Single Euro Payments Area (SEPA) Definition and History

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Lucas Downey
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Lucas Downey is the co-founder of MAPsignals.com, and an Investopedia Academy instructor.
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Updated August 27, 2021
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Michael J Boyle
Michael Boyle
Reviewed by Michael J Boyle
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Michael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics.
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What Is a Single Euro Payments Area (SEPA)?

The single euro payments area (SEPA) is a system of transactions created by the European Union (EU). The SEPA harmonizes the way cashless payments are transacted between euro countries. European consumers, businesses, and government agents who make payments by direct debit, instant card transfer, and credit transfers use the SEPA architecture. The SEPA makes it possible for people doing business in these countries to make cashless payments across borders with the same cost and convenience of domestic payments. The single euro payment area is approved and regulated by the European Payment Council (EPC).

Key Takeaways

  • SEPA is a regulatory initiative to facilitate cross-border cashless payments in euro-using countries by harmonizing payment processing across euro-using countries.
  • SEPA allows people doing business across borders in euros to do so with the same ease as domestic transactions within the countries subject to SEPA.
  • SEPA is administered by the European Payments Council across the 27 EU members and 9 other European countries where the euro is commonly used.

Understanding SEPA

The purpose of the SEPA initiative is to make cross-border electronic payments as inexpensive and easy as payments within one country. SEPA makes it possible for retail transactions to directly debit accounts in another member country and for those living, working, or traveling to use accounts in their home country to receive direct deposit payments and pay bills by electronic transfer. This helps promote labor mobility and economic integration among SEPA member countries. Also, the system brings more competition to the payments industry by creating a single market for payment services, thus bringing down prices.

SEPA consists of four payment processing schemes:

  1. The SEPA Credit Transfer Scheme
  2. The SEPA Instant Credit Transfer Scheme
  3. The SEPA Direct Credit Core Scheme
  4. The SEPA Direct Debit Business-to-Business Scheme

These schemes set the rules and implementation guidelines for how member nations regulate electronic euro payment processing amongst themselves.

SEPA currently facilitates over 43 billion transactions per year in 36 member countries. It encompasses the 27 EU member states along with the U.K., Iceland, Norway, Liechtenstein, Switzerland, Andorra, Vatican City, Monaco, and San Marino. The single euro payment area remains an ongoing, collaborative initiative among these parties. SEPA is in the process of harmonizing rules regarding mobile and online payments.

SEPA is managed by the European Payments Council on a collaborative basis with the European Commission, the European Central Bank (ECB), and other European stakeholder groups.

History of the Single Euro Payments Area

In 2007, the European Union passed the Payment Services Directive. The Directive formed the legal basis for the establishment of the SEPA in 2008. By 2014, SEPA was fully implemented for credit and debit payments.

On December 15, 2019, the European Commission extended rules forbidding banks to charge extra cross-border transaction fees to non-euro EU member countries as well. The new regulation dictates that all people in the EU have the right to transfer euros across borders at the same cost as they would pay for a domestic transaction. The new rules also require that consumers are informed of the cost of a currency conversion before they make a payment abroad in a currency different than their home currency.

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  1. Eurpoean Payment Council. "SEPA Payment Scheme Management," Accessd February 12. 2021.

  2. European Payments Council. "Introducing the EPC," Accessed February 12, 2021.

  3. European Payments Council. "Extension of the Geographical Scope of SEPA Schemes in March 2019," Accessed February 12, 2021.

  4. European Payments Council. "Brexit from 1 January 2021 Onwards: Get Ready for the End of the Transition Period," Accessed February 12, 2021.

  5. European Central Bank. "Single Euro Payments Area (SEPA)," Accessed February 12, 2021.

  6. European Commission. "Frequently Asked Questions: Intra-EU Cross-Border Payments." Accessed June 21, 2021.