SEPA payments explained
The Single Euro Payments Area, or SEPA, is a zone where cross-border Euro payments can be made quickly, easily, and safely – essentially making them as straightforward as domestic transactions. Think of SEPA like the payments version of travelling between nations where border controls are relaxed (like in the EU or the Schengen Zone.)
Which countries are part of SEPA?
All 27 EU member states are part of SEPA, plus 6 European non-EU countries, and 3 EEA nations:
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Brexit has not impacted the UK’s inclusion in SEPA, it has full membership just like Switzerland and the other non-EU countries.
Benefits of being part of the SEPA zone
SEPA is all about simplicity, convenience, and efficiency.
For a business based in a SEPA state, it provides access to 36 international markets with as much ease as if you’re transacting domestically in your home country.
Working with just one consolidated payments standard, regardless of where your customer or supplier is or who they bank with, means saving money by avoiding high transaction fees and saving time because there’s no more reformatting payment files for multiple providers.
What are SEPA payments and how do they work?
SEPA Credit Transfers are like regular bank transfers. They are usually used for one-off payments and are processed within a day (if both banks and the payment provider are within SEPA.) There is a rapid version of this, the SEPA Instant Credit Transfer, which completes in seconds.
SEPA Direct Debits are ‘pull’ payment bank transfers, which work just like domestic Direct Debits and are often used for subscriptions and recurring purchases. The customer sets it up, provides authorisation for continued access, and the supplier can take ongoing hassle-free payments. SEPA payments are only for euro-to-euro transactions.
How do you make SEPA payments and how long do they take?
SEPA payments work with IBANs (International Bank Account Numbers), which is the primary identifier for European banks.
SEPA Credit Transfers are euro-to-euro payments and have virtually no transfer limit (€999,999,999.99.) These operate by submitting a transfer request, so there is a slight delay when sending and receiving funds in this way, but most SEPA Credit Transfers will process within one day. These work similarly to CHAPS, in timeframe and limit, but are faster than BACS or SWIFT.
SEPA Instant Credit Transfers come with a €100,000 but are generally instantaneous, as there is no transfer request involved. These can be made with smartphones and are usually processed in less than five seconds, making them a much more convenient way to make most SEPA one-off payments. These work similarly to the UK-based Faster Payments scheme.
SEPA Direct Debits have no legal transfer limit but are governed by the agreement between both parties during the setup process. Transactions can take several days and, just like domestic direct debits, you won’t know whether the payment has been successful until the transaction has finished processing. SEPA Direct Debits are the most commonly used vehicle for non-SEPA businesses to transact with SEPA businesses.
To make SEPA payments, you do not need a special bank account or payment provider. If your bank account is based in a SEPA member state, registered with SEPA, and you have an IBAN, your payments to other businesses with the same features will automatically be processed using the SEPA network. Most, but not all, European banks are SEPA-registered.
