It is an Euro/SEPA-related problem (with the app, I mean.)
i.e. sending money from X to Y in EUR, both being in SEPA, does not require the user to enter a BIC/SWIFT, since that field isn’t even displayed. The field appears once you change the currency to a local one, be it of X’s or Y’s.
The app most likely checks for that field regardless of it being shown to the user or not. Yikes.
As to your last point, no, I haven’t and most likely will not.
As for the others:
Transfers > New > New Transfer > Bank recipient, having “Business” selected in the following “Account details.”
App version is 10.5.2.
You’re correct. Banks are not supposed to use BICs for SEPA Euro transfers.
The error you’re seeing is odd. I would make sure to have all updates installed and double check the IBAN. IBANs have a checksum to avoid typos. Maybe this is about an invalid IBAN, and the app shows a wrong error text.
If that doesn’t help, I would provide a screen recording to support.