Friday, September 23, 2016

SEPA Payments - Some information

Below info is consolidated from

What  is SEPA?

SEPA, or the Single Euro Payments Area, is a payment system that simplifies bank transfers denominated in EUR. SEPA is an initiative by the European Union. As of January 2016 SEPA consists of the 28 member states of the EU, Switzerland, Iceland, Norway, Liechtenstein, Monaco and San Marino. In 2016 Andorra will also join.
SEPA payments are either free or very cheap, which is great for intra-European business. In countries where the euro is not the national currency many banks still allow people to hold bank accounts denominated in euro.
SEPA introduced a lot of harmonization on 3 domains:
·         Credit transfers
·         Direct Debits
·         Card payments

The harmonization was done on the standards themselves (everyone now talks XML ISO20022), pricing aspect, and speed of processing and the rules of behind each of 3 domains. You can find a lot of information on the EPC websites.

SEPA, together with PSD (Payment Services Directive) and other innovations from the past decade,  has allowed fintech startups to come up with innovative solutions.

Most of the principles of SEPA could be carried over to a successor system:

·         use of IBAN (with or without BIC)
·         use of XML data formats
·         fees for cross-border payments equal to national payments (in the same currency)
·         schemes for credit transfer and direct debit

What  is SEPA Direct Debit (SDD)?
The Single Euro Payments Area (SEPA) Direct Debit is a payment arrangement where the debtor/payer authorizes a creditor to collect payments from his or her bank account through a signed mandate. The SEPA Direct Debit allows users to pay for goods and services through bank transfers as long as they come from the 34 SEPA member countries in the European Union. 

SEPA is a payment method supported by Paymentwall (company)

Can I open a bank account for corporation at SEPA bank from Japan?

You need a bank with an activity in the SEPA zone. You can ask your Japanese bank to open it via the local branch in one of the Sepa countries. All Japanse banks I know with an activity in Brussels are already doing this.

What are the differences between ACH, SEPA and RTGS?

ACH stands for Automated Clearing House. It is an electronic network for bank transactions. The term was originally used for the US clearing network(e-check). All ACH payments in the US are done by one of the two ACH: either the EPN or FedACH. ACH rules are governed by NACHA. Its now being used for other country's clearing house as well. To put in the context of India, NEFT is our ACH.

RTGS is a settlement technique; it is used by various central banks around the world to do large payment settlement of their member banks. Best way to describe RTGS is as a real-time settlement system for banks for large value payments. Banks hold Nostro accounts with the central banks and all large payments are settled on a gross basis by the central bank. It is also the mechanism via which deferred net settlement is done on a periodic basis. 
The primary difference between ACH/NEFT and RTGS is that payment instructions in ACH are settled in batches whereas payment instructions in RTGS are settled individually. RTGS is gross settlement whereas NEFT/ACH is net settlement. 

SEPA is the European equivalent of bank transfer for all countries Euro. It is implemented in all the countries where Euro is and a couple of other participating countries. So the payment is a single payment instruction/set regardless if the payment is being made within the Euro country or to another (cross-border) Euro country. It is not real-time yet, but eventually would be heading there.
SEPA stands for Single Euro Payments Area. It really is ACH for European countries under EURO zone. All EURO countries participate in clearing network like domestic market. Under SEPA, there's no difference between transactions within or between EURO countries.

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