SEPA stands for Single Euro Payment Area. The SEPA system was created to make European money transfers quicker and cheaper. The European Commission and the ECB coordinate it through the European Payments Council.
SEPA unifies and harmonises domestic and cross-border funds transfers in European countries — not just EU members but also other countries on the continent. It aimed to create an environment where payment systems are subject to general rules and standards for the compatibility of transactions.
To use the services in the system, the consumer needs to have a bank account at any of the European banks, with which direct operations, replenishment and withdrawal of funds will be carried out. It does not matter in what currency the payer's current account is opened since there is a mechanism for countries outside the Eurozone to convert the national currency into euros.
For non-cash transactions, the international format of the payee's bank account number is assigned, called IBAN (International Bank Account Number). This way, one set of payment instruments can be used for everything from direct debit, credit and instant transfers to payment cards.
Making SEPA transfers is quite simple. Here's a brief step-by-step guide:
The goal of a unified payment system in Europe is to make electronic interbank transfers fast and secure.
The advantages of this are apparent:
SEPA accounts for over 85% of non-cash transactions. The system is suitable for both one-time and regular payments. It is in demand among a wide range of users — businesses of all industries, transport companies, and retail businesses. Government bodies get the opportunity to control payments — taxes, fees, and purchases quickly. Individuals use it to pay for airlines and travel companies, custom-made workshops, entertainment and educational programs.
The idea to create a unified payment zone in Europe occurred among representatives of the banking sector back in 1999, when EU members accepted a single monetary policy and a single currency – the euro. They wanted to simplify the process of financial settlements and increase the integration of the economies of the EU member states.
In 2002, the banking industry formed the European Payments Council (EPC). EPC started working out the idea and schemes for SEPA.
The legal basis for the creation of such a zone was approved by the European Union five years later in the form of a new regulation — the Payment Services Directive (PSD). It wasn't tailored to SEPA, being a comprehensive set of rules covering the whole electronic payments industry.
In 2010, the SEPA council was established to pursue the full realisation of the initiative. A new regulation was introduced for mandatory migration to SEPA in subsequent years. This way, SEPA completely replaced European countries' national euro credit transfer and direct debit schemes.
Currently, the Single Euro Payment Area includes 36 members: 27 EU states; the United Kingdom, which left the Union; European Free Trade Association (EFTA) member states: Iceland, Norway, Switzerland, and Liechtenstein; and microstates having monetary agreements with the EU: Andorra, Monaco, San Marino, and the Vatican.
SEPA is usually quicker than a regular bank transfer, taking up to 24 hours. It is cleared several times a day, but overseas transfers may get credited the next business day. However, SEPA guarantees that the transfer will be completed within 48 hours, and in most cases, it arrives much quicker.
SEPA payments cost the same as domestic bank transfers, meaning they are usually free. However, some banks charge for wire transfers within one country and, therefore, may charge for SEPA. That's why it's worth asking about the fees at the bank you're going to use to make a transfer.
Banks that charge a fee for SEPA transfers may allow two options for fee payment: you can pay it in whole or share the fee equally with the recipient.
There may also be currency conversion fees if you're covering the transfer with a currency other than the euro.
SEPA payments are made using IBAN and handled by authorised and licensed banks, so they are as safe as banking could possibly be.
Yes, SEPA direct debit transactions can be reversed. For this, the person who made it needs to file a chargeback. Most banks do not ask them about the reason for the reversal, which may harm the business.
As for the SEPA credit transfer, the reversal is possible only under these conditions:
