Difference Between SEPA And SWIFT Transfers

International bank payments are usually associated with fairly high fees and the need to enter detailed information about the recipient of the funds. The pan-European SEPA project is a funds transfer system designed to relieve users of most of the inconvenience. In this article, you will learn about the advantages of SEPA, as well as its differences from SWIFT. You can track currency exchange rates using for a more favorable outcome.

What Is SEPA?

SEPA (Single Euro Payments Area) is a payment system that emerged as a project thanks to a joint initiative of European banking companies. They advocated optimizing money transfers between EU states.

The project found an active response both among the participants of the European Commission and the Central Bank of the European Union. The final version of the directive and the operating rules of the new system were enshrined in Directive No. 2007/64/EC of November 13, 2017.

For the first time, residents of European countries tried the innovation in practice in 2008. As of June 2023, SEPA transfers are available in 36 countries and territories.

SEPA users have the opportunity to:

  1. Transfer funds between current accounts of different owners, for example, in EUR or USD;
  2. Make payments by bank cards;
  3. Pay for services and invoices.

A SEPA bank transfer can be made by a resident of any EU country, as well as a non-resident who has a current account in a European bank. In addition, you can use SEPA for cryptocurrency transactions, including Bitcoin. One of the largest crypto exchanges, Binance, also partners with SEPA.

What Are The Differences Between SEPA And SWIFT?

The SWIFT payment system remains popular for international transfers. This payment system is used by people around the world of different social classes, including clients and management of Bank of America, Aflac, and JPMorgan Chase. SEPA is the most popular option for the European Economic Community.

The main differences between the two systems:

  • SWIFT operates throughout the world, SEPA – in European countries;
  • within SWIFT you can make transfers in different currencies, but within SEPA – only in euros;
  • the duration of SWIFT transfers is usually up to a week, in the case of SEPA they can be instant or completed within 24 hours;
  • the SWIFT commission in euro terms is usually €10–50, the SEPA tariff is €0–5.

The main difference between SWIFT and SEPA is the need to provide detailed information about the recipient of funds. For SEPA transfer you only need IBAN and BIC.

Types of SEPA Money Transfers

Direct debit and credit transfers are available to users. Let’s look at them in more detail:

  1. SEPA Direct Debit. A direct debit is a recurring automatic payment initiated by a merchant to receive payment in euros. If necessary, other currencies will be converted at the current rate, but this may incur additional costs. Direct debit also helps make payments between companies.
  2. SEPA Credit Transfer. A credit transfer is a one-time payment for goods and services. Typically, the receiving bank receives the transfer on the same day if the transaction was initiated before the financial institution’s settlement time expired. Conversion into currencies of countries located in the SEPA zone is possible, including the UK, Poland, Norway, and others. For states outside the community, the transaction is treated as a standard international transfer.

What Is The Role of IBAN In SEPA?

IBAN is an identifier that is required to send and receive international payments using SEPA. The length of the IBAN number varies in different countries, but in any case, the number of characters (letters and numbers) does not exceed 34. The first two characters indicate the bank’s affiliation with a particular country.

If the client makes a mistake in specifying the details, then he has to pay an increased commission. The bank also takes the reward if the client who submitted the application does not have enough funds in his account. Using an IBAN simplifies the transaction process, reduces costs, and guarantees the security of the transfer.

What Is SEPA Instant?

SEPA Instant is a new SEPA transfer format that was launched in the European Union in November 2017. This service exists thanks to the joint efforts of all SEPA participating countries.

Key benefits of SEPA Instant:

  1. More applications to ensure quick and convenient use;
  2. Transfers take no more than 10 seconds;
  3. Transfers are available through payment services such as Paysera;
  4. Tariffs for using the SEPA Instant service are cheaper than for regular SEPA transfers;

The main difference between SEPA Instant and regular SEPA transfers is the time it takes to transfer funds. If using regular SEPA transfers, the time to receive money can take up to 1-3 business days, then when using SEPA Instant, money is transferred instantly.

How to Use SEPA Instant?

To use the SEPA Instant service, you must select one of the payment systems that support this service. It is also necessary to configure the SEPA transfer format to Europe. To send funds through the SEPA Instant service, you must complete a payment transaction through the direct debiting (b2b) payment system.

Tips for users:

  1. Not all payment services support SEPA Instant, so before transferring money you need to make sure that the service supports this format;
  2. If you want to receive money within the SEPA transfer system but are not sure about the possibility of using SEPA Instant, we strongly recommend using the regular SEPA transfer format;
  3. When using the SEPA Instant service, it is possible to save money, but do not forget that this is only possible with a large number of transfers;
  4. Some payment services may charge a fee for using SEPA Instant, so you should check for such fees before sending money;

Unlike regular SEPA transfers, which can only be used within the European Union, SEPA Instant can be used in a wider international context.

Wrapping It Up

SEPA and SEPA Instant allow you to make transfers with maximum speed and efficiency without the participation of additional payment systems, which provides improved performance compared to other solutions. You can use Rates to track currency exchange rates at Ukrainian financial institutions. You can use the service around the clock, no matter where you are – in Los Angeles or Chicago.

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