Thanks to the advance of technology and the evolution of Fintech companies, a series of tools have enabled traditional Banks, financial institutions, and companies to offer more competitive services to their users, allowing companies to expand their operations and access new international markets. Within these financial solutions, two “standards” stand out, IBAN and SEPA, which would enable cross-border transactions. However, these denominations tend to create confusion among new users; therefore, we will analyze each tool and show its primary functions and differences.
Concept and definition
IBAN is an international bank account number used to identify a specific bank account. SEPA is a set of regulations that allows payments in euros to be made efficiently in the European Union and some other European countries (using IBAN as part of the identification process).
Type of standard
Although these are two financial standards, we must point out that IBAN is a format numerical bank account that financial institutions or banks standardized to help identify bank accounts during international transactions. On the other hand, SEPA stands out as an integration method standardized by European financial institutions, which allows transactions to be carried out efficiently and securely within the European Union, hence its name Single Euro Payments Area or SEPA.
Geographic scope
Although both standards allow international or cross-border transactions, their geographic scope is their main difference. In the case of IBAN, this system permits international transactions within and outside Europe in around 80 countries that have adopted this financial standard.
On the other hand, the SEPA standard allows international transactions only within the European area (around 35 countries). It is essential to mention that in addition to the 27 member states of the European Union (EU), the European Economic Area (EEA) includes countries like Liechtenstein, Norway, and Iceland and also those non-EEA countries like the United Kingdom, Switzerland, Monaco, the Vatican City State, San Marino, and Andorra.
Type of currency
The type of currency available for transfers is a significant distinction between these two terms. For example, SEPA only allows transactions in euros (EUR). IBAN, on the other hand, permits transactions in various currencies. For example, Pilsenga offers the IBAN multi-currency account service, which allows medium-sized companies to make transactions or manage their account in more than 30 different currencies.
It is essential to clarify that even though some countries do not belong to the European Union or the European Economic Area, they have chosen to use the Euro as a payment alternative and have adopted the SEPA payment system.
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