Understanding SEPA

Understanding SEPA

What is SEPA?

The Single Euro Payments Area, or SEPA, has emerged as a crucial framework transforming the way businesses and individuals execute euro-denominated transactions across Europe. Familiarity with SEPA is now imperative, representing not merely a choice but a fundamental requirement for those involved in cross-border payments within the Eurozone.

The SEPA Framework

SEPA represents a European Union initiative aimed at establishing a unified and standardized payments framework across participating European countries. SEPA facilitates smooth electronic money transfers in euros, simplifying and cost-effectively enabling individuals, businesses, and banks to engage in cross-border transactions within the SEPA region.

This integrated system encompasses credit transfers, direct debits, card transactions, and cashless payments, fostering financial integration and streamlining cross-border transactions. SEPA empowers businesses to streamline financial transactions, enhance efficiency, and alleviate the intricacies associated with international money transfers, ultimately benefiting both businesses and consumers throughout Europe.

As of January 2023, there are 36 countries within the SEPA region. While the majority of these nations are part of the European Union and European Economic Area, the region also encompasses certain members of the European Free Trade Association, as well as some non-EU and non-euro countries. Notably, the UK’s membership in SEPA underwent substantial changes due to Brexit. Nevertheless, the UK and the EU reached a Brexit trade deal that incorporated arrangements for the UK’s ongoing involvement in SEPA. Consequently, UK banks and financial institutions retained the ability to provide SEPA services to their customers. To ensure the seamless flow of cross-border payments, the UK adhered to the rules of the SEPA scheme, enabling businesses and individuals in the UK to persist in enjoying the streamlined euro transactions facilitated by SEPA.

All SEPA payments are denominated in EUR.

SEPA Payment Mechanics

SEPA payments are know for their swiftness, typically settling within one business day, and their cost-effectiveness, featuring low or no fees for both domestic payments and cross-border transactions within the SEPA area. The mechanics of a SEPA transfer as follows:

  1. Initiation: The sender, also referred to as the payer, commences the SEPA transfer through their bank, utilizing either online or in-person channels. They furnish essential details, including the recipient’s IBAN (International Bank Account Number), name, payment description, and the designated amount for transfer.
  2. Authorization: The payer’s bank scrutinizes the payment request, ensuring adequate funds in the payer’s account. Once authorized, the specified amount is deducted from the payer’s account.
  3. Transmission: The payer’s bank dispatches the payment instruction to the Clearing House, serving as an intermediary tasked with processing SEPA transactions.
  4. Clearing: The Clearing House handles the payment processing and forwards it to the recipient’s bank based on the provided IBAN.
  5. Receiving Bank: The recipient’s bank receives the payment instruction and credits the funds to the recipient’s account.
  6. Notification: Both the sender and the recipient receive notifications from their respective banks, confirming the successful transfer of funds.
  7. Completion: With the funds now transferred, the recipient gains access to and can utilize the funds in their account.

Although SEPA Instant payments are processed in under 10 seconds, a standard SEPA transfer generally requires one business day for completion. Nevertheless, it’s crucial to recognize that the precise timing of standard SEPA transfers can vary based on several factors including cut-off times, bank processing times, holidays and weekends and inaccurate KYC information.

SEPA Payment Schemes

Not all SEPA payments are the same. On a biennial basis, the European Payments Council revises or adopts payment schemes that aim to maximize speed and cost efficiency based on the nature of the SEPA payment. As of today, there are four SEPA Payment Processing Schemes:

SEPA Credit Transfer Scheme (SCT):
SEPA credit transfers serve various purposes, including salary payments, bill settlements, and other forms of money transfers. They provide a cost-effective and standardized method for both cross-border and domestic euro payments, streamlining financial transactions for the convenience of businesses and individuals alike.

SEPA Instant Credit Transfer Scheme (SCT Inst):
SEPA Instant Credit Transfer (SCT Inst) represents an advanced iteration of the SEPA Credit Transfer (SCT) scheme. Facilitating real-time payments between participating banks within the SEPA region, SCT Inst ensures that funds are transferred and made available in the recipient’s account within seconds. This swift and convenient payment solution has garnered significant adoption, with over 60% of European payment service providers joining the SEPA Instant scheme. Particularly useful for time-sensitive transactions, SCT Inst enhances the speed and efficiency of euro payments, contributing to a more responsive and interconnected European payments landscape.

SEPA Direct Debit Transfer Scheme (SDD Core):
SEPA Direct Debit Transfer (SDD Core) is a standardized payment scheme designed for the direct collection of funds from a payer’s bank account. It serves various purposes, including regular bill payments, subscriptions, and dues. By providing a uniform method for euro-denominated direct debit transactions across European countries, SDD Core automates transactions, reducing administrative costs and errors for both payers and billers. This standardized approach streamlines direct debit processes, ensuring efficient and consistent payment collections throughout Europe.

SEPA Direct Debit Business-to-Business Scheme (SDD B2B):
SEPA Direct Debit Business-to-Business (SDD B2B) is a specialized payment scheme tailored for business-to-business transactions. Particularly valuable for companies engaged in trade or recurring business transactions with specific payment terms and flexibility requirements, SDD B2B enhances the efficiency and reliability of euro-denominated B2B payments within the SEPA region.

Access to SEPA

For individuals and business outside of the EEA, SEPA is not available without a partnership with a financial institution. Payment service providers such as MultiPass and GuruPay, among many others, can offer non-EEA businesses and individuals with SEPA access. The key when evaluating a payment service provider for SEPA payments is to ensure they offer multi-currency accounts, as well as ancillary payment rails such as Faster Payments, Swift, etc.


SEPA can be a massively beneficial payment rail within the EEA, which non-EEA individuals and businesses can avail themselves to with the proper guidance.

Adam Tracy offers comprehensive payment systems architecture consulting and onboarding with countless financial isntitutions. Be sure to reach out should you have any questions.

Otherwise, you can book a meeting here.

About Adam Tracy

Adam Tracy is a payments expert and entrepreneur who specializes in payment systems, blockchain technology, digital currencies, and other emerging technologies. He is the founder of Blockrunner, LLC that provides consulting services to clients in the blockchain, payments and cryptocurrency arenas.

Tracy has been involved in the payments industry as an attorney, consultant and entrepreneur since 2005, while he was become an expert in blockchain and cryptocurrency since its advent in 2013. Tracy has worked with a wide range of clients, including startups, established businesses, and investor – both in the United States and worldwide. He has advised clients on a wide range of compliance, legal and operational issues related to payment transfer systems, crypto token generation and architecture, cryptocurrency exchanges, regulatory licensing, smart contracts, and other blockchain applications.

In addition to his consulting work, Tracy has founded several companies in the payments, blockchain and cryptocurrency space, including a digital asset hedge fund, licensed electronic money institution and a blockchain-based tokenization platform. He is also a proponent of decentralized finance (DeFi) and has been involved in various DeFi projects.

Tracy is also a frequent speaker and writer on blockchain and cryptocurrency topics. He has been featured in a wide range of publications, including Forbes, Hollywood Reporters, CNBC, Reuters, CoinDesk, and Bitcoin.com.

Find Adam: https://linktr.ee/adamtracy

Blockrunner, LLC., is a financial services match-making marketplace and consulting company. We are not a bank, FI/NBFI, Payment Service Provider, deposit taking institution, trust, or money services business of any kind. We are not regulated by any financial regulator. Banking, Payment, Processing, and Licensing services are provided by our participating members. This website is for informational purposes only and does not constitute legal advice. If you need legal advice, please consult a licensed attorney in your jurisdiction.