What are SEPA transfers and how to make them

Sometimes it’s hard to imagine that years ago money transfers between European countries took up to five business days and fees for the services differed vastly. But now these transfers are mostly seamless thanks to the adoption of SEPA.

In this blog post, we will take a look at how SEPA came to be, what are the advantages, and explain to people who are new to SEPA transfers how to make them. Ready? Let’s start.

What is a SEPA payment

SEPA, which stands for a single euro payments area, is an initiative implemented by the European Union to integrate electronic payments within Europe. The deployment of SEPA became the next logical step in creating a single market after the euro was established as the EU’s official currency in 1999. European citizens needed cross-border payment services that would be fast and have the same fees as domestic ones. 

Nine years of discussions, preparations, and adoption of regulations later, and in 2008 the SEPA Credit Transfer (SCT) scheme, which allows payment service providers (PSPs) to transfer single and multiple payments within the EU, was launched by the European Payments Council.

And in November of 2009, a SEPA Direct Debit (SDD) scheme was introduced, offering direct debit transactions between different countries of the euro area. SDD is great for people who worry about payment deadlines, as the scheme is used for recurring payments. 

There are also two versions of the SDD scheme – an SDD Core, which is primarily used by consumers, and SDD B2B, which is only used by businesses. With the former, a client can get a refund up to eight weeks after the operation, while the latter refunds are prohibited. Hence, before the SDD B2B payment is made, the payer’s bank must confirm that there is a valid mandate to ensure that a transaction is authorized.

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And as for the latest updates, the SEPA Instant Credit Transfer (SCT Inst) scheme was adopted in 2017, making credit transfers in euro extremely fast, with money available in the account of the payee within ten seconds and processing operations available on a 24/7/365 basis. And just on July 1st, it was announced that the maximum amount per SCT Inst was raised from 15 thousand to 100 thousand euros.

The adoption of the Payment Services Directive (PSD) in 2007 also became a vital part of SEPA’s implementation, as the PSD regulates the rules applicable to all electronic payment services within the European Union. 

In 2015, the directive was revisited (PSD2) to make cross-border payments safer by protecting consumers’ data. PSD2 facilitated access to consumers’ banking data to the third-party providers (TPPs), enabling them to initiate payment services, and also introduced Strong Customer Authentication​ to better protect merchants from fraud. 

Check out Genome’s article on “How to securely accept credit card payments online”, if you want to know why the PSD2 compliance is a must for both European banks and merchants. 

To sum up, right now SEPA payments allow for credit and direct debit transfers in euro within the SEPA zone, making fees for transnational euro payments equivalent to domestic payments. And it works: last year 146 billion electronic payments were made. 

What are SEPA zone countries

Currently, there are 36 countries and territories that are in the SEPA zone. 27 of these are a part of the EU: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden. 

The other nine are Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, Switzerland, the United Kingdom, and Vatican City State. 

How long does it take to make a SEPA payment

The time spent on a SEPA transaction depends on a scheme a bank or a PSP participates in. For instance, the SCT scheme is mandatory for all the financial institutions that want to provide SEPA transfer services. Thus, if your PSP uses the SCT scheme, the SEPA payment will take up to one business day.

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There is also an SCT Inst scheme, which is optional for banks and has 100 thousand euros, but payments happen in 10 seconds or less, and the service is available 24/7/365. As a rule, the information about a scheme used can be found on PSPs’ websites. 

How to make a SEPA transfer

These types of payments are easy to make, all you need to know is:

  • Name of the beneficiary – a person you are sending money to;
  • Their International Bank Account Number (IBAN), consists of 34 digits;
  • Their Bank Identifier Code (BIC) – is a number-letter combination, which consists of 8 to 11 digits;

The rest is pretty simple: make sure your bank support SEPA payments and open its “transfers” tab. There you’ll need to enter the beneficiary’s name, IBAN and BIC (might be optional) and fill in the reference (might be optional) – a number or a description of a reason you transfer money, for instance, paying bills, baying products, etc. And there you go – your SEPA payment will be completed within a business day, or in 10 to 20 seconds, if your bank uses SCT Inst scheme.

Having a secure and convenient payment service provider that is SEPA compliant is absolutely necessary if you live and do business within Europe, and Genome is up to challenge. We offer onboarding and all our services online at affordable prices for SEPA services.

Need a personal or business IBAN to receive SEPA payments? Genome got you covered with two detailed tutorials on how to open a personal IBAN account and a business IBAN account. Visit Genome’s website to find out more about our services.