What is SEPA?
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.
How to use SEPA?
Making SEPA transfers is quite simple. Here's a brief step-by-step guide:
- Get the recipient's details like full name and IBAN. You may also need their SWIFT or Business Identifier Code (BIC).
- Log in to your bank or payment provider account.
- Initiate a payment transfer as usual.
- When providing the recipient's details, add the IBAN of their bank account and any other details your bank requires.
- Click 'Submit' or 'Send' and pay for your money transfer. The bank or payment provider will pay the recipient in euros.
Purpose and benefits of SEPA
The goal of a unified payment system in Europe is to make electronic interbank transfers fast and secure.
The advantages of this are apparent:
- Reliable and secure transfers that can be made online at higher speed — from instant to 24 hours maximum.
- Fixed transfer fees and decrease in prices for banking services due to increased competition.
- Simplifying the procedure using uniform instruments and identification of the payer by the IBAN code. The automatic system ensures that funds are routed through one mechanism for domestic and international payments.
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.
Single Euro Payment Area's history of the creation
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.
The most frequently asked questions about SEPA transfers
Where is SEPA available?
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.
Are SEPA payments same day or instant?
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.
Are SEPA transfers free?
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.
Are SEPA payments safe?
SEPA payments are made using IBAN and handled by authorised and licensed banks, so they are as safe as banking could possibly be.
Can SEPA transfer be reversed or cancelled?
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:
- It is for numerous transactions, not separate ones.
- It applies only to the correction of technical errors made by banks.
- The amount of the reversal is equal to the amount of the original transaction.
- The consent of the beneficiary is required.
Ready to boost your business to the next level?
Get in touch with us and we will try to provide you with the most relevant offer.