the creditor reference. When initiating an ISO 20022 message in the Customer-to-bank space, it is recommended for the Debtor to feed the RF Creditor Reference into the specific data element of the Structured Remittance Information component foreseen for the creditor reference. This is also implicitly reflected in the EPC recommendations on the use of the RF Creditor Reference, which refer to structured creditor reference. 6.3 Guidelines for ERP system vendors In order to allow for a smooth end-to-end processing of the RF Creditor Reference, the new reference has to be included in all invoice and payment related processes supported by ERP systems at the level of the Debtor s and the Creditor s IT infrastructure. In detail, the RF Creditor Reference should be incorporated in the following processes often handled via ERP systems: Procure-to-Pay process chain: o Invoice receiving processes; o Payment generation processes; o Engage Partners, e.g. purchase invoice workflow, bank integration, inhouse bank Order-to-Cash process chain: o Invoice generating processes; o Payment reconciliation processes; o Engage Partners, e.g. middleware system, inhouse bank, bank integration. The integration of the RF Creditor Reference into an existing data format is not an issue when using the new creditor reference in a SEPA environment based on ISO 20022 message formats, as the SEPA standards fully support the RF Creditor Reference. It is recommended that organizations such as national bankers associations help to ensure a smooth roll-out of the RF Creditor Reference in a step-by-step approach to be agreed by the different communities.

22 (36) Page 6.4 Guidelines for payment systems vendors Payment systems vendors are another key party in the chain when it comes to ensuring that all elements required for a smooth end-to-end processing of the RF Creditor Reference are covered. In detail, the RF Creditor Reference should be incorporated or taken into consideration in the following processes that might be supported by payment systems vendors: Outgoing payment process: o Keying in payments o Validation and qualification o Translation/syntax conversion process Incoming payment process o Validation and qualification o Translation/syntax conversion process o Remittance information processes o Providing transactions for A/R reconciliation 6.5 Guidelines for the Debtor s bank EPC recommendations Validation in different payment initiation channels Adoption in interbank clearing formats EPC recommendations for banks As mentioned earlier in this document, the European Payments Council has included recommendations concerning the use of the RF Creditor Reference in its SEPA Credit Transfer Scheme Rulebook 4.0, which was issued on 30 th October 2009 and will become effective by 1 st November 2010. The EPC recommendations specifically geared at banks are as follows: The remittance data supplied by the Originator in the Credit Transfer Instruction must be forwarded in full and without alteration by the Originator Bank and any intermediary institution and CSM to the Beneficiary Bank. When the Originator provides a Structured Creditor Reference with a Credit Transfer Instruction, it is recommended that the Originator Bank checks the correctness of the Structured Creditor Reference at the point of capture by the Originator. Validating the RF Creditor Reference in different payment initiation channels The Debtor s bank is required to accept and recommended to validate RF Creditor References. Validation processes, which are aimed at detecting and correcting typing errors, are highly recommended in all interactive channels where the Debtor or an employee of the Debtor s bank keys in the payment. Based on the immediate feedback provided to the submitting party following the validation process, the Debtor or the bank em-

