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What is a SEPA Payment?

sepa payments

SEPA stands for Single Euro Payments Area, which is a transaction system of the European Union that facilitates cashless payments between Euro countries. 

It is used by individuals and entities in the area to make electronic transactions such as direct debit, instant credit transfer, and credit transfers. 

SEPA is regulated by the European Commission. 

Why was SEPA Created?

The SEPA system was designed to make transactions across borders as simple and inexpensive as possible, just as they are within a country. 

Prices are kept lower because a central system creates more competition by offering a single payment system to all 520 million people who live in the SEPA-covered areas.

Those people account for more than 122 billion transactions per year.

SEPA enables customers to make electronic payments to any account located in the SEPA area with a single bank account and one set of payment instruments.  

Anyone in any eurozone country can use SEPA to receive direct deposits and make payments anywhere in the eurozone, which makes it easier to move between countries.

How does SEPA work?

Each type of SEPA transaction has interbank rules, standards, and practices.

There are 3 types of SEPA initiatives:

  • SEPA Direct Debit (SDD)
  • SEPA Credit Transfer (SCT)
  • SEPA Cards Framework (SCF)

SEPA Direct Debit

SDD is similar to an ACH debit in the United States. 

It is pull-based, meaning that when the customer requests the transaction, the merchant initiates the payment. 

The transfers are bank to bank only, without the involvement of card services.

The features of SDD are:

  • All transactions are in Euros.  Currency exchanges are up to the individual banks to handle.
  • Customers have 13 months to dispute unauthorized transactions. 
  • The transactions require the customer's Bank Identifier Code (BIC) and International Bank Account Number (IBAN).
  • There are 2 types of SDD – Consumer to business (CORE SDD), and business-to-business (B2B SDD).  Not all banks can offer the B2B SDD.  The time frames for B2B transactions are faster. B2B transactions are not eligible for refunds of authorized transactions.

The uses of SDD include:

  1. Subscriptions can be paid by SDD, and is good for merchants’ confidence in the regular collection of payments. Also, there is no expiration date for merchants to worry about as they would with a credit card automatic payment. This ensures regular revenue and reduces costs.
  2. Invoicing for services can be done with SDD which enables merchants to collect on bills whenever they want, improving cash flow control.  They can also debit any required amount, rather than just a fixed amount.
  3. Customers who have relationships with merchants can use SDD at any time, simplifying payments and creating flexibility for payments.
  4. In areas where credit cards are not used much, such as Germany and the Netherlands, SDD offers merchants and customers another option.

SEPA Credit Transfer

A SEPA credit transfer is a payment initiated by a payer to a beneficiary. 

Like SDD, SCT transactions are in Euros. 

They can be used for one-time or recurring payments, and require both the payer and recipient’s BIC and IBAN. 

Funds are usually received by the beneficiary within one day of the transaction initiation.

SEPA clearing rules require that payments made before the cutoff point on a working day be credited to the beneficiary’s account no later than the next working day.

Uses of SCT include:

  • The deposit of payroll into an employee’s account.
  • One time payments to another person, similar to paying with a cash app.

SCT Instant

In our digital age, people expect speed in monetary transactions. 

People want to buy anywhere, anytime. 

With SCT instant, SCT transactions occur within 10 seconds.

SCT Instant enhances the customer experience and increases the revenue and improves the cash flow for merchants.

SCT Instant was launched in November 2017, and was available for end customers in eight eurozone countries.

It is expected to be available soon in most European countries and all SEPA countries. 

SEPA Cards Framework

The objective of the SEPA Cards Framework is the streamlining and harmonization of card payments in the SEPA area. 

It’s not a payment instrument, but rather an interoperability framework.

The framework establishes common operating rules for all banks, payments, users, and card acceptors within the SEPA area. 

Essentially, any card issued in any SEPA country must be accepted in all SEPA countries. 

SCF is limited to transactions in Euros.

The account can be held in euro or other currencies, but the transactions are in euros and must be transacted in the SEPA area. 

Card pricing must also be the same for all cards issued in the SEPA area.

Within the SEPA area, card payments must comply with EMV security standards and have a chip, and require a personal identification number (PIN).

Merchants in the SEPA area must accept cards no matter where the card was issued

Who can use SEPA?

There are 36 members of SEPA as of now. 

These include the 27 European Union countries which are

  • 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
  • Sweden

Non-EU Members of SEPA include:

  • Iceland
  • Liechtenstein
  • Norway
  • Switzerland
  • The United Kingdom. 
  • Andorra
  • Monaco
  • San Marino
  • Vatican City.

These countries have special territories which are not part of SEPA:

  • Cyprus: Northern Cyprus
  • Denmark: the Faroe Islands and Greenland
  • France: the French Southern and Antarctic Lands, French Polynesia, New Caledonia, and Wallis and Futuna
  • Netherlands: Aruba, the Caribbean Netherlands, Curaçao and Sint Maarten
  • Norway: Svalbard and Jan Mayen
  • United Kingdom: British Overseas Territories except for Gibraltar and the Crown dependencies.

Looking for a way to make SEPA payments for your business?

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What does SEPA stands for?


Why was SEPA Created?


What are the types of SEPA?


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