SEPA in