What is SEPA and SWIFT?
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- swift network
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- International payment system
- Money Transfer
- Single Europe Payments Area
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What is SEPA and SWIFT?
SEPA and SWIFT are the most widely used international payment systems in the world. They aim to make money transfers seamless, secure, and reliable to individuals and businesses and improve the integrity of an ever-changing system of payments. You might be a little unfamiliar with financial terminology and wonder what these transfers are.
Now, let’s get started.
What is SEPA?
SEPA stands for Single Europe Payments Area. Almost all banks implemented it within the EU and Schengen Areas after 2008. This payment transfer allows people and businesses to send money in euros across Europe as quickly as they would in their country of origin.
Banks must credit the entire amount to the recipient’s account when a payment is made in SEPA between European organizations. SEPA also allows for fast payments. The transaction can be completed in less than one day after processing the document. SEPA will enable banks to make international payments between individuals and businesses in Europe. The European Payment Council coordinated its implementation. The introduction of SEPA meant that there were no differences in payments in euros between domestic and international.
34 European countries are currently making SEPA payments. This includes the European Free Trade Association, Norway, Iceland, Liechtenstein, and Switzerland, all of which are members of the Schengen Area. They all share the same goal: to harmonize electronic euro payments and provide simplicity, cost-effectiveness, and convenience for consumers and businesses.
How Does SEPA Work?
SEPA transactions are processed on the same terms and conditions as local transactions. This is unlike SWIFT transfers. SEPA transfers are usually processed in a matter of days. However, the SCT Inst scheme is quickly growing. SEPA transfers can be processed in just 10 seconds or less.
You only need to have a Euro account and the IBAN of the recipient’s bank account to send a SEPA Transfer. Conversion rates are not necessary. You can also forget about the transfer commission. Payments will be processed in 10 seconds if both your banks’ institutions are connected to SCT Inst automatically.
What is SWIFT?
SWIFT stands for Society for Worldwide InterBank Financial Telecommunications and is the most secure global messaging system that banks and other financial institutions use to communicate. It is used to transmit information like amount, IBAN, and bank code, and financial messages worldwide about payments and transactions. SWIFT is known for its strong security standards and high protection of transactions.
Every bank that uses the SWIFT payment system has its own unique code. The money is sent to an individual’s or legal entity directly when it is transferred. No matter the currency used to send the payment, the sender can choose the currency they wish to use. The money transfer between bank accounts is quick and accurate since there are over 11,000 financial institutions (mostly banks) in the SWIFT network. International payments made using the SWIFT network have the greatest advantage: they are available anywhere in the world. The SWIFT system also uses correspondent banks that, while not directly connected, work with it.
How Does SWIFT Work?
You will need the IBAN or BIC of the recipient party for SWIFT money transfer. These are the account numbers and codes of the SWIFT bank. The transfer can be sent in any currency and converted automatically. You have complete control over the rates of conversion. For example, if you send money from Poland to Canada via SWIFT transfers, you can select Moldovan Leu as your currency. The transfer will either be converted at reception or converted to Canadian dollars before sending. It is possible to send the money in US dollars, but it will be converted twice (and you will be charged for conversion).
SWIFT transfers can be simple but may take a few days to process. Depending on your country, the average commission you would have to pay for the transfer could be $50.
What Are the Similarities Between SEPA and SWIFT Transfers?
SEPA and SWIFT payments look very similar from the perspective of the EU’s average user. Both require an account to send money from, and almost all essential information of the recipient party must be provided. They are both secure regardless of whether you send them with your smartphone app or in the bank.
These differences can arise when one sends an international transfer to non-EU countries. In this case, the process would work the same as for other non-EU countries.
What’s the Difference Between SEPA and SWIFT Payment?
The SEPA payment system, which EU legislators created, can only be used within Europe. Money cannot be sent outside the SEPA region in euros. The recipient’s account number must also be in IBAN format, and the fees should be split between the beneficiary and the sender. The document processing in SEPA payments takes less than one day, making the whole process very quick.
The SWIFT system allows money transfers to be made internationally because it works globally. SWIFT payments can be made to any bank in any country supporting the SWIFT service. You can execute SWIFT payments in all currencies. The beneficiary and the recipient can decide whether the charges will be paid jointly or individually. SWIFT payments can include both IBANs and account numbers. The value date for a SWIFT transaction depends on the currency used and where it is sent.
What is the Cost of SEPA and SWIFT?
SEPA transfers are free, and banks pay any costs as part of their monthly service fees. The monthly payment is only 50 cents. SWIFT can charge the payer anywhere from 3 to 4 percent of the total amount. It also includes currency conversions and administrative costs. It can cost up to 30 EUR per transfer in real money. The charges vary from bank to bank and depend on which currency. Sometimes, the sender bank, as well as the receiver bank, might charge the recipient. Both receivers and senders need to be aware of the fees that they may incur.
If you want to make payment within Europe, SEPA is best for you. But if you want to transfer money internationally, SWIFT will be a more convenient option. So, choose the one that works best for you.