SEPA stands for the Single Euro Payments Area - a payment method introduced by the European Union with an aim of standardising and improving payments across the Euro zone. The European Central Bank has said SEPA is key to advancing the usability of the euro.
Practically, SEPA removes constraints on sending money, allowing payments to easily move cross-border, supporting both business and individuals.
The SEPA scheme covers 36 countries; 19 countries who adopt the euro. A further 9 countries who are part of the European Union, but whose local currency is not euro. The remaining countries have some form of agreement with the EU but are not one of 28 EU member states.
The full list of countries is:
Andorra, Greece, Norway, Austria, Hungary, Poland, Belgium, Iceland, Portugal, Bulgaria, Ireland, Romania, Croatia, Italy, San Marino, Cyprus, Latvia, Slovakia, Czech Republic, Liechtenstein, Slovenia, Denmark, Lithuania, Spain, Estonia, Luxembourg, Sweden, Finland, Malta, Switzerland, France, Monaco, United Kingdom, Germany, Netherlands, Vatican City State
The scheme itself was initially introduced during 2008 (for credit transfers) and 2009 (for direct debits). The full implementation was complete but 2014 for euro countries, and 2016 for non-euro countries.
What does SEPA allow?
1) Credit transfers;
2) Instant credit transfers; and
3) Direct debits.
SEPA is only for euros.
What are the benefits of SEPA?
SEPA Credit transfers
Payments made by SEPA are processed in the same speed between countries as they are domestically. For example, a SEPA payment made from France to Germany will take the same amount of time as a payment made from one French account to another.
SEPA credit transfers are received by the recipient either the same day, or +1 business day.
This is especially convenient when comparing to a payment made by SWIFT, which can take 1-3 business days to clear internationally.
Instant credit transfers
More recently, during 2017, an improved version of the SEPA credit transfer was introduced, being the instant credit transfer – settlement within 10 seconds. This includes cross-border payments between countries in the Single Euro Payment Area, for the countries that have implemented the new instant credit method.
Additionally, over 50% of EU Payment Institutions are now signed up to the instant credit transfer scheme.
Direct debits with SEPA
SEPA direct debits are driven by the merchant. This is known as ‘pull based’. Once the customer signed the direct debit mandate, the merchant initiates the payment and receives the payment from the customers account. This includes cross-border direct debits within the SEPA region.
SEPA and Xace
Xace accounts have SEPA credit transfer facilities included as a payment option, while each account is a named IBAN in your business or personal name.
If you send a payment but chose a country outside of the SEPA region, Xace software will automatically adjust the payment process to allow the transfer to proceed.
If you receive payments from outside the SEPA region, the payment will still clear into your account. Xace will convert the incoming payment appropriately.