If you’re sending money in euro to or within Europe, you have multiple options. One of these options is SEPA. In this article, we’ll explain what SEPA is, how it works, and when you should consider using SEPA over other payment rails like SWIFT.
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What is SEPA?
SEPA, which stands for the Single Euro Payments Area, is a low-cost local payment rail primarily used within Europe to transfer funds between bank accounts in euro. SEPA enables seamless and often instant transactions across European countries.
While SEPA is mainly used for payments within Europe, it can also support cross-border payments outside of Europe. This is possible when the payment service provider has a banking relationship within Europe to handle the domestic leg of the transfer.
SEPA is divided into different SEPA payment types, each tailored to specific types of transactions. The two main types for international and domestic payments are SEPA Credit Transfer (SCT) and SEPA Instant Credit, which differ in speed and functionality.
SEPA Credit Transfer (SCT): This is a standard credit transfer method within the SEPA network. It requires both the payer's and recipient's IBAN (International Bank Account Number), and sometimes the BIC (Bank Identifier Code), to ensure the correct and secure transfer of funds. SCT is mainly used for one-off payments. If you select local payments on our platform, this is the SEPA rail that will be used.
SEPA Instant Credit: A faster alternative to the standard credit transfer, SEPA Instant Credit allows funds to be transferred within seconds directly between bank accounts via the SEPA Instant scheme. This service is available 24/7, including weekends and holidays. However, both the sender's and recipient's bank accounts must support SEPA Instant Credit for the transaction to be processed.
While SEPA Credit Transfer (SCT) is free in most cases, SEPA Instant Credit may not be. Fees for SEPA Instant Credit vary depending on the bank or payment service provider, so it's important to check with your bank for specific costs.
How Long Does a SEPA Transfer Take?
SEPA Credit Transfers (SCT) typically take 1 to 3 business days to complete, depending on the banks involved and their cut-off times. Domestic transfers within Europe are usually quicker than international payments to Europe, often being processed faster within the 1-day timeframe. SEPA Instant Credit transfers, on the other hand, are processed within a few seconds, 24/7, regardless of the time or day.
SEPA vs. SWIFT: What’s the Difference?
When it comes to cross-border payments, SEPA and SWIFT are two widely used systems, each with its own advantages and limitations:
- Cost: SEPA transfers are generally low-cost or even free, making them a cost-effective option for euro-denominated transfers within Europe. In contrast, SWIFT transfers can be more expensive due to fees charged by the multiple banks involved in processing the transaction.
- Traceability: SEPA offers limited tracking capabilities. Once a SEPA transfer is initiated, it’s challenging to trace the payment in detail. On the other hand, SWIFT, especially with the use of SWIFT gpi (Global Payments Innovation), provides full traceability. SWIFT gpi allows you to track the payment in real-time, offering complete visibility throughout the transaction process.
- Transaction Scope: SEPA is designed specifically for euro transfers within the SEPA region, making it ideal for payments within Europe. SWIFT, however, supports international payments in multiple currencies, making it suitable for global transactions beyond Europe.
In summary, SEPA is a great choice for low-cost, euro-denominated transfers within Europe, while SWIFT is more appropriate for fully traceable, global payments in various currencies.
What Happens If I Send a SEPA Payment to a Non-SEPA Account?
If you send a SEPA transfer to an account that does not support SEPA, several issues can arise:
- Returned Payment: The payment will usually be returned to you if the recipient’s bank account is not SEPA-compatible. This return process can take some time and cause delays.
- Potential Fees: There might be fees associated with the return of the payment, depending on the policies of the involved banks. These fees could reduce the total amount refunded to you.
- Processing Delays: Since SEPA transfers are intended for use within the SEPA network, sending a transfer to an unsupported account can result in delays as the payment is rejected and sent back.
To avoid these issues, it’s important to verify that the recipient’s bank account supports SEPA before initiating the transfer.
SEPA is a cost-effective and widely accessible payment system, available in 36 countries, including all EU member states and non-EU countries like Norway, Switzerland, and Iceland. It offers reliable euro transfers within Europe, with options like SEPA Credit Transfer for standard payments and SEPA Instant Credit for near-instant transactions. While SEPA is generally slower and less traceable than SWIFT, it remains an ideal choice for euro-denominated transfers within Europe. Just ensure the recipient's account supports SEPA to avoid delays.
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