What is a SEPA Payment Method and How Does it Work?

The Single Euro Payments Area (SEPA) was introduced in 2008 under the authority of the European Union (EU) to simplify and harmonize euro-denominated payments across Europe. The SEPA payment method allows individuals, businesses, and organizations to make and receive payments in euros under the same conditions, rights, and obligations, regardless of their location within Europe.

What is SEPA Bank Transfer?

A SEPA bank transfer is a cross-border payment system used to transfer euros across member countries. This system is designed to make euro transactions as easy as domestic payments within each participating country. SEPA operates in 36 countries, including the 27 EU member states, as well as Iceland, Norway, Liechtenstein, Switzerland, Monaco, San Marino, Andorra, and Vatican City. This extensive reach makes it a preferred method for various financial transactions; it’s even possible to buy BTC with SEPA.

There are three main types of SEPA payments:

  • SEPA credit transfer (SCT)
  • SEPA direct debit (SDD)
  • SEPA instant credit transfer (SCT Inst).

How Do SEPA Payments Work?

SEPA credit transfer is the most common type of SEPA payment. To initiate an SCT, the sender needs the recipient’s International Bank Account Number (IBAN) and sometimes the Bank Identifier Code (BIC). The process involves the sender instructing their bank to transfer a specific amount of euros to the recipient’s bank account.

SEPA direct debit is intended for recurring payments, making it ideal for regular bill payments, subscriptions, and similar services. There are two types of SDD: Core and B2B. To set up an SDD, the payer must provide a mandate to the payee, authorizing them to collect payments from their bank account. Once authorized, the payee’s bank will debit the payer’s account on the agreed dates. The primary advantage of SDD is its automation, which ensures timely and consistent payments.

Introduced to enhance the speed of transactions, SEPA instant credit transfer allows for near-real-time transfers, with funds available to the recipient almost immediately. This service is available 24/7, including weekends and holidays, offering unparalleled convenience. To use SCT Inst, both the sender’s and recipient’s banks must support instant payments.

How Long Does a SEPA Transfer Take?

The time it takes for a SEPA transfer to complete depends on the type of transfer:

  • SEPA credit transfer takes one business day.
  • SEPA direct debit timeline varies depending on the arrangement between the payer and payee but usually takes two business days for the initial setup.
  • SEPA instant credit transfer ensures that funds are transferred almost immediately, usually within seconds.

SEPA payments have revolutionized the way euro transactions are conducted across Europe, offering a standardized, efficient, and cost-effective solution for cross-border payments.