What is SEPA?

SEPA refers to Single Euro Payments Area and consists of the 28 European Union member states, the 4 members of the EFTA (Iceland, Liechtenstein, Norway and Switzerland), Monaco, San Marino, Andorra (from 2016) and Vatican City State. This project, launched in 2002 by the financial institutions, aims to make the payments between the 35 countries as easy and safe as national payments by delivering three pan-European payment instruments: SEPA Credit Transfer, SEPA Direct Debit and SEPA Card Payment.

Why having SEPA?

With a single set of payment instruments, SEPA is an important milestone to the European single market. In a way, it is an extension of the euro banknotes and coins changeover. The introduction of the euro has helped to make cash payments anywhere in the euro area just as easy as at home. But, until recently, it was not so easy to pay for goods or services electronically in another euro area country, for example with your bank debit card – a means of payment favoured by many Europeans today. And when you wanted to transfer money from your home bank account to an account in another euro area country, the payment could take much longer, and sometimes, the beneficiary did not get the full amount.   

Since the 1st February 2014, in the 19 euro area countries, SEPA changed all this. It made all electronic national and cross-border payments in the euro as easy as cash payments. You can make fast and secure transfers between accounts anywhere in the euro area. And it will be possible for the 16 non-euro area countries of the SEPA zone from the 31st October 2016. It is the deadline decided by the European Union to close the transition period to SEPA Credit Transfer and SEPA Direct Debit. 

What are the benefits?

You have certainly discovered yourself: SEPA direct transfer and SEPA direct debit have modified your bank account details. These are now harmonised at European level and use your BIC and IBAN codes to identify respectively your financial institution and your bank account.  The numbers are longer and not so easy to remember but this inconvenience is compensated by the benefits of these new norms of payment.  

SEPA means also a better banking service for all. The pricing is transparent and the costs are reduced. You can easily use direct debits for all your monthly bills (gas, electricity or phone), SEPA guarantees that your euro payments are made promptly and in full. If something goes wrong with your euro payments, banks assume full responsibility. And you have 8 weeks to dispute a bill.

Articles that might interest you

  • The queen of cards. There are many different types and they offer many possibilities other than cashless payment, from differed repayment to additional guarantees on purchases.

  • 3D Secure is an internationally recognised security standard for online payments. The service is limited in Luxembourg to credit cards.

  • If it’s true that when we shop in a store and handover physical cash, the pain of paying finds the act prompts more awareness about spending, and parting with cash may even hurt a bit more than swiping a bank card.