The European Union developed the SEPA payment system as a financial tool that facilitates bank transfers between the 38 countries that adopted this payment system, including the European Union member states, some additional (non-EU) countries, and microstates such as Vatican City State, San Marino, and Monaco. Below, we’ll learn more about the history of SEPA payments.
Euro as a single currency in the European Union
Six years after the European Union was created in 1993, the euro was created to provide a solid financial and political foundation for Europe. However, in its early days, the euro was only introduced virtually (on January 1, 1999) and was used for electronic transactions in financial markets and large-scale corporate transactions, including interbank transactions (cross-border settlements in euros), government bonds (converting existing debt into euros), euro-denominated stock and bond markets, as well as corporate transactions such as invoicing, contracts, and accounting in multinational operations.
It is worth noting that the virtual euro was used as a “parallel currency” as coins and banknotes (physical euros) were introduced, coexisting with the coins as a single currency, which allowed the creation of a single market and a unified financial system in the European Union.
Single Euro Payments Area (SEPA)
Once the euro began circulating in the member countries of the European Union (Eurozone), it was observed that using the same currency made it more convenient and easier to make payments. However, this could only be seen in payments using cash since there was still a gap in electronic payments at the personal, business, and medium-sized enterprise levels.
It was then that the European Union developed the Single Euro Payments Area (SEPA) initiative, which aimed to further consolidate the European market and financial system by simplifying and standardizing euro payments between member countries of the European Union.
SEPA payment system
The SEPA payment system was introduced into the European financial system in several stages:
SEPA payment system in 2008
In 2008, the SEPA Credit Transfer (SCT) system was introduced into the European financial system, standardizing euro credit transfers between member countries, thus enabling seamless and efficient cross-border payments.
SEPA payment system in 2009
In 2009, the SEPA Direct Debit (SDD) system was introduced into the European financial system, standardizing cross-border direct debit payments in euros. This SEPA Direct Debit system made it possible to automate recurring payments, such as utility bills or subscriptions, across member countries.
SEPA payment system in 2014
The year 2014 marked the deadline for Eurozone member countries to migrate to the SEPA system. It was required that by February 1, 2014, member countries would fully adopt the SEPA standards for their SEPA Credit Transfer (SCT) and SEPA Direct Debit (SDD) transactions, in order to meet the goal of creating a unified and efficient payment system for cross-border transactions, allowing them to be as fluid as domestic transactions.
SEPA payment system in 2017
In 2017, the SEPA Instant Credit Transfer (SCT Inst or SEPA Instant) system was introduced into the European financial system. This allows for real-time euro payments, enabling transactions to be completed in as little as 10 seconds. In this way, SEPA payments offered a new level of transactional flexibility within the European financial system, offering speed and convenience for consumers and businesses within Eurozone member states.
SEPA payment system in 2025
In 2025, significant advances will be made in the SEPA payment system due to the implementation of new regulations, particularly related to the European Instant Payments Regulation. These new regulations require instant payments in euros within 10 seconds; therefore, all payment service providers (PSPs) in the eurozone must offer instant payment services in euros with fees comparable to traditional SEPA credit transfers.
Furthermore, in 2025, the SEPA Instant Credit Transfer Regulation (SCT Inst or SEPA Instant) introduces improvements to the European financial system, including the elimination of the maximum transaction amount, which will allow for higher-value instant payments.
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