What Are SEPA Payments?
Making global payments comes with multiple benefits, including improved vendor and supplier relationships, and the ability to negotiate pricing discounts. Identifying which global payments to make can be confusing at first. For example: Did you know that if you or your payee is part of the Single Euro Payments Area (SEPA), you’re qualified to make Global ACH payments?
Understanding SEPA payments is key to taking full advantage of them.
There are 32 countries that participate in SEPA, which is an established home market area for making cross-border Euro bank transactions. Essentially, it simplifies the international money transfer process by making it equivalent to domestic transactions. This means that, even if you’re transferring funds between two banks that are in different SEPA countries, you can enjoy a fast transaction and minimal transfer fee.
Choosing a global payment platform that automates cross-border transactions can improve your bottom line, enhance compliance, and simplify your ability to get funds to your suppliers on time, every time. But not all global payment platforms support SEPA payments. Choosing one that does is vital to comply with International Bank Account Number (IBAN) requirements. IBANs are needed to make a cross-border payment using the SEPA system.
Can I Do a SEPA Direct Debit?
Conducting a SEPA direct debit means the payee is collecting a Euro-denominated payment from your account. The payee receives a request from you to pull funds from your account and then initiates the payment. This type of payment is bank to bank, meaning there is no card network involved. The entire payment process is performed between the payer’s and payee’s banks.
It’s important to understand that a SEPA direct debit is only conducted in Euros. Even if both banks involved in the transaction are not Euro-based, a currency exchange will take place, which may come with a fee. The payer and payee will decide who pays for the conversion fee or if it will be split. The payee must have your IBAN to collect a SEPA payment.
A SEPA direct debit transaction is not a form of instant payment. Generally, it will take a minimum of two interbank working days to process; this applies if it is conducted under the business-to-business (B2B) SEPA direct debit scheme. When performed under the core scheme, it takes a minimum of three interbank working days.
Under the SEPA core direct debit scheme, a payee will submit the collection request at least five interbank working days before your payment is due and at least two days in advance for any subsequent payment collections. Under the SEPA B2B direct debit scheme, the payment request only has to be submitted one interbank working day before the payment due date. With this in mind, if you are wanting to make a cross-border SEPA direct debit payment in the quickest manner possible, the SEPA B2B direct debit scheme provides the fastest avenue.
Is an IBAN Number Necessary to Send a SEPA Payment?
In August 2014, SEPA guidelines were updated to indicate that only IBANs were needed to conduct a national SEPA payment. In February 2016, the same update was applied to cross-border SEPA payments.
The SEPA IBAN-only rule simplifies cross-border payments. Because there is no need for a bank identifier code, this reduces processing errors and results in higher rates of successful international money transfers.
Contact your global payment services provider or bank to get your IBAN. You can also log into your online banking portal to view it. Your IBAN will have up to 34 alphanumeric characters, which represent:
- Country identification code;
- Bank account number;
- Bank identifier;
- Check digits.
In addition to your IBAN, you must have the payee’s IBAN. Contact the payee or the bank to which you are sending the payment to identify this number. As you can imagine, when you’re making mass global payments, it can be incredibly time-consuming locating each payees’ IBAN. A global payments automation platform can automate the process for you.
What Are the Benefits of SEPA Payments?
Probably the most notable aspect of the SEPA system is the ability to make Global ACH payments. This payment method allows you to make cross-border payments in a timely manner without the high transaction fee that is often associated with international wire transfers. It also eliminates the hassle of using paper checks.
With a global payments platform that automates ACH payments, you can achieve optimal tracking. This gives you a bird’s eye view of each payment, including payment status updates, invoice due dates, and failed payments. You can make affiliate payments with the push of a button or have them automated to ensure each affiliate is paid on time.
Can I Use SEPA Payments for Currency Transfers?
The SEPA system gives you a single method for processing both domestic and cross-border payments. This is not always a good thing if you are not making all payments in Euros. In fact, the only time you would want to make a SEPA payment is if you are paying a supplier in Euros. When transfers are made using a currency other than the Euro, a currency conversion will take place. The related conversion fees can quickly impact your bottom line. However, paying suppliers who prefer payments in Euro is an excellent way to take advantage of the SEPA system, improve vendor relationships, negotiate better pricing terms, and simplify the payment process.
To ensure your profit margins are not hindered by conversion fees, it’s imperative to choose a global payments platform that offers low currency conversion fees. In addition, you should opt for one that makes it simple for payees to provide their value-added tax (VAT) ID numbers during onboarding. Furthermore, this platform should automate the collection of pertinent payee information, like national ID and tax certificates, which is essential to achieving compliance with anti-money laundering regulations.
If you want to make SEPA payments, your existing systems, as well as your current level of payment processing automation, will impact your ability. And if you are currently using online banking to make payments instead of using batch data, you will need to upgrade. Your bank contact details, as well as your trade partners’, will need to be converted to the IBAN format. A global payment services provider that supports SEPA payments can perform necessary upgrades and convert bank contact numbers for you, which streamlines the entire international money transfer process.