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What Are SEPA Transfers and How Do They Work?

Known for its efficiency and reliability, the Single Euro Payments Area or SEPA transfer system is a widely used money transfer protocol in Europe. Established to make cross-border euro transfers fast, secure, and cost-effective, it has been praised for bridging the gap between different European countries and standardising payment processes. This article will delve further into exactly what SEPA is, how it operates, the costs implicated, and if any transfer limits are imposed.

Understanding SEPA transfers

A SEPA transfer is essentially a system of money transfer among European countries. It minimises the complications of handling different regulations by offering a unified mode of transferring euros between banks. The initiative was championed by the European Union to simplify bank transfers denominated in euros.

Countries included in the SEPA zone are all 27 EU member states, and also Iceland, Liechtenstein, Norway, Switzerland, Monaco, San Marino, Andorra, Vatican City State, and the United Kingdom.

How do SEPA transfers work?

There are three forms of SEPA transfers: SEPA Credit Transfer (SCT), SEPA Instant Credit Transfer (SCT Inst), and SEPA Direct Debit (SDD).

SEPA Credit Transfer

SEPA Credit Transfer (SCT) allows for the initiation of euro-denominated transfers to accounts anywhere in the SEPA zone. The process of sending and receiving money using the SCT is rather straightforward. To initiate a payment, the payer first needs to acquire the International Bank Account Number (IBAN) and the Bank Identifier Code (BIC) of the payee.

Once these details are available, the payer can instruct their bank to transfer funds from their account to the account of the payee. The instructions can be given either online or at a bank branch. The addressed bank is then obligated to execute the credit transfer accordingly, charging the payer an agreed-upon fee for the service. Generally, the funds reach the payee’s bank on the same working day, provided that the transfer is initiated within the bank’s established cutoff time.

SEPA Instant Credit Transfer

SEPA Instant Credit Transfer (SCT Inst), a subset of SCT, is designed for urgent, time-critical transfers. It operates around the clock, 365 days a year, facilitating the transfer of funds up to €15,000 within ten seconds. The swift functioning of the SCT Inst is greatly attributed to its direct routing approach. Unlike usual bank transactions that involve multiple financial intermediaries and processing units, the SEPA Instant Credit Transfer goes directly from the sender’s bank to the recipient’s bank. However, to utilise this transfer tool, both the sending and receiving parties’ banks must be enrolled as SEPA Instant members.

SEPA Direct Debit Transfer

SEPA Direct Debit (SDD), on the other hand, enables businesses to collect euro-denominated payments from various accounts across the SEPA countries. This system works by having clients pre-authorise mandates which, in turn, give the corresponding businesses the access they need to debit payments straight from the clients’ accounts.The SDD provides businesses with a hassle-free and efficient process for handling recurring payments.

Recurring payments that can be efficiently managed using the SEPA Direct Debit are many and varied. They typically include monthly utility bills such as electricity, gas or water, rent payments, gym membership fees, subscription-based services like Netflix or Spotify, insurance premium payments, and even loan instalments. Any payment that occurs periodically and is generally for the same amount each time is considered a recurring payment and can be managed through the SDD.

The workings of the SEPA Direct Debit system start with a mandate. A client signs a mandate that legitimises the business’s request to collect payments directly from the client’s account. It also instructs the client’s bank to allow these payments. Consequently, upon reaching the payment due date, the business sends a request to their own bank. This request is then sent to the client’s bank, and the agreed amount is debited from the client’s account and credited to the recipient’s account.

The SEPA Direct Debit system offers two types of transfers:

  • The SEPA Core Direct Debit Transfer, sometimes referred to as the standard SDD scheme, is available to all consumers, including businesses, and public authorities.
  • The SEPA B2B Direct Debit Transfer, as the name suggests, is used exclusively between businesses.

Duration, Costing and New EU Regulation

Typically, a SEPA transfer takes one to two business days to complete depending on the specific type, with SEPA Instant Credit Transfer being the fastest. However, recent regulation in the EU has mandated that all EU member states should enable the possibility of offering instant money transfers to clients, making the transfer process even more efficient and user-friendly.

Regarding costs, SEPA transfer fees may be handled in one of two ways. They can be fully paid by the sender or divided equally between both the sender and recipient. Commercial banks are mainly responsible for calculating these transaction fees, and this is done based on their unique tariff structures. These structures, importantly, are independently decided by each bank, meaning different banks may charge different amounts for the same type of SEPA transfer.

An additional cost to consider comes into play when multiple currencies are involved in the transaction; this is known as the currency conversion fee. If a SEPA transfer is made using a currency other than that of the recipient’s account (e.g. when you send Norwegian krone to Spain), a conversion to the recipient’s currency needs to be done which may attract a fee. This currency conversion fee, like the transaction fee, varies from bank to bank and depends on their specific fee structure.

SEPA Transfer Limits

While the SEPA standard does not set a maximum amount for credit transfers, individual banks can impose their own limits for security reasons. However, the SEPA Instant Credit Transfer has a cap of €100,000 per individual transaction.

Enjoy All the Benefits of SEPA Instant Transfers with CFPS

Enjoy easy and instant money transfers with CFPS anytime, any day, including weekends and holidays. If you live and work in Europe, our SEPA transfers make it easy for you to receive your salaries and payments from across the EU, straight into your linked account and cards. This transfer method is not only free for receivers, but also fast and safe.

To make things even easier for you, we provide instant updates about your transactions. There’s also no restrictions on how much you can transfer with SEPA, perfect for those big transactions. A special perk for our clients is that all these SEPA transfers are completely free if you send money to your CFPS friends. For those who need to move money further afield, we also offer fast and stress-free SWIFT transfers at highly competitive rates.

Posted on March 14, 2024