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As a freelancer or small business owner in India catering to clients in the European Union (EU), you might have encountered the term SEPA many times. Perhaps your clients have inquired about the possibility of making a SEPA payment for your services. This acronym refers to the Single Euro Payments Area, a system that facilitates fund transfers across 36 countries.
So, in this article, we’ll demystify SEPA, gaining a deeper understanding of how it works. We will also explore how an Indian entrepreneur can seamlessly leverage its capabilities to collect payments from your EU clientele.
What is a Single Euro Payments Area (SEPA)?
SEPA is a standardized transaction framework introduced by the EU to streamline the process of cashless payments across Euro-using nations. Single Euro Payments Area serves European governmental entities, businesses, and individuals alike. This method facilitates various payment modes such as direct debit, credit transfers, and instant card transfers.
SEPA payments offer a seamless mechanism to execute transactions across diverse countries. It enables individuals and entities to make cross-border payments amongst themselves with the same convenience and expense as domestic dealings.
This initiative is under the governance and oversight of the European Payment Council (EPC). It is endorsed for application in 27 EU and nine additional European nations where the Euro currency is shared. Currently, it facilitates over 43 billion transactions annually.
Type of SEPA Payment Schemes
Single Euro Payments Area includes four payment processing schemes:
1. SEPA Credit Transfer
SEPA Credit Transfers are single euro transfers between banks equipped with IBAN codes. These transfers are in euros and are popular for consumer transactions in SEPA nations. However, business owners located outside the Single Euro Payments Area region wouldn’t typically use this method. Is is because both sending and receiving financial institutions must be within SEPA countries.
2. SEPA Instant Credit Transfer
While many account transfers involve submitting a request and waiting hours to days for processing, SEPA Instant allows real-time transfers up to €100,000. This method permits immediate euro payments between any two SEPA area account holders, anytime, any day. Nearly all SEPA Instant Credit Transfers are completed within five seconds, Moreover, they’re accessible via smartphones.
3. SEPA Direct Debit
SEPA Direct Debit or SDD is a common way for foreign (non-EU) businesses to engage with Single Euro Payments Area accounts. For Stripe users, it’s a reusable payment method linked with the customer and reusable within authorized parameters. It’s also a delayed notification method, with transaction outcomes known only after processing, which might take days.
4. SEPA Direct Debit B2B
This scheme allows business owners to collect payments from other businesses electronically. Unlike the standard SEPA Direct Debit that covers consumer payments, SDD B2B caters to the unique requirements of business-to-business payments. Businesses often use them for recurring payments such as subscription services, membership fees, and regular business transactions where one business authorizes the other to debit funds from its account. The settlement time for payments under this scheme may take up to 3 business days.
Do They Apply Exclusively to Euro Transactions?
SEPA (Single Euro Payments Area) transfers exclusively pertain to payments conducted in Euros. They do not replace other forms of payment in Single Euro Payments Area countries, particularly those involving currencies other than the Euro. Transactions involving non-Euro currencies continue to exist and utilise different payment schemes.
How to Receive SEPA Payments in India?
If you’re a freelancer/small business owner in India collaborating with clients in the EU, SEPA can be a convenient way for your clients to make payments to you. While Europe widely uses SEPA, India isn’t part of this region.
However, there’s a practical solution for receiving SEPA payments even if you’re based in India. Platforms like Cashfree Payments offer an effective workaround. They enable you to efficiently collect Euro payments from clients through a virtual SEPA account. This means you don’t need to hold a traditional SEPA bank account in a SEPA-zone country. Instead, Cashfree provides you with the tools to easily receive Euro payments and then transfer the funds to your Indian INR bank account. This approach combines the simplicity of local SEPA transfers with the global accessibility of cross-border transactions.
The core of this offering is both simple and impactful. You can acquire a local Single Euro Payments Area account to seamlessly receive Euro payments. Moreover, the settlement of these payments in India is efficient and cost-effective. With a competitive fee structure, Cashfree Payments ensures a hassle-free way to access your funds while effectively managing costs.
In conclusion, Cashfree Payments presents an accessible solution for Indian businesses to embrace the benefits of SEPA payments without the need for a physical presence in the Single Euro Payments Area zone. By streamlining the process, Cashfree helps freelancers and small business owners expand their global reach and simplify cross-border transactions.
