SEPA for Dummies
Choosing the right payment method can be difficult if you are not sure of all of your options. What makes it even more difficult is understanding how all of them work. One of the safest and fastest ways to transfer money is to use SEPA (Single Euro Payments Area), a pan-European payment system that enables users to send money across borders in the Eurozone.
But how does it work and is it right for you? Well, we are here to help with all of your questions with our short guide.
What is a SEPA bank transfer?
All in all, these transfers are the most effortless way to transfer money within the European Union, with the benefit of being quick, cheap, and very safe. Because of this, all transactions happen in Euros, even if the accounts have a different currency. The only thing needed is the customer’s BIC and IBAN, and not their entire account number. Additional safety measure is that, currently, payers can get a refund from their bank for unauthorized payments for up to 13 months.
Which countries partake in the payment system?
There are currently 36 countries that participate in the SEPA system and these are:
- 27 of countries from the European Union
- Four countries are from the European Free Trade Association (Liechtenstein, Norway, Iceland, and Switzerland)
- Four are microstates that have special monetary arrangements with the EU (Vatican City, San Marino, Monaco, Andorra)
- The UK, although in the process of leaving the EU, is still counted as a member and is expected to remain so even after officially leaving the EU.
How does a SEPA bank transfer work?
There are three types of transfers, which offer three distinct services.
SEPA Credit Transfer
The SEPA Credit Transfer uses the IBAN and occasionally the BIC numbers of both the sender and the recipient’s bank accounts to move money from one bank account to another and it usually involves one-off transfers. Once the transfer is authorized, the recipient should receive their money within one business day after the payment was made.
SEPA Instant Credit Transfer
If you care more about the speed of the transfer, then the SEPA Instant Credit Transfer is for you. Once the sender confirms a SEPA Instant Credit Transfer, the funds can be available in the recipient’s bank account in less than 10 seconds. The only downside is that in order to use it, both the sender and the receiver’s banks must be registered as SEPA Instant members, but most banks already are.
SEPA Direct Debit Transfer
In contrast to the previous two, the SEPA Direct Debit Transfer is frequently used for recurring payments (subscriptions, rent, monthly bills, etc). Similar to the other types of transfers, this one also requires the IBAN and (occasionally) BIC of both the sender and the recipient. But the roles are reversed, meaning that the recipient of the funds must request the money transfer from the sender instead.
How long does a transfer take?
The length of time it takes for a transfer to be completed depends on the type:
- The SEPA Credit Transfer takes one business day.
- The SEPA Instant Credit Transfer takes less than ten seconds.
- The SEPA Core Direct Debit Transfer takes a minimum of two business days.
- The SEPA B2B Direct Debit Transfer takes a minimum of three business days.
Are SEPA payments safe for merchants and customers?
Unlike other methods, SEPA Direct Debit offers a real protection to the consumer which is why they prefer this payment option. The consumer simply gives their IBAN details and pays directly from their bank account, making the process simple and convenient.
Why should I get SEPA for my shop?
Using SEPA Direct Debit puts control back into the merchant’s hands. This means that you would be able to collect recurring payments and different amounts using a single authorization. As and when the payment amount changes, merchants are able to automatically claim the new amount without requiring the customers to give new bank instructions each time. By supporting easy cross-border payments within the SEPA region, you can reach 500 million potential customers who prefer to not use their credit card information.