SWIFT vs SEPA Payments: What Are the Differencies & Benefits

SWIFT and SEPA are facilitating payments within Europe and worldwide. So the benefits of it are far extending. Especially, for merchants dealing without borders, it is a blessing. Also as the payments industry is evolving the existence of SWIFT and SEPA can make your life a lot more easier as a merchant.

What is SEPA?

SEPA stands for the Single Euro Payments Area. It is an initiative of the European Union (EU) aimed at creating a harmonized and standardized payment system across participating European countries. The goal of SEPA is to make cross-border euro payments as easy, efficient, and cost-effective as domestic payments within a single country. SEPA provides payments in Euros with no restriction on the amount and within the Eurozone. In this the recipient’s account number is required to be in the IBAN format.

What is SWIFT?

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is a global leading messaging network that facilitates the secure and standardized exchange of financial information between banks and other financial institutions worldwide. SWIFT does not facilitate funds transfer itself, but rather, it provides a secure and standardized communication platform for financial institutions to exchange messages related to various financial transactions.

So, whether you operate within Europe only or across the world, SWIFT and SEPA can be the true savior! Restricting business due to lack of payment solution is a thing of the past. Payment solutions are wide reaching with the globalisation trends.

How do SWIFT & SEPA work?

SWIFT provides a network that enables financial institutions worldwide. It sends and receives information about financial transactions in a secure, standardised and reliable environment. SWIFT also sells software and services to financial institutions. Also much of it for use on the SWIFTNet network, and ISO 9362. Furthermore, business Identifier Codes (BICs, previously Bank Identifier Codes) are popularly known as “SWIFT codes”.

SEPA is a payment-integration initiative of the European Union for simplification of bank transfers denominated in euro. As of 2019, there were 34 members in SEPA. It consists of the 28 member states of the European Union, the four member states of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland) and two more. Some countries participate in the technical schemes: Andorra, Monaco, San Marino, and Vatican City.

What are the differences between SWIFT and SEPA?

Both SWIFT and SEPA are related to the financial industry but they serve different purposes and operate in different contexts. While SWIFT is a global messaging network facilitating a wide range of financial transactions on a global scale, SEPA is a regional initiative focused on simplifying and harmonizing euro payments within the European Union and certain associated countries.

Institutional Identification:

  • SWIFT: Each financial institution connected to the SWIFT network is identified by a unique Bank Identifier Code (BIC) or SWIFT code.
  • SEPA: It uses International Bank Account Numbers (IBANs) and Bank Identifier Codes (BICs) to identify accounts and banks within the SEPA region.

Nature of Transactions:

  • SWIFT: It is used for various financial transactions beyond payments, including securities trading, treasury operations, and other financial activities.
  • SEPA: It primarily focuses on euro-denominated payments, aiming to streamline and simplify cross-border credit transfers and direct debits within the SEPA area.

Benefits of SWIFT and SEPA

SWIFT:

  • SWIFT payments clearly detail the amounts involved in the transaction. The route it takes between banks, the details of all charges and the nature of the payment. This information allows all parties involved to track the transaction and to understand the costs and time period involved.
  • Because SWIFT details the route of the transaction between banks and the amount of money involved. It provides clear and recognised proof of payment.
  • Due to the consistency of how messages are structured, payment information is easy to decipher regardless of country or language barriers.

SEPA:

  • It allows easy bank transfers to cross the border within Euro areas.
  • The transaction costs are lower and faster.
  • Also, the payment gets completed within the validity period of guarantee and banks are not allowed for making any deductions for the amount transferred.
  • Furthermore, the customers get also clear and simple information on any of the charges and costs. This means there are no hidden charges involved in the local bank.

How can PayFasto help with payment processing?

Processing payments across borders can be troublesome, even more for high-risk merchants. Therefore using a professional solution like PayFasto, payment processing gets a whole lot easier. Get started today!

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