After the introduction of the euro as a single currency, the need arose for the development of a unified European market and a regulatory framework for payments in the Eurozone. That is why the Single Euro Payments Area, better known as SEPA, was established. The purpose of the creation of SEPA is to strengthen the euro, as well as to stimulate competition both inside and outside the European Union.
What is SEPA:
Basically, SEPA is an area where consumers can pay and receive payments in euros electronically, within and across borders, having the same characteristics, obligations and rights wherever they are based. In this way, cross-border payments are facilitated, since they are carried out in the same way as domestic payments.
Which countries participate in SEPA:
36 countries participate in SEPA:
- The 27 member states of the European Union
- The member countries of the European Free Trade Association (EFTA): Iceland, Liechtenstein, Norway and Switzerland
- Non-member countries of the European Union, which have a special agreement to use the euro as their national currency: Vatican City, San Marino, Monaco and Andorra
- The United Kingdom. Although the country has left the European Union it is still a member of SEPA. Brexit has created some minor changes to the execution of SEPA transfers from the UK, such as if the transfer is via an English commercial bank, it will now need to include the sender’s bank’s mailing address.
Who is SEPA for:
- Private consumers
- Businesses
- Banking Institutions
- State Authorities
- Public Administration Bodies
What is the importance of SEPA:
SEPA has many benefits for payments in the European area.
- Speed: SEPA significantly reduces the time required to carry out cross-border transactions ensuring more efficient payment processing.
- Cost reduction: By standardizing payments, SEPA reduces transaction costs for consumers and businesses.
- Transparency: Through SEPA it is ensured that participating countries consistently follow rules and standards, which provide transparency and reliability in the payment process.
- Financial Integration: Harmonizing payment systems promotes financial integration in Europe by guaranteeing financial stability and facilitating cross-border trade relations.
- Convenience: SEPA simplifies the process of making and receiving payments between participating countries.
What do you need to do a SEPA transfer:
- The name of the recipient (consumer or business)
- The IBAN of the recipient (There is a European Union regulation [EU Regulation No. 260/2012] which prohibits the different treatment of IBANs issued by a provider based in any other SEPA member country, provided that the IBANs are accessible via SEPA. This is also known as IBAN discrimination.)
- The exact amount
- The currency of the transfer
- Name and address of the sender
SEPA offers three types of payments:
The European Payments Council (EPC) is responsible for the management and development of SEPA payments.
- SEPA Credit Transfer:
It allows the transfer of euros between bank accounts in SEPA participating countries. It is recommended for one-time payments or recurring payments, such as salaries or paying bills.
Transaction Execution Time: Usually one business day. If the payment falls on a weekend or holiday, it will be executed the next day.
Maximum amount per order: €999,999,999.99 (1 cent less than 1 billion euros). - SEPA Instant Credit Transfer:
Provides 24/7 direct euro transfers to SEPA member countries. It is an ideal method for urgent payments.
Transaction execution time: It takes a few seconds to process the transaction 365 days a year, 24 hours a day, and the money is immediately available to the recipient.
Maximum amount per order: €100,000 - SEPA Direct Debit:
It enables consumers and businesses to receive payments in euros from bank accounts. This payment type is suitable for recurring payments.
Transaction execution time: The payment is executed on a specified date.
Maximum amount per order: The limit is agreed between the parties involved and the payment does not exceed the specified amount.
SEPA has reshaped the way payments are made in Europe, offering simple and efficient solutions to facilitate cross-border transactions. By understanding what SEPA is, the types of payments and its importance in general, consumers and businesses can take advantage of it to improve their financial operations. Whether it’s everyday transactions, urgent payments, or recurring ones, SEPA makes sure they are quick, easy and simple, keeping at its center the financial stability in Europe.