23 (36) Page ployee will be in a position to double-check the creditor reference and correct any typing errors if the feedback has been negative. When receiving the payment in a file format, the Debtor s bank may validate the RF Creditor Reference but should not reject the payment if the creditor reference is not correct. It is recommended to inform the Debtor about incorrect creditor references. Adopting the RF Creditor Reference in interbank clearing formats When the ISO 20022 standard is used in the interbank space, the RF Creditor Reference should be included in the structured remittance information component. When the Debtor has provided the RF Creditor reference in the unstructured remittance information field, it should be forwarded in the same field without any alteration. When the payment is forwarded using an MT103(+) message, the RF Creditor Reference should be included in field 70 without any prefix. When the payment is forwarded in the local format, the usage rule for the RF Creditor Reference should be agreed by the local community. 6.6 Guidelines and best practices for the Creditor s bank Forwarding the RF Creditor Reference to the Creditor Creating a separate reconciliation file for A/R reconciliation Forwarding the RF Creditor Reference to the Creditor The Creditor s bank forwards the RF Creditor References attached to payments to the Creditor in a way agreed with the Creditor and depending on the standard used in the account reporting provided by the bank. Creating a separate file for A/R reconciliation As a value-added service for the reconciliation of payments, the Creditor s bank may provide a separate account reporting file (e.g. in the ISO 20022 credit notification format, a camt. 054 message) consisting of payments with RF Creditor References. In this case, the account statement includes only one booking entry per day for an amount equal to the total amount of payments with RF Creditor Reference included in the separate file. All the other entries, i.e. payments carrying no RF Creditor Reference, would lead to a separate entry on the account statement.

24 (36) Page 7 Introduction of the RF Creditor Reference at local level and migration from local to global Guidelines for local communities Example: implementation in Finland Recommendation on phased migration approach for countries and corporates Guidelines for local communities To ensure STP and a high quality of the payment data, some conventions and best practices regarding the implementation of the RF Creditor Reference should be agreed by a local community. Currently, most of the payments are local and thus, if no local creditor reference is in use, migrating local payments to the RF Creditor Reference standard would entail the highest benefits. Over time, such a harmonised regional creditor reference standard would span benefits to a wide number of countries SEPA being a good example of this evolution. On the one hand, if a local creditor reference standard is already in use in the community, the implementation of the RF Creditor Reference should be easier as the parties involved are already familiar with the concept of a standardized creditor reference, and only the differences between the existing and the new standard need to be taken into consideration and tackled. On the other hand, specific attention needs to be given to the local message formats as the migration from these local formats to the new global standard might imply a number of particular issues to be solved. One of the first issues to be solved is the checking of the RF Creditor Reference in the process steps where the RF Creditor Reference is manually keyed in. If a local creditor reference is in use and the RF Creditor Reference is launched for parallel use, a coordinated start-up date should be agreed from which on all parties are prepared to offer the same service level for the RF Creditor Reference as for the local creditor reference. A community may also recommend that the RF Creditor Reference should be derived from the local creditor reference by adding the letters RF and the two check digits. This makes it possible to use the short format of the RF Creditor Reference in the local message standards that do not yet support the full RF Creditor Reference format. The solution is similar to the full IBAN and short format BBAN solution applied in some countries with the introduction of the IBAN. The integration of the RF Creditor Reference into an existing data format is not an issue an environment based on ISO 20022 message formats, as the standard fully supports the RF Creditor Reference. It is recommended that organizations such as national bankers associations help to ensure a smooth roll-out of the RF Creditor Reference in a step-by-step approach to be agreed by the different communities.

25 (36) Page Implementation of the RF Creditor Reference in Finland The banking community in Finland has decided to support the RF Creditor Reference by 1 st December 2010 in local invoices and payments. For cross-border use, the decision for adoption resides with the individual banks. The RF Creditor Reference will be derived from the local creditor reference by adding the letters RF and the two check digits. Banks will validate the RF Creditor Reference in all payment channels. For legacy payment messages (non-sepa payments), only the local creditor reference part (short format) is transferred. The debtor (customer) or the debtor s bank will strip off the letters RF and the two check digits when using the local message format. The Federation of Finnish Financial Services has published supporting documents concerning the adoption of the RF Creditor Reference for service providers and vendors. The implementation of the RF Creditor Reference is also communicated as part of the Finnish SEPA Migration Plan. It is anticipated that some of the creditors, mainly those that have cross-border activity, will be the front-runners in adopting the RF Creditor Reference. For clear reasons, they want to use the same standard both for local and cross-border invoices. Creditors with only local business will probably continue to use the current local creditor reference. For the time being, no decision has been made with regard to setting an end date for the local creditor reference. Recommendation on phased migration approach for corporates It is worth considering whether Creditors and/or Creditors banks should start off by supporting the RF Creditor Reference in cross-border invoices and payments. In most cases, cross-border payments are currently still reconciled manually and the use of the RF Creditor Reference would bring immediate benefits even if the quality of the end-to-end payment process would not be as good as in domestic payment environments where the creditor reference is validated by the Debtor or by the Debtor s bank. Nevertheless, the resulting payment process would already significantly exceed the use of non-standardized procedures in terms of quality. As the RF Creditor Reference is recommended, among others, by the EPC, banks on the Debtor side should get ready to process the RF Creditor Reference attached to the payments. Furthermore, Debtors should be instructed by Creditors on how to initiate payments when receiving invoices with the RF Creditor Reference.

