What is SEPA? 

Single Euro Payments Area is a payment integration initiative that enables seamless euro transactions across 36 European countries. Launched in 2008, SEPA standardises euro payments, making it easy to send money across borders. 

The payment system uses standardised instruments such as IBAN (International Bank Account Number) and BIC (Bank Identifier Code). This ensures transactions are processed efficiently and securely across borders. 

This system covers not just EU member states, but also extends to countries like the UK, Switzerland, Norway, and Iceland. For financial institutions and their customers, SEPA simplifies cross-border payments whilst maintaining robust compliance standards, making European financial integration both practical and secure. 

Types of SEPA payments 

SEPA Credit Transfer (SCT) 

SEPA Credit Transfer allows individuals and businesses to send euro payments across participating countries using a standardised format. These transfers typically process within one business day and usually uses only the recipient's IBAN to complete. SCT is ideal for regular payments like salaries, supplier invoices, or personal transfers. 

SEPA Instant Credit Transfer (SCT Inst) 

SEPA Instant Credit Transfer processes payments in 10 seconds, 24/7, 365 days a year. This service enables instant euro transfers up to €100,000, ideal for urgent payments and digital banking. But this instant nature requires enhanced fraud monitoring and compliance checks. 

SEPA Direct Debit (SDD) 

SEPA Direct Debit allows businesses to collect recurring or one-time payments directly from customers' bank accounts across SEPA countries. SDD has two schemes: Core (for consumers and businesses) and B2B (business-to-business only). It requires customer mandates and offers refund rights, making it ideal for subscriptions, utilities, and regular billing. 

SEPA Request-to-Pay (SRTP) 

SEPA Request-to-Pay is a new service that lets businesses ask customers for payments. Customers can then approve and pay through their preferred method. SRTP enhances customer experience while maintaining security and compliance standards. 

How SEPA payments work 

SEPA payments follow a standardised process that ensures consistency and reliability across all participating countries: 

Account identification: Every SEPA payment uses an IBAN to identify the recipient's account. IBANs contain up to 34 alphanumeric characters and include country codes, check digits, and domestic account details. Many transactions also use BIC codes to identify the recipient's bank, though this isn't always required for SEPA payments. 

Payment initiation: Customers initiate payments through their bank's online platform, mobile app, or in-branch services. The payment instruction must include the recipient's IBAN, the amount in euros, and any relevant payment references. 

Processing and clearing: Banks process SEPA payments through standardised clearing mechanisms that ensure consistent formatting and routing. This standardisation enables straight-through processing and reduces manual intervention. 

Settlement: Payments settle through the TARGET2 system (Trans-European Automated Real-time Gross Settlement Express Transfer System) or other approved settlement mechanisms, ensuring funds reach the recipient's account securely. 

How to ensure SEPA compliance 

Modern compliance relies on sophisticated technology solutions that can handle the complexity of cross-border euro payments: 

Advanced payment validation 

Modern verification systems include comprehensive IBAN and BIC validation tools that check account details in real-time. They don’t just check the format of payment instructions. They also verify account details against trusted databases to prevent payment errors and reduce fraud. 

Automated compliance monitoring 

Machine learning algorithms continuously monitor SEPA transactions for compliance risks, including: 

• Sanctions screening against EU and international watchlists 

• Anti-money laundering pattern detection across cross-border payments 

• Unusual transaction velocity or amount patterns that may indicate fraud 

• Verification of customer identity and payment authority 

Bank account verification 

Bank Account Verification ensures that the person behind a bank account is the same individual whose identity has already been verified and that they’re authorized to make payments from that account. 

Real-time fraud detection 

By analysing transaction behaviour, device information, and authentication details, fraud detection systems can identify potentially suspicious payments before they are processed. 

Regulatory reporting tools 

Compliance platform generates the detailed reporting required for SEPA oversight. This includes transaction monitoring reports, suspicious activity reporting, and audit trails that demonstrate compliance with EU payment regulations. 

SEPA FAQ 

Which countries participate in SEPA? 

SEPA includes all 27 EU member states plus the UK, Iceland, Liechtenstein, Norway, Switzerland, Andorra, Monaco, San Marino, and Vatican City. This covers over 500 million people and enables seamless euro payments across diverse European markets. 

What's the difference between IBAN and BIC codes? 

IBAN identifies the specific bank account for a payment, whilst BIC identifies the bank itself. For most SEPA payments within the eurozone, only the IBAN is required. BIC codes are typically needed for payments to countries outside the eurozone or for certain cross-border transactions. 

How long do SEPA payments take to process? 

Standard STC typically complete within one business day, whilst SEPA Instant payments process in seconds. SEPA Direct Debits can take several business days to complete the full cycle including any potential refunds. 

Are there limits on SEPA payment amounts? 

SEPA itself doesn't impose amount limits, but individual banks and payment service providers may set their own limits. Instant payments are currently capped at €100,000 per transaction, whilst standard transfers can handle larger amounts subject to your bank's policies and additional compliance checks.