What Are SEPA Tranfers?

SEPA, or Single Euro Payments Area, is a payment network that covers European countries. It allows bank accounts across borders to send and receive money transfers.

SEPA payment system facilitates transfers exclusively in euros. It is regulated by the European Payments Council (EPC) and handles approximately 46 billion transactions annually.

SEPA aims to standardise transactions between European financial institutions, providing a uniform framework. Before SEPA was established, European countries operated as separate national markets, which complicated cross-border transactions. In the US, for example, the equivalents to SEPA are the ACH and Fedwire networks.

SEPA Countries

As of January 2023, SEPA region countries included 36 European nations, including several countries which are not part of the euro area or the EU.

History of SEPA Transfers

SEPA was launched in 2008 for credit transfers and expanded to include direct debits by 2009. The full implementation of the programme was achieved in 2014 for Eurozone countries and by 2016 for non-euro SEPA states.

The legal framework for SEPA was developed by the ECB in close collaboration with the European Commission. It primarily relies on several key regulations: the Cross-border Payments Regulation, the Payment Services Directive (PSD/PSD2), the SEPA Migration End-Date Regulation, and the Interchange Fee Regulation.

SEPA established common standards, procedures, and infrastructure that all member states agreed to use for fund transfers. The initiative lowered the barriers to transferring money between accounts but also reduced the costs of moving capital across the EU and nearby countries.

How Does SEPA Work?

SEPA enables direct debits from any EUR-denominated bank account within the SEPA region. This also makes payments within any member country straightforward and cost-effective.

SEPA account holders can receive direct payments and make electronic payments from their bank accounts, even when travelling in another country. For consumer transactions, SEPA enables businesses to debit accounts within any member country directly.

SEPA Transfers Explained

There are four main types of SEPA money transfers. Let’s take a look at them in more detail.

Sepa Credit Transfer

SEPA Credit Transfers are single-time transfers between banks that use IBAN codes. They are carried out in euros, and are typically utilised for consumer purchases within SEPA countries. If your business is outside the SEPA area, you would not use this type of transfer, as both the sending and receiving banks need to be located in the SEPA territory.

SEPA Instant Credit Transfer

SEPA Instant payments enable real-time transactions of up to €100,000, unlike typical SEPA transfer duration that can take hours or days to process. With this method, any two account holders in the SEPA area can complete euro-based transactions instantly, at any time and on any day. Ninety-nine per cent of these transactions are processed within five seconds and can be done using smartphones.

Sepa Direct Debit Core

A SEPA Direct Debit is a recurring payment that needs to be set up only once. This allows businesses to automatically collect varying amounts at regular intervals directly from a customer's bank account. Customers must give their permission through an agreement, such as for subscriptions or recurring payments. This method helps improve cash flow and reduce missed or late payments.

SEPA Direct Debit B2B

SEPA Direct Debit B2B payments are used for transactions between companies or with authorities, such as loan repayments, tax payments, and large purchases. Unlike SEPA Direct Debit Core payments, B2B payments require mandate verification and have different refund rules. The mandate must be registered by the debtor's Payment Service Provider (PSP) before processing, a step that ensures extra security.

How to Make a SEPA Payment

Every bank account in the SEPA area has an International Bank Account Number (IBAN). SEPA transfers require the IBAN codes of all European accounts involved in the transaction.

To make a SEPA transaction, start by gathering the recipient's bank details. This includes their full name, IBAN, and country, along with their SWIFT or BIC if necessary.

Visit your local bank branch with this information and your own account details. The bank agent will help process the transfer. They will inform you about any fees, which are similar to domestic transfer costs, and currency exchange charges if applicable. Normally, transfers take one business day, but if both banks support ‘SEPA Instant’, it will take about 10 seconds.

How Long Does SEPA Transfer Take?

Most SEPA transfer time does not exceed one to two business days, if sent before the cut-off time. SEPA Instant Credit Transfers settle in just 10 seconds. SEPA B2B Direct Debit transactions take at least three business days.

Do I Need SEPA for My Business?

European businesses do not require a specific bank account to use the SEPA network. SEPA is not a bank but a system used by banks within its member countries. If your business bank account has an IBAN and is in a SEPA member country, you can use SEPA services.

Should non-SEPA area businesses open a European bank account to use SEPA? If you have European subsidiaries or operations within SEPA countries, getting an IBAN by opening a local bank account could be beneficial. This can allow access to SEPA Credit Transfers and Instant Credit Transfers, and cheaper cash withdrawals across Europe.

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