You might have heard of SEPA transfers. After all, it is the most popular method of sending money within the European Union. SEPA has been around for some time. It was first introduced for credit transfers in 2008 but wasn’t fully implemented until 104 in the Euro area. Countries not in the Euro waited until 2016 to use SEPA.
The idea behind SEPA was a noble one; to make cross-border electronic payments as inexpensive, easy and affordable as payments within one country. If you’re expecting to use SEPA to send or receive money for the first time, your greatest concern is how fast the transaction will be. However, the response to that question is not straightforward. It will depend on factors like the transfer method you choose. Here’s a general look at SEPA transfers to help you understand the systems and know when to expect the money.
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What is a SEPA Bank Transfer?
A Single Euro Payments Area is a mechanism that enables businesses and people in the SEPA zone to send and receive money transfers in euros from one bank account to another. It is a cross-border payment made within the Eurozone but is inexpensive and works the same way as a domestic payment.
The mechanism was first introduced in 2008 with the aim of making cross-border funds transfers as simple as domestic bank-to-bank options.
Overall, SEPA is a simpler, cheaper and faster version of SWIFT, but designed specifically for the Eurozone.
Not all SEPA member states use the Euro currency. So, they have special agreements with the European Union to continue benefiting from the SEPA payment scheme. The countries under SEPA are:
- Austria
- Latvia
- Belgium
- Lichtenstein
- Bulgaria
- Luxembourg
- Croatia
- Malta
- Cyprus
- Monaco
- Czech Republic
- Netherlands
- Denmark
- Norway
- Estonia
- Poland
- Finland
- Portugal
- France
- Romania
- Germany
- San Marino
- Gibraltar
- Slovakia
- Hungary
- Spain
- Iceland
- Sweden
- Ireland
- Switzerland
- Italy
Besides harmonising payments, SEPA also creates a single market for payment services. It helps generate more competitiveness in this sector. The SEPA mechanism is generated by the European Commission and the European Central Bank.
Within SEPA transfers, the European Payments Council (EPC) has created different payment schemes to match the various needs of people looking to use the network. More on these later.
Who Can Use SEPA Transfer?
The requirements for a SEPA bank transfer are that you have a bank account from a country that is a SEPA member state. The recipient should also be in a SEPA member state, and the funds should be in Euros.
The account should already cover SEPA bank transfers if you meet the above requirements and have a normal bank account. If you’re in a non-European country, you should first confirm that your country or the recipient’s country is a SEPA member.
Any bank account owner in a SEPA country can make a SEPA transfer. You don’t need a specific type of bank account because most banks in the SEPA zone complete SEPA transfers as a standard type of transfer.
How Does SEPA Transfer Work?
If you’re using SEPA for the first time, you might wonder how it works. It’s a simple platform that is easy to understand after your first transaction. Here’s an example:
Let’s say John is sending Jane €500, and both receiving banks are in the SEPA zone. When John initiates the transfer, his bank will debit €500 from his account and credit it to Jane’s commercial account held with John’s bank by the same amount. Jane’s bank will then credit her personal account with €500.
In this case, the banks have an established relationship. The transaction runs through a central bank account or intermediary account in Europe. After the money is debited from John’s account, the amount is credited to an intermediary bank, which credits Jane’s bank with the funds. Finally, Jane’s bank will credit the money in her account.
SEPA transfers work like regular bank transfers. The only difference is that the money is transferred overseas and only in Euros.
How to Make a SEPA Transfer
If you live in the SEPA zone and have a bank account, you can most likely make a SEPA transfer from your existing bank accounts because most banks have adhered to the system. If you’re uncertain, you can confirm with your bank or check the SEPA members’ register.
After confirming your SEPA status, you will need to follow a few simple steps to make a SEPA transfer:
- Log in to your bank account online the same way you would for any other bank transfer
- Set up your transfer by adding the recipient’s details and the amount you want to transfer
- The SEPA transfer requires that you add the recipient’s IBAN number
- Confirm the information entered is accurate and send
Depending on the type of SEPA transfer you select, the money should arrive within 48 hours maximum.
How Long Does a SEPA Transfer Take?
In a nutshell, the length of time for a SEPA transfer to be completed will depend on the type of SEPA transfer you choose:
- When using the SEPA Credit Transfer, it takes one business day for the recipient to receive the money.
- The SEPA Instant Credit Transfer takes 10 seconds or less for the money to be available in the recipient’s account.
- The SEPA Core Direct Debit Transfer takes a minimum of two business days, but the period could be longer.
- The SEPA B2B Direct Debit Transfer takes a minimum of three business days.
How Much Does a SEPA Transfer Cost?
The cost for a SEPA transfer is more or less the same as a domestic wire transfer, which is almost zero in most cases. However, some banks might charge you a nominal fee, so you should check with your bank just in case they also have a nominal fee.
There are no charges levied based on the bank location. That means you would pay the same if you transfer to a UK bank account or another European bank.
Benefits of SEPA Bank Transfers
Before SEPA bank transfers, there were other ways to send money within the EU, like SWIFT. However, SEPA has taken root well among users and banks. Why? Because SEPA offers some unique benefits that other money-sending options don’t, like:
Instant payments
SEPA is a fast money transfer mechanism that allows processing transactions of up to 100,000 EUR. Most of the transactions in SEPA are completed in under 10 seconds. But the exact time of delivery might vary depending on the option you select. The service is available around the clock every day of the year.