26 (36) Page 8 Implementation guidelines Examples on invoices (Annex III) Example of ISO 20022 messages remittance information Example of MT messages Validation and exception handling Example of ISO 20022 message with structured creditor reference in remittance information (ISO 11649) Message types: Customer Credit Transfer Initiation pain.001.001, Payment Status Report pain.002.001, FI to FI Customer Credit Transfer pacs.008.001, Payment Return pacs.004.001, Customer Direct Debit Initiation pain.008.001, FI to FI Customer Direct debit pacs. 003.001, Payment Reversal pacs.007.001, Bank To Customer Account Report camt.052.001, Bank To Customer Statement camt.053.001, Bank To Customer Debit Credit Notification camt.054.001. The following example is valid for ISO 20022 message versions maintained in 2009 and compliant with EPC Rulebooks effective on November 2010. <RmtInf> <Strd> </Strd> </RmtInf> <CdtrRefInf> <CdtrRefTp> <Cd>SCOR</Cd> <Issr>ISO</Issr> </CdtrRefTp> <Ref> RF332348236</Ref> </CdtrRefInf> Example of MT messages remittance information In SWIFT Fin messages, the RF Creditor Reference is mapped to the same field in which the remittance information for the beneficiary is currently mapped. Message types: MT103, MT103+, MT101 Field 70: RF332348236 In this usage case, the RF Creditor Reference is moved forward as free text, no coding is needed as "RF" already indicates that the field contains an RF Creditor Reference. Note: There is a 16 character length limitation defined when using the code /RFB/.

Message type: MT940, MT942 27 (36) Page Field 86: /REMI/ RF332348236 Validation and exception handling The RF Creditor Reference is maximally 25 characters long and can only contain the numbers 0-9 and upper and lower case letters from A to Z and from a to z. The check digit validation is described in the chapter Validating the check digits in an RF Creditor Reference. In case of an error when keying in the RF Creditor Reference, the user should be requested to check if any typing errors have occurred. If the original RF Creditor Reference is incorrect e.g. on the invoice, the reference should be forwarded as free text remittance information. In case an error in an RF Creditor Reference is detected as a result of a batch validation process at the Debtor s bank, the payment should not be rejected but the Debtor could be notified accordingly as it is preferred to execute the payment with incorrect information rather than reject and delay the payment. The defective RF Creditor Reference can be forwarded in the original field unless otherwise agreed by the community. In case an error is detected in the RF Creditor Reference as a result of a validation process conducted at the Creditor s bank, the defective RF Creditor Reference can be forwarded in the original field as the Creditor should validate the data before reconciliation.

