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What Exactly are SEPA Payments and How Do You Implement Them?

Want to start making cashless euro-related transactions? Go through this article to get proper guidance through the procedure.

As the world continues to grow and evolve with time, the era of printed cash is seemingly coming to an end. With this change comes several ways of making payments through other means, especially if the transaction is international. Enter the Single Euro Payment Area (SEPA) which adds harmony to all transactions made across Europe.

What is SEPA?

Launched in 1999, The Single Euro Payment Area (SEPA) is a program that allows you to make international payments in an easy and cost-friendly manner. With 35 countries across Europe and other regions taking part in this initiative for making international euro bank transactions, SEPA gets the job done with simplicity. This falls in the payment services market where the addition of such programs makes the market competitive and in the process, makes it a lot cheaper and faster for customers to utilize.

The Setup Process

Similar to how the ACH transfer is set up in the United States, this overview summarizes all that you need to know in order to start making transactions with SEPA as the medium and learn about SEPA as a whole. So how exactly do you set this up? Below, you will find all the steps you need to follow in order to start making international payments with SEPA.

1. Provide the Creditors’ Bank Information

The process for making cross-border transactions is as simple as making transactions in the domestic market. The first step is to provide the payment amount involved to either the creditor or the payer where you will be on the receiving end of the procedure. It is also important to note that the bank accounts used must be in SEPA countries or be of SEPA origin.

 2. Provide the Mandate

In order for the sides to collect payments from each other, the European Payment Council (EPI) has made the payment contract mandatory in its authorization agreement. There are several payment schemes with Sepa Direct Debit (SDD), SEPA Credit Transfer, and Sepa Instant Credit Transfer.

SEPA Direct Debit (SDD)

The SDD is commonly used for making payments for clearing bills or signing up for a subscription. As with all SEPA payment schemes, this too needs to be done with the euro currency and from one bank to another.

The mandate is what specifies all details about the transaction so that the customer can understand the terms and take action accordingly.

There are two types of SDDs: the Core Direct Debit, which is used between producers and consumers, and the B2B Direct Debit, which is used for collection from businesses. Here, the merchants are in control of the entire transaction from issuing the mandate to notifying customers when the payments are due. This is the key difference between the direct debit and credit transfer schemes.

3. Setup Account for SEPA Direct Debit

As mentioned earlier, as SEPA payments are bank to bank, an account must be created for all the transactions to go through. To take part in these transactions, the merchant must make their customer sign the SDD mandate.

This will contain details of the merchant and the method of payment used as well as strong identity verifications. Once this process is done, the document is then submitted to the associated banks so that accounts are verified and the transactions may begin to take place.

4. Submission of Payments

We have discussed earlier that the merchant controls the entire transaction. In doing so, they are required to give a pre-notice to the customer that includes the time of collection and the total payment required with or without adjustments.

The unique mandate reference is also to be mentioned. This allows debtors or customers to make sure that they have sufficient funds to pay the merchant. Note that a 14-day prior notice is a usual case, but merchants can communicate with their customers to change this.

Legalities, Rulebooks & Documentation

Since the year 2014, the International Bank Account Number (IBANs) are necessary parts of the SEPA nation and cross-border payments. The IBANS make bank identification codes redundant and represent four key things: the country identification code, the bank account number, a bank identifier, and check digits. Both the merchant and the payees’ IBANs are required for the transaction to take place.

With digital marketing and other variables impacting the size and number of cross-border payments being made, the (EPC) publishes a rulebook that is of use to both parties. These rulebooks consist of criteria required to be met in order to accept SEPA payments. Furthermore, the rulebook also provides guidance for refunds, report of fraud trends, clarification on customer reports, and information on managing payment messaging.

The Benefits of SEPA

As with all things, there must be incentives to take SEPA as the option for cross-border transactions. Firstly, SDD cuts cost for producers and make the cash inflow more predictable. Furthermore, there is a low risk for them with prior notices being sent to their customers. Banks also benefit from this as they are also able to lower their costs and achieve high efficiency (with automated systems) at the same time.

Banks are less likely to be held accountable for mishaps as well since they don’t manage the payment process. Not only does SEPA allow cross-border transactions to be made, but it does it in a faster, safer, and simpler fashion.


SEPA is a payment instrument that is becoming more and more widely used with the EU being one of the center parts of the world economy. For small businesses or startups, SEPA is an effective method for collecting payment, especially if you provide services in the form of subscriptions. We hope that this guide has clarified all confusion you may have had on SEPA. We wish you good luck in your endeavors.


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