What is SEPA?

SEPA transfer was introduced by the European Union in 2008, providing an easy way to make cashless euro payments between European countries, including several non-EU nations. For those participating countries, all euro-denominated transfers must be collected using the SEPA payment scheme.

But how do SEPA payments work, exactly? And should your business consider using them? This article will explain everything you need to know, describing the different types of SEPA payments and how they can transform your payment flows.

What is the Single Euro Payments Area?

The Single Euro Payments Area (SEPA) is a payment initiative spanning 36 European countries, designed to simplify bank transfers for countries paying in euros. European countries, businesses and government bodies use the SEPA network to make payments by direct debit and credit transfer, making SEPA one of the most widely used global payment methods.

SEPA was created to make cross-border electronic payments as cheap and easy as domestic transfers. This was done by harmonizing standards between participating nations, which also helped boost the efficiency of the European economy as a whole. The SEPA area is regulated by the European Payment Council (EPC).

What is SEPA transfer?

There are three types of SEPA transfer:

SEPA Credit Transfer

A SEPA Credit Transfer is typically used for a one-off euros transfer between two banks that have IBAN codes. These banks must both be in the SEPA. In most cases, a SEPA Credit Transfer will clear within one working day.

SEPA Instant Credit Transfer

As the name suggests, A SEPA Instant Credit Transfer is an almost instantaneous transfer of funds between two account holders in the SEPA area. These transfers can be made at any time, on any day of the year and, in 99% of cases, are completed within 5 seconds.

SEPA Direct Debit Transfer

SEPA Direct Debit Transfers occur directly between two banks and are pull-based, meaning the merchant initiates the payment after being given a mandate by their customer. They usually take between 1-3 days. There are two types: SEPA Core Direct Debit Transfer, which is available to individuals, and must be offered by all participating banks in SEPA; and SEPA B2B Direct Debit Transfer, which can only be made by businesses and is not mandatory.

Which countries are included in SEPA?

The SEPA zone consists of 36 European countries, including some non-euro zone and non-European Union nations.

The member states include:

27 European Union countries, including Spain, France, Germany and Italy.
Four microstates that have special agreements with the EU: Vatican City, San Marino, Monaco and Andorra.
Four countries from the European Free Trade Association: Liechtenstein, Norway, Iceland and Switzerland.
The UK, even after officially leaving the EU.

Is the UK still part of SEPA?

Yes. Even though the UK public voted to leave the EU, UK Finance asked the EPC for permission to remain part of SEPA. This application was approved in March 2019.

Brexit has caused some minor changes to the UK’s involvement with SEPA. For instance, SEPA payments made from a UK corporation’s bank must now include the debtor bank’s postal address. Other than that, the UK’s involvement remains largely the same.

How to make a SEPA payment?

SEPA bank transfers can be made via online banking, from the sender’s bank branch, or through a payment service provider like Checkout.com. They can be used for both one-off and recurring payments.

Both the sender and the recipient must have SEPA accounts within one of the SEPA countries listed above. If you are a US-based business (or are based in another non-SEPA country), to make and receive SEPA payments, you will need to open a business bank account in a member country. However, even without one, you may still be able to facilitate customer-to-customer transactions for consumers who reside in SEPA.

To make a SEPA payment, you’ll need to have the following:

The recipient’s name - to ensure the payment goes to the correct person
IBAN - every bank account within the SEPA has an International Bank Account Number (IBAN), which is used to identify both the sender and recipient’s accounts during a funds transfer
BIC - in some cases, the sender will also need the Bank Identifier Code (BIC) to make the payment
Authentication - the sender may also need to authenticate the payment by providing a PIN, one-time password or biometric data
Fees - the fees charged on SEPA payments vary depending on the type of SEPA payment made, the institution that facilitates the payment, and whether or not a currency conversion is required. Many banks don’t charge to make SEPA payments

Once the sender has provided all the necessary information, the money is deducted from their account and credited to the recipient.

How long does a SEPA transfer take?

The length of time depends on the type of SEPA transaction:

SEPA Credit Transfer: 1 business day
SEPA Instant Credit Transfer: Within 10 seconds.
SEPA Core Direct Debit Transfer: 1 or 2 business days (depending on whether the transaction is sent before the cut-off time).
SEPA B2B Direct Debit Transfer: At least 3 business days.

SEPA transactions, especially Instant Credit Transfers, provide businesses a quicker alternative to wire transfers, enabling you to transfer funds in as little as ten seconds.

Accept SEPA payments with Checkout.com

Like the sound of SEPA? With Checkout, you can easily integrate SEPA with your payments flow, opening up your business to speedier transactions and more than 520 million potential customers already using SEPA.

SEPA facilitates over 20 billion transactions per year, offering quick and cost-effective direct debits across 36 European countries, helping to expand your reach and streamline your transaction flows. For more information on how SEPA can help your business, contact our sales team today.

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