Understanding what the SEPA banking is

The main goal of this measure is to offer users of the European financial system more opportunities for carrying out transactions within the region without geographical barriers or borders.

The initiation of this policy dates back to 2008, but it has undergone various modifications and updates based on the economic and financial needs at both national and supranational levels.

How does SEPA work?

In short, SEPA enables euro transfers between accounts located in any country within the eurozone using simplified procedures that are the same for all users of the system. This means that any individual, business or organization residing in a SEPA area can send and receive funds with greater ease and convenience compared to before.

Among the main financial instruments that SEPA includes, the following stand out:

1. Euro bank transfers (SEPA Credit Transfer – SCT).

2. Euro direct debit orders (SEPA Direct Debit – SDD).

3. Card payments.

These services are harmonized under the umbrella of SEPA, which means efficiency and greater transparency in the movement of payments between participating countries.

What countries are part of SEPA?

Although the eurozone is often referred to as synonymous with the European Union, it's important to highlight that not all EU member countries share a single currency. In this regard, the current configuration of SEPA includes states belonging to both the EU and the European Economic Area (EEA).

The countries that are part of SEPA are:

• The 27 member states of the European Union.

• Iceland, Liechtenstein, and Norway (EEA member states).

• Andorra, Monaco, San Marino, Switzerland, and the Vatican City.

In addition, other territories associated with these countries are also considered within the SEPA space, such as Gibraltar and the Canary Islands, among others.

Benefits of SEPA banking for individuals and businesses

The SEPA system offers various benefits for both individual and corporate users. Here are some of them:

1. Greater efficiency in transfers and direct debits: By unifying and simplifying procedures related to euro payments, the time required to complete these transactions is progressively reduced. This generates greater commercial flows and facilitates economic transactions in the region.

2. Lower fees for international transfers: With the implementation of SEPA, the costs associated with cross-border euro transfers are significantly reduced. Thus, the fees applied to these operations are on par with domestic transfers of each country.

3. Standardized bank accounts and IBAN numbers: Operating under a uniform protocol, all users within the SEPA zone must have the same type of banking information (IBAN code). This measure allows them to make their payments or receive funds without needing to provide additional information such as SWIFT/BIC codes or other details about their financial institution.

4. Increased protection and security for users: Regulations dictated by the EU implement control and supervision measures that guarantee the proper functioning of the financial system in the eurozone according to universal standards.

Disadvantages of SEPA banking

Despite the benefits mentioned, there are also some limitations to the SEPA system:

1. Limited to eurozone countries: While the list of countries included in the SEPA space is extensive, there are still many regions that are not part of this group. As a result, operations involving financial entities outside the SEPA area continue to require more complex processes.

2. Differences between local procedures and SEPA regulations: Although the system aims to simplify and standardize financial operations in euros, there are still significant differences between the regulations of each country. This can generate additional costs for certain transactions and affect the expected standardization.

In summary, SEPA banking is a set of tools and processes designed to facilitate and speed up economic transactions within the eurozone. Thanks to this initiative, individuals and businesses can enjoy better conditions for their transfers and euro payments, in addition to having security and protection guaranteed by the relevant regulatory bodies.