SEPA - Single Euro Payments Area

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A new era for European payments

The Single Euro Payments Area (SEPA) is the largest payments initiative ever undertaken in European Union (EU), currently covering the 28 EU Member States (incl. several territories belonging to these countries) plus Iceland, Norway, Liechtenstein, Switzerland, Monaco and San Marino. The initiative is driven by the European Payments Council and the aim of SEPA is to harmonise electronic euro payments in Europe and thereby to enable companies, public authorities and individuals to issue and receive payments within countries of the SEPA zone faster, safer and in a more efficient way.  This is achieved upon an agreement on a common set of data (ISO 20022 XML message standard), maximum value days, transparency of charged fees etc. 

There are four different euro payment schemes, SEPA Credit Transfer (SCT), SEPA Direct Debit Core (SDD Core), SEPA Direct Debit Business-to-Business (SDD B2B) and SEPA Instant Credit Transfer (Inst) scheme. 

SEPA Credit Transfer (SCT) 

SCT is an electronic payment from one bank account to another. SCTs can be one-off or recurring payments (for example, a standing order to pay the monthly rent of an apartment or to regularly transfer money to a savings account). Likewise, single or bulk payments (such as one debit from the payer’s account with multiple credits to different beneficiaries) are supported. The deadline for SCT in the euro area was 1st of February, 2014 and for non-euro area the 31st of October, 2016. As of these dates, the existing national euro credit transfer schemes have been replaced by SCT.

SEPA Direct Debit (SDD) 

SDD consists of two services- CORE and B2B.  Main target market for Core scheme is retail and private customers, whereas B2B scheme is targeting direct debits between corporates. The main difference between the two services is primarily related to debtor's refund rights, technically the two services are based on the same formats. The deadline for the two SDD schemes in the euro area was 1st of February, 2014 and for non-euro area the 31st of October, 2016. As of these dates, the existing national euro direct debit schemes have been replaced by SDD.

SEPA Instant Credit Transfer (Inst)

The Instant Credit Transfer (Inst) scheme which officially is launched in November 2017 enables euro credit transfers with the funds made available on the account in less than ten seconds at any time and in an area that will progressively span over the 34 SEPA countries. All payment service providers (PSP) are invited to adhere to the scheme as soon as possible, however this is not a compulsory scheme.

Benefits with SEPA:

  • Transparency into pricing and fees for payments. 
  • Harmonized and simplified payment processes are faster and result in cost reductions. 
  • Businesses can reduce the number of bank accounts necessary to do business across Europe and thereby simplify their liquidity management.
  • Easier centralization of payment flows.                                                    

SEPA checklist:

  • Analyze your cash flow and payment practices and examine if you are using SEPA payment option where it is possible.
  • Ensure that you have and include your International Bank Account Number (IBAN) and BIC (not compulsory by the scheme, but recommended by Nordea) on all of your company's invoices and other documentation that state your bank requisites.
  • Verify that all invoices issued by your business partners contain IBAN and BIC.
  • For file payments, check that your company's ERP systems are compatible with ISO 20022 XML format (version 3).

Your next steps 

Nordea can provide you with deep expertise on SEPA, explaining how your company can further optimize your payment flows and processes and guide you through implementation of these. For more information, please contact your local advisor in Nordea.