SEPA for Non-EU Financial Institutions

SEPA for Non-EU Financial Institutions

What is SEPA?

SEPA stands for the Single Euro Payments Area. It is an initiative of the European Union that aims to create a single integrated market for electronic payments in euros. The goal of SEPA is to make cross-border euro payments as efficient and cost-effective as domestic payments within a single country.

SEPA allows consumers, businesses, and other economic participants to make and receive payments in euros under the same basic conditions, rights, and obligations, regardless of their location within the SEPA area. The SEPA area consists of the 27 European Union member states, along with Iceland, Liechtenstein, Norway, Switzerland, Monaco, and San Marino.

The key components of SEPA include:

  1. SEPA Credit Transfer (SCT): This enables individuals and businesses to make electronic credit transfers within the SEPA area.
  2. SEPA Direct Debit (SDD): This allows for direct debits to be made within the SEPA area under a common set of rules and standards.
  3. SEPA Cards Framework (SCF): This covers debit and credit card payments and aims to create a harmonized card payment system within the SEPA area.

SEPA aims to simplify cross-border payments, reduce costs, and increase efficiency by standardizing payment instruments and processes across participating countries. It has been implemented to facilitate a more integrated and competitive European payments market.

When does a Non-EU Financial Institution need SEPA?

Under what circumstances should financial institutions outside of Europe consider opening an account within the European Economic Area (EEA)?

Client demand typically serves as the primary catalyst for such decisions, and the following scenarios are commonly encountered:

  1. Non-European bank clients who earn income in the European Union (EU) but prefer to spend or manage their finances in their home countries.
  2. A significant portion of clients from non-European financial institutions are digital nomads, with either their income or expenses closely tied to the European Economic Area (EEA).
  3. Clients of non-European banks involved in online trading within the EEA may find it challenging to organize payment processing for a legal entity situated outside of Europe. Instead, a more streamlined approach involves collecting funds in euros, storing them in a euro account within the EEA, and subsequently transferring them to accounts in their respective national currencies. This method simplifies and reduces the costs associated with transactions, enabling clients to settle with European suppliers efficiently and cost-effectively.

Obtaining Access to SEPA

To participate in SEPA credit transfers, the financial institution needs to connect to the SEPA Credit Transfer scheme. This involves implementing the necessary technical infrastructure to send and receive SCT payments in compliance with SEPA standards. Generally speaking, this will require obtaining either a banking, electronic money institution or payment institution license from an EU member state. Moreover, the EU-licensed financial institution will then have to ensure that the institution’s payment processes and systems comply with SEPA standards. This includes adhering to the ISO 20022 messaging format, which is the standard for electronic data interchange between financial institutions.

Most non-EU financial institutions will choose to collaborate with local banks or payment service providers that are already connected to the SEPA system. This can be a more practical approach, as these partners may already have the necessary infrastructure and compliance measures in place.

Factors to Consider

Assuming the overwhelming majority of non-EU financial institutions will opt to partner with an EU financial institution in lieu of obtaining a new license, there are three critical factors to consider when seeking a partner.

Firstly, it’s crucial to acknowledge the sanctions restrictions affecting citizens of Russia and Belarus. These restrictions are in place and demand careful consideration.

Secondly, the manner in which SEPA payments are executed deserves attention. This involves a choice between direct SEPA details or an indirect approach. For instance, a bank’s client payment can be processed on the client’s behalf, enhancing transparency, clarity, and convenience. Alternatively, it may involve a payment on behalf of the payment institution, originating from a designated “wallet,” with the sender clearly identified in the payment details. This decision hinges on the technical capabilities of the payment provider.

Thirdly, the cost associated with SEPA payments varies widely in the market. Most electronic money institutions or payment institutions assess a commission based on the risk profile and business model of the non-EU financial institution, ranging from 0.50 euros to 40 euros per payment. This significant difference is attributed to the administrative expenses incurred by the EU financial institution during payment processing. Some payments are automated under the supervision of AI systems, while others necessitate additional verification or review by specialists well-versed in AML/sanctions matters. In short, the higher the risk profile and the greater amount of human intervention needed, the greater the commission.


Looking for a SEPA solution? Adam Tracy assists with both EU electronic money institution and payment institution licensing, as well as identifying financial institution partners offering SEPA access.

Be sure to reach out with any questions or comments!

Otherwise, you can book a free consultation 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

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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.