Instant money transfers facilitate offline payment of goods and services and contribute to economic growth. Through SEPA, a merchant can receive their payment before you exit the store. Real-time payment processing also helps producers order raw materials and pay for them in the comfort of their offices.
You use the same credentials
Although SEPA is relatively new, it’s not an entirely new system. It’s more of an upgrade to an existing system on the usual SEPA network. When sending money, most of the details you provide are the same. You provide the same IBAN you normally use for other transactions.
If you and your recipient have SCTinst set up, you will not need to select anything. The payment will be processed instantly and automatically.
Simpler, with fewer fees
SEPA bank transfers have simplified the process of sending money to people within the country and the SEPA member countries. It is also cheaper to send money using SEPA because there are no incoming fees. You use the existing SEPA code for merchants, banking apps and other platforms, so you don’t need to develop any additional instruments.
For merchants, SEPA transfers make it easy to instantly accept payments by flipping the switch on the online banking app, and that’s it. The system is connected to the website and accepts instant payments without any additional setup at all.
Security
SEPA doesn’t require any superstructure or form of 3rd party payment systems or applications. It reduces possible points of fraud or interception. Simplified access to funds is not just safer for the transactors but also the banks.
The security checks required on the SEPA Network though minimal are robust and run in a few seconds. Systems with multiple levels, the security checks take longer and create new points for potential interruption of secure financial services.
The only downside with SEPA bank transfers is it is only available in the 36 European countries that are SEPA members.
Types of SEPA Transfers
How fast your SEPA transaction is completed depends on the type of SEPA transfer you select. Each type has specific requirements and limitations. You should understand them to determine which method of sending is best for you. Here are the three types of SEPA transfers you can use and the duration it takes for transactions to be completed in each type.
SEPA Direct Debit
This is a pull-based payment method. It requires the debtor to sign a valid mandate to allow the merchant or creditor to debit their bank account. The SEPA direct debit service is exclusively available in Euros.
For this payment method to work, the payee must have the payer’s International Bank Account Number (IBAN) to collect the SEPA payment.
This type of payment is suitable for one-off and recurrent transactions. You can use this method to pay rent, insurance premiums, subscriptions and other expenses. You can also use SEPA direct debit to settle business financial obligations and manage cash flow when moving money abroad.
There are two types of SEPA direct debit payments methods:
- SEPA Direct Debit Core
- SEPA Direct Debit B2B
It’s mandatory for all SEPA banks that offer Euro-denominations to offer the SEPA Direct Debit Core services. However, B2B is an optional scheme. It is available to those collecting payment from other businesses.
Differences between SEPA Direct Debit Core and SEPA Direct Debit B2B Schemes
Understanding the different money transfer schemes under SEPA ensures your transfers get to the recipient at the right time. When going for the SEPA direct debit method, you should know the differences between the two schemes available.
- You can only use the SEPA Direct Debit B2B scheme when the debtor is a business or enterprise. On the other hand, the core scheme is available to private individuals and enterprises.
- SDD B2B is not mandatory; therefore, some banks do not accept it. You should check with the bank and recipient to ensure they can facilitate the transfer to avoid unnecessary delays. In the B2C scheme, the payee must submit a collection request five banking days before the payment due date and at least two days in advance for subsequent collections.
- With the B2B scheme, the request can be submitted only one working day before the payment is due. That means the B2B direct debit is the right choice for a cross-border SEPA direct debit payment.
- The B2B scheme requires debtors to sign an agreement with their bank before any direct debit payments. The transaction will be rejected if the debtor doesn’t notify the bank.
- In the B2B scheme, customers are not entitled to refunds. But in the Core scheme, customers can seek a refund within eight weeks for authorised collections and 13 months for unauthorised collections. However, the debtor must provide proof that the creditor was not authorised.
SEPA direct debits are not a form of instant payment. The transaction normally takes a minimum of two business days to process and up to three working days for a Direct Debit B2B scheme.
SEPA Credit Transfer
SEPA Credit Transfer is usually used for one-off transfers. The scheme uses the IBAN and, occasionally, the Business Identifier Code (BIC) of the sender and recipient’s bank to move money between banks.
After the transfer is authorised, it takes one business day for the recipient to receive the money after the payment has been made. The scheme can also work for recurring payments made individually or in bulk, which makes it an ideal option for payrolls or other functions where one debit is involved for multiple credits to different beneficiaries. Some of the benefits of SEPA Credit Transfers include the following:
- Payer and payee and their banks are identified using IBAN and BIC. This double-layered information requirement reduces the chances of sending money to the wrong recipients since both numbers have to match.
- The beneficiary receives the funds within one business day after the payment is executed.
- The beneficiary receives the full amount. There are no hidden costs or charges. The sender bears the cost of sending the money.
- The cost of a SEPA cross-border payment under this scheme is the same as a local transfer.
- The payer and payee using the SEPA Credit Transfer scheme are only charged by their own service providers for the payment in question.
SEPA Instant Credit Transfer
SEPA Instant Credit Transfer is also known as SEPA Instant Payment. It was established in 2017 to deliver payments and money transfers instantly. But, true to its name, it’s all about speed.
With the SEPA Instant Credit Transfer, once the sender confirms the transaction, the money can be available in the recipient’s bank account in less than 10 seconds.
The scheme uses direct routing from the sender’s bank to the recipient’s bank. It doesn’t involve any intermediaries in the process.
The scheme is available 24/7, 365 days a year, unlike other schemes that might be delayed on weekends and on public holidays.
However, to use the service, the sender and recipient’s banks must be SEPA Instant registered members. You should check that both banks comply with this requirement before hitting send.
