SEPA Payments: Your Complete Guide to SEPA transfers

SEPA – Single Euro Payments Area

SEPA – Single Euro Payments Area is an initiative by the European Union aimed at simplifying the bank transfer process for euro transactions between SEPA countries. SEPA countries include 28 members of the EU; four members of the European Free Trade Association (Liechtenstein; Switzerland; Norway; Iceland) and Monaco, Marino and Andorra. The EU initiative makes electronic euro transfers between these countries equivalent to domestic transfers within one country. By making the transfer process easier the SEPA system initiative aims to encourage trade between SEPA countries and the use of the euro as a payment currency. The creation of a cross-border integrated market for electronic transfer in the euro is important both politically and economically for SEPA-member nations.

SEPA Euro Payments Area

The European Central Bank and the European Commission collaborate to manage SEPA payments through the European Payments Board. The European Payments Board is chaired by the ECB and includes representatives from consumer groups and government who work together to govern and guide the SEPA agenda. Financial institutes need to comply with strict standards and regulations in order to become SEPA members. SEPA-member financial institutions must hold an authorized license and implement a complex integration between their system and the SEPA system and have the ability to open SEPA bank account and SEPA Euro payments.

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Advantages of SEPA Bank account / SEPA Payments

  • Lower prices and fees for running a bank account and for making transactions between SEPA countries.
  • Transparent pricing.
  • No hidden charges.
  • Faster transfers between SEPA countries within a guaranteed time.
  • Cross-border direct debits in euro between bank accounts anywhere in the EU.
  • A single euro account for all your payments and collections within SEPA countries.
  • Improved liquidity.
  • Increased business opportunities thanks to access to a broader European market that can make transactions without dealing with multiple payment card standards.

How is SEPA useful to you and your business?

To benefit from a SEPA bank account you first need to have a bank account in a SEPA country and that this is your SEPA account online. Once you have a personal or business bank account with a financial institution in Europe that uses SEPA you can then go ahead and make SEPA euro transactions between any of the SEPA countries. You will benefit by being able to send and receive euros swiftly and at a low cost.

With SEPA payments must be received within a specific time and banks are forbidden from making any deductions on the amount being transferred. This is guaranteed by regulations introduced in 2001. However, the banks can still charge a credit-transfer fee if the same fee is charged to all EEA members, payment institutions and banks, domestic or not. This is relevant to countries that do not use the euro and where domestic euro transfers are not common and fees might be inflated. For example in Sweden and Denmark where the euro is not the national currency legislation states that all euro transfers must be charged the same as transfers in the national currency. This means that you can withdraw euros from an ATM for free but there are charges for ATM withdrawals in other EU currencies.

The 28 EU States / SEPA countries list

Austria, Germany, Netherlands, Belgium, Greece, Poland, Bulgaria, Hungary, Portugal, Cyprus, Ireland, Romania, Czech Republic, Italy, Slovak Republic, Denmark, Latvia, Slovenia, Estonia, Lithuania, Spain, Finland, Luxembourg, Sweden, France, Malta, United Kingdom and Croatia.

Other Territories:
Iceland, Monaco, Switzerland, Liechtenstein, Norway, San Marino.

Legal Framework of SEPA

You can learn about the full legal framework of SEPA by reading the payment services directive 2007/64/EC and SEPA regulation (EU) No 260/2012 which specifies the business and technical requirements for direct debits and credit transfers in euro and the date of entry into force of the law. This document also lays out the arrangements and conditions for euro direct debit and credit transfers in countries outside of the eurozone

How does SEPA facilitate efficient bank transfers?

With the creation of SEPA, the EU adopted IBAN, a system of bank account numbers that are uniform across all SEPA countries. The Europe-wide standardization of IBAN bank account numbers has made for streamlined transfers in euro, fast processing time and standardized bank transfer fees across all SEPA countries. For merchants, this means they can receive SEPA payments from customers across Europe, and for the customers, it means that they benefit from quick, efficient payment processing and low transfer fees but to enjoy this, you must open a SEPA  bank account first.

SEPA Money Transfer Costs

SEPA policy insures that banks make no deductions from the amount being transferred and that the euro transfers are completed within a guaranteed period of time. However, payment and banking institutions may opt to set a charge for euro credit transfers if the same fee is charged to all banks, payment institutions (foreign or domestic) and EEA participants. This is significant for countries where their currency is not euro and where domestic transfers of euro are uncommon as they may be charged elevated bank transfer fees. Denmark and Sweden (both countries where the euro is not the official currency) have addressed this issue by ruling that all euro transfers must incur the same fees as transfers in the national currency. This means that euro withdrawals from ATMs in Sweden and Denmark are free but ATM withdrawals in other EU currencies incur charges.

SEPA Credit Transfers

What is a SEPA Credit Transfer?

A SEPA Credit Transfer (SCT) is a credit transfer system used across Europe. SCT is now used in the SEPA zone instead of the previous domestic and cross-border Euro Credit Transfers (CT) that were once used. By introducing the SEPA Credit Transfer system payments are now consistent throughout Europe. Making a SEPA Credit Transfer is as easy and straightforward as receiving a domestic ACH transfer. In 2016 when the updated version 8.2 of the SEPA Credit Transfer Rulebook was published all technical and functional points remained unchanged.

How long does it take to do a SEPA Credit Transfer?

SEPA Credit Transfers take a maximum of three days although they can be processed in one day depending on the time of day you make the transfer. There is a 15:00 cut-off time so that if you make the transfer before 15:00 your transfer can happen on the same day. If your transfer request is made after the cut-off time of 15:00 it will be processed on the next Banking Day.

How does the SEPA Direct Debit scheme work?

SEPA Direct Debit (SDD) is a direct debit scheme used throughout Europe allowing merchants to accept Euro-denomination payments from accounts using the SEPA payment system in all eurozone and non-eurozone SEPA countries and associated territories.

For consumers, the SDD system means that their transactions are now automated. There is no risk of missing a payment or being late for a payment and so no risk of being charged a late-payment fee or being at the mercy of service interruptions. When a customer has a recurring payment that needs to be made on time each month the SDD system handles it automatically bringing the customer peace of mind. Not only does the customer know that the payment will be made on time but they also have the security knowing that there is a straightforward and timely refund procedure if necessary.

For businesses, the SDD system’s automated payment processing means efficiency gains, optimization of cash flow and prompt payment of invoices when due. As the system is standardized trade can occur smoothly across borders throughout Europe thus supporting a functioning single market.

What does a SEPA Direct Debit entail?

SDD operates on a pull model meaning the merchant initiates the payment only once the customer has given his authorization (SEPA Direct Debit Mandate) for the payment to be collected from their Euro-denomination bank account. SEPA Direct Debit does not use a card network but rather operates as a bank-to-bank transfer directly between banks. The information and legal wording used in the mandate is specific (see here) and explicitly lays out the refund terms under the relevant SEPA Direct Debit scheme. For example, the SEPA Direct Debit Mandate provides protection for customers requesting regular scheduled payments to insure against fraudulent or mistaken deductions. We have provided a SEPA Customer Protections guide for your convenience.

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