28 (36) Page Annex I List of relevant documents ISO 11649, www.iso.org ISO 20022 standards, www.iso.org ISO/IEC 7064 (MOD 97-10), www.iso.org EPC Rulebooks/Implementation Guidelines, www.europeanpaymentscouncil.eu Finnish implementation / www.fkl.fi Implementation of the Global Reference Standard in Finland Finnish implementation for SEPA Credit Transfers / www.fkl.fi AOS2: Bundling several invoices and credit notes to one payment Academic study concerning the adoption of the RF Creditor Reference (link to be provided) Common Global Implementation document (document to be published soon)

29 (36) Page Annex II The perceived attributes of the RF Creditor Reference An academic study 4 concerning the adoption of the RF Creditor Reference standard was established in May 2009 in order to conduct research into the potential advantages and disadvantages of the RF Creditor Reference for Creditors. The study was carried out by Aleksi Aalto in his graduation work; it was initiated by Markus Hautala of Tieto, and led by Assistant Professor Esko Penttinen of the Aalto University School of Economics in Helsinki, Finland, as a part of the Real-Time Economy project. The academic framework used for the study is the Diffusion of Innovations theory, which has been successfully adopted in innovation studies for five decades. Special interest was paid in the study to the perceived attributes of innovation, which determine the most important features of an innovation, in this case the RF Creditor Reference, as perceived by the adopting source, in this case the Creditor. The study consists of a case interview section where four Finnish companies handling cross-border payments were interviewed and a survey, which was created online and sent to international treasury and payment specialists and managers. The study determined that the most important perceived attribute for the adoption of the RF Creditor Reference is relative advantage. The most frequently cited sources of relative advantage were cost and time savings, as well as the reduction of mistakes in the reconciliation of payments. Diffusion of Innovations theory The Diffusion of Innovation (DOI) theory developed originally by Everett Rogers in 1962 states that innovations are communicated through certain channels over time and within a particular social system. This process is called Diffusion. Hence, the purpose of the diffusion of innovation theory is to determine to what degree a given innovation is taken into use in a given social system. The DOI theory consists of five parts; the study on the RF Creditor Reference standard focused on the first of these parts, Perceived attributes of innovations. The other parts covered by Rogers theory are Type of innovation decision, Communication channel, Nature of the social system and Extent of change agents promotional efforts. The focus on perceived attributes is due to the fact that they best exemplify the perceived advantages and disadvantages of a given innovation, in this case RF Creditor Reference, in the eyes of the adopting entity. The Perceived attributes of innovations as stated by the theory are Relative advantage, Compatibility, Complexity, Trialability and Observability. Relative advantage is the extent to which an innovation is perceived to be better than the idea it supersedes. Often relative advantage is expressed as economic profitability, but the nature of the in- 4 http://hsepubl.lib.hse.fi/en/ethesis/. The thesis is estimated to be published during June. Search for "Creditor Reference".

30 (36) Page novation ultimately determines the type of relative advantage that is important to the adopters. Especially with IT-related innovations, relative advantage has been found to be the most important perceived attribute. In this study, relative advantage deals with the extent to which the use of the RF is advantageous compared to existing crossborder payment reconciliation methodology. Compatibility is the extent to which an innovation is perceived as being consistent with the existing values, past experiences, and needs of potential adopters. In this study, as well as in previous studies regarding innovations having to do with technology, compatibility deals with the innovation being compatible with existing information systems. Complexity is the degree of difficulty concerning the usage and adoption of an innovation. Complexity in the current study is related to the difficulty in implementation of the RF Creditor Reference standard. Difficulties in implementation can relate either to users or information systems. Trialability determines how easily an innovation may be experimented with as it is being adopted. As the RF Creditor Reference is partly an information systems investment, trialability in this study deals with how easily users and information systems trial projects can be arranged. Observability is the extent to which an innovation and its effects are visible to others. In this study, observability refers to the users ability to observe the effects of the RF Creditor Reference. This encompasses the observances of the users as well as the availability of statistics representing the use of the RF Creditor Reference and its effects on the adopting organization s payment handling processes. Case interviews on RF Creditor Reference adoption Four Finnish companies receiving cross-border payments were selected for case interviews in May-June 2009. The object of the interviews was to determine current reconciliation processes used in Finland as well as the perceived advantages and disadvantages of RF Creditor Reference adoption. The interviewed companies consisted of a financial institution (providing e.g. factoring services), a large listed transportation service company, a large listed manufacturing company and a large financial management and accounting service provider. The heterogeneity of these internationally operating companies provided a thorough and comprehensive view of cross-border payment reconciliation in Finland Based on the interviews, relative advantage was seen as the most important perceived attribute of RF Creditor Reference adoption, particularly pertaining to cost and reconciliation mistake reductions. The factoring service company representative also noted that as payment handling is a service to them, adopting the RF Creditor Reference would increase the service quality they offer to their customers. Only the manufacturing company did not view RF Creditor Reference support as a business advantage, as its own ERP system had already been programmed to automatically reconcile cross-border payments based on the invoice number. The manu-

