Difference between SEPA and SWIFT
SEPA and SWIFT are often mentioned in cross-border payments. You have probably heard about them while sending money through traditional banks or via money transfer service providers. But have you thought about why individuals and businesses use SWIFT and SEPA transfers? Find out their meanings and clear differences in this article on AskWallet.
What is SEPA Transfer and SWIFT Payment?
SEPA means "Single Euro Payments Area." It was set up to have a single market for Europeans to make cross border payments in euros within the European Union (EU). SEPA payments are usually done for free between member states.
On the other hand, SWIFT refers to the Society for Worldwide Interbank Financial Telecommunication. It links over 11,000 banks, corporations, and financial institutions in over 200 countries and territories. It is a cooperative that gives banks access to a secure network that allows them to send money safely around the world.
Difference Between SWIFT and SEPA
SWIFT and SEPA are not one and the same. These are the areas in which they are different:
- SEPA payments can only be made between European Economic Area (EEA) member countries, as well as the UK, whereas SWIFT transfers can be made between any country in the world.
- SWIFT is used by almost all banks and financial organisations in the world. It covers the majority of foreign transactions. But SEPA can not be used by banks and financial institutions outside the EEA.
- An IBAN number is what is basically required for a SEPA bank transfer. It provides low-cost, quick transactions inside the Eurozone, as well as convenient online banking. Whereas SWIFT requires unique bank identifier codes called “SWIFT Codes” or “Business Identifier Code” (BIC) for international payments. Usually, the receiver's data, such as bank account number, bank address, and SWIFT code, are required for a SWIFT payment.
- Money can be transferred in different currencies via SWIFT, unlike SEPA, which allows payments only in the euro.
- Payments made via SEPA are faster than those made through SWIFT. It typically takes less than a business day to complete a SEPA transfer, whereas it could take about three working days to complete a SWIFT transfer, depending on several factors that might cause a delay in payment processing.
- SWIFT payments are more expensive than SEPA. SWIFT fees are handled differently by various banks. Some of the banks are more open than others in terms of their fees. So, before making your SWIFT payment, get a fee breakdown to ensure that there are no hidden fees.
- While some countries require the sender and beneficiary to split SEPA fees, others require financial institutions to credit the whole amount to the recipient's account free of charge. On the other hand, typically, the individual transferring the money pays the SWIFT fees. However, a sender might choose to have the recipient pay all fees or split the fees with the receiver. To keep track of who is paying the SWIFT fees, banks use the following codes: "OUR" indicates that the sender pays all fees, "BEN" means that the recipient pays all fees, and "SHA" specifies that the fees are divided by both parties.
Best Apps for SEPA Payments
Use any of the apps listed below to send and receive money in the eurozone. They offer you cheap, secure, fast, and convenient ways to manage your payments within Europe. They are a reliable alternative to your bank.
Best Apps for SWIFT Transfers
Many money transfer applications have been developed to help you send money from your location to anywhere in the world quickly, effortlessly, cheaply, and securely. They make international payments simpler by enabling multi-currency transactions in a variety of countries and territories through digital technology. They also allow you to link your credit cards or bank accounts with a digital wallet. With only a few touches on your smartphone, you can complete overseas transactions and payments in minutes.
The best apps for SWIFT transfers are:
Competitors of SWIFT and SEPA
SEPA and SWIFT aren't the only international payment networks that exist across the world. There are others that are worthy of being mentioned.
There is UnionPay in China. It is the country's primary international payment network. In addition, China's central bank, which is called the People's Bank of China, has established the Chinese International Payment System (CIPS), which employs SWIFT communications and formats.
Russia also has a similar system to SWIFT. It is called the System for the Transfer of Financial Messages (SPFS). Before now, it was available for use only in Russia. However, it has gone global and there are plans to make it available to banks and financial institutions throughout the Eurasian Economic Union in 2019. (EAEU).
The RippleNet and Stellar Networks, which are based on blockchain technology, are the most recent additions to international payment networks. They also provide an easier system for cross-border payments.
How Much Do SWIFT and SEPA Transfers Cost?
On the one hand, SEPA transfers are mostly free. Any bank charges that may need to be paid, such as service fees, are usually small, not more than a euro.
SWIFT, on the other hand, might cost the payer between 3% and 4% of the total amount, including currency conversion and other administrative fees. It can cost up to 30 EUR per transaction, and the fees vary by bank and currency. Both the sending and receiving banks may charge some fees. As a result, senders and recipients must be aware of possible costs before making a SWIFT transfer.
What Countries Are in the SEPA Zone?
SEPA has 36 members as of May 2022. 27 of them are European Union (EU) countries, 3 countries belong to European Economic Area (EEA), and 6 more are non-EEA countries:
- The 27 EU members of SEPA are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Republic of Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, and Sweden.
- The three EEA countries that are in SEPA are Norway, Liechtenstein, and Iceland.
- The six non-EEA SEPA countries are Andorra, Monaco, San Marino, Switzerland, the United Kingdom, which remains a SEPA country despite Brexit, and Vatican City.
What Countries Use SWIFT Codes?
As of May 2022, the SWIFT network is used by more than 200 nations globally, accounting for over 40% of all international money transactions.
The use of SWIFT is partially or completely restricted in some countries. The list of these countries includes Russia, Ukraine, China, Iran, Cuba, Lebanon, Syria, North Korea, and Sudan.
In 2012, as a result of EU and U.S. sanctions, which were a response to Tehran's "nuclear program," Iranian banks were disconnected from SWIFT. In 2017, North Korean banks were sanctioned.
Iran accounted for about 50 banks, and the volume of transactions in the SWIFT system, though significant, did not seriously affect the entire national economy. Iranian bankers began to use Turkish banks as intermediaries to make payments. They had to pay extra fees for this, but it helped save the situation in general.
Do You Need a SWIFT Code to Make a SEPA Payment?
No, you do not need it. As of 2016, senders are no longer required to include their beneficiary's SWIFT code when making a SEPA payment. Moreover, the introduction of online fast money transfers has practically eliminated the need to use only SEPA for cross-border payments.
To make transfers in the SEPA zone, you will need an IBAN number. Many companies, such as Paysend, create a temporary IBAN just for your transfer. Even if you don’t live in one of the SEPA countries. The account will be valid for three days and will serve as an intermediary between your account and the recipient's account.
Regardless of their differences, SWIFT and SEPA have the same goal. They were created to offer individuals and companies seamless, secure, and reliable money transfers. While you can make SEPA payments only within the SEPA zone for almost free, you can use SWIFT to wire money beyond Europe for some fees. Choose SWIFT when you want to make multi-currency payments to any part of the world.