31 (36) Page facturing company also had a significant number of customers from outside the SEPA region, which the company viewed as not being ready to handle the RF Creditor Reference. The ability of countries outside the SEPA region to use the RF Creditor Reference without any previous experience with creditor reference numbers was also viewed as a key issue with regard to RF Creditor Reference adoption by the other interviewed companies. Issues with the compatibility and complexity of RF Creditor Reference adoption were mostly related to the companies payment handling information systems. The central issues in this regard were the costs and testing needs related to information systems upgrades. General training needs were also recognized, but because Finland has a long history of domestic creditor reference standard usage, this was not viewed as a critical issue. Based on the interviews, the trialability of RF Creditor Reference adoption would be best approached with a joint-pilot project between the Creditor and selected customers. Since the importance of information systems compatibility was identified as a key issue in RF Creditor Reference adoption, several accounting and ERP-system producing companies were interviewed in the autumn of 2009. All interviewed payment system vendors claimed that the RF Creditor Reference was already planned in for inclusion in their future systems updates. The RF Creditor Reference was viewed as a key feature provided in their product range, but also as a necessity for the maintenance of customer service quality. Some payment system vendors had already scheduled the RF Creditor Reference update for late 2010 or early 2011. The RF Creditor Reference was also viewed as a feature for regular system updates and not as a stand-alone addin. Hence the implementation risks and costs for the customer would be incorporated into the standard risks and costs of a regular system update. It must be noted, however, that all vendors interviewed for this study operate in Finland, where the domestic creditor reference number is supported by any payment-handling information system. Therefore, one cannot conclude from these interviews that RF Creditor Reference support carries an international consensus among information system producers. International survey on RF Creditor Reference adoption An international survey set to study the perceived attributed of RF adoption was constructed and published in September 2009. The survey aimed to provide quantitative data concerning the perceived attributes of RF adoption, as well as the adopting creditors. The questions in the survey were created with the help of the previously held case interviews, as well as with the assistance from Olli Kähkönen, Markku Ranta, Markus Hautala and Esko Penttinen. The survey was sent to treasury and payments specialists and executives as well as promoted on the GT News website as a part of an article about RF Creditor Reference written by Juha Keski-Nisula and Olli Kähkönen. The survey was divided into three sections. The first one gathered background information on the respondent s organization. The second section was used to determine the nature and scale of the respondent s organization s payment handling and reconciliation process. The third section addressed the perceived attributes of RF Creditor Reference innovation. These were measured by 26 statements on which the respondent stated how much they agree on the seven point Likert scale, where 1 stands for

32 (36) Page Totally disagree and 7 stands for Totally agree. Hence an average over 4 denotes agreement to the statement. The results of the survey clearly show that the most important perceived attribute of innovation is relative advantage as denoted in the survey by the 5.27 score on the Likert scale. The highest scoring statements were Using RF will increase automation in payment reconciliation in our organization and Using RF will increase the accuracy of payment reconciliation. Also the statements concerning the RF Creditor Reference leading to cost savings, mistake amount reductions and job simplification received scores over 5, or Somewhat agree. Complexity was the second most important perceived attribute of RF, measuring 4.65 on the Likert scale. Again, Finnish respondents viewed the RF Creditor Reference as less complex as an innovation and investment than non-finnish respondents. Survey respondents particularly agreed to the statements Learning to use RF would be easy for me and Using RF would be similar to any other creditor reference standard. The main issue with complexity was reflected in the statement Upgrading my organization s information systems to handle RF would not be a significant business risk. The attributes of trialability and observability received milder levels of respondent agreement. Most respondents agreed to the statement that a joint creditor-customer trial would be a good way to test RF Creditor Reference use. This statement was added to the survey based on the case interviews, and represents an excellent and promotable method for companies planning RF Creditor Reference adoption to test its effects on their payment handling processes. Survey respondents also agreed that they could effortlessly communicate the advantages and disadvantages of RF Creditor Reference adoption, and explain why RF Creditor Reference adoption would be beneficial for their company. This suggests that the RF Creditor Reference standard and its effects are easily understandable and promotable on an international scale. Conclusions and findings of the study By using the Theory of Innovation Diffusion, it was possible to determine the most important perceived attributes of RF Creditor Reference adoption, as well as its advantages and disadvantages to creditors handling cross-border payments. Relative advantage was found to be the most important perceived attribute of RF Creditor Reference innovation. This coincides with previous academic research regarding innovation diffusion. The score was even higher with Finnish companies, which had previous knowledge of the RF Creditor Reference and creditor reference numbers in general as they were able to reflect on their experience with the domestic creditor reference number when assessing the effects of the RF Creditor Reference. Finnish companies also viewed RF Creditor Reference adoption a less complex process needing less employee training and being less risky in comparison to the perceptions of non-finnish respondents. Information system compatibility and complexity was viewed as the largest risk and cost factor in RF Creditor Reference adoption, but based on payment system vendors interviews, these fears are mitigated by the inclusion of RF Creditor Reference support in general payment system upgrades.

33 (36) Page Based on the case interviews and survey results, the main advantages of RF Creditor Reference adoption are cost savings, reductions in reconciliation mistakes and the automation of payment handling processes. This is consistent with the objectives of the RF Creditor Reference stated in the official documentation of the standard. The risks of RF Creditor Reference adoption can be reduced by universal and active support from payment system vendors and the banking sector. Countries with an existing creditor reference standard view the adoption process as less complex and risky than countries without a history of creditor reference numbers, which means that special attention must be paid in RF Creditor Reference promotion to those countries that cannot subjectively assess the effects of RF Creditor Reference adoption. Picture 1. The five elements of diffusion of innovation Picture 2. Perceived attributes of innovation

34 (36) Page Annex III Invoice and credit transfer form example with the RF Creditor Reference

35 (36) Page Company name Department Contact person INVOICE Invoice date Invoice number Customer s business ID Due date Delivery Period for complaints Interest on arrears Terms of payment Product item Number Unit Unit price VAT % Total price excluding VAT 0 Value-added tax total Reference number RF33 2348 236 Invoice total euro 0 Company s official name Address Telephone Fax Bank Internet address P.O. Box / Postal address Street address Model Bank Business ID xxxx Post code and post office Post code and post office (XX) XXX XXX (XX) XXX XXX account number xx Domicile xxxxxx IBAN xxxxxx BIC xxxxxxxx Beneficiary s account number IBAN BIC Beneficiary Payer s name and address Signature RF33 2348 236 From account no. Due date Euro Ref. No.

Annex IV 36 (36) Page RF Expert Group Coordinating Editors Markku Ranta, Nordea Bank Olli Kähkönen, Nordea Bank Co-Editors Pasca Spittler, IKEA Ole.H.Hansen, Accenture GuyMoons, Clear2Pay Ella Hoffman, Fundtech Carlo Palmers, SWIFT David Chance, Dovetail Systems Joo Kim Ong, Citi Hartmut Bremer, Deutsche Bank Annick Moes, EBA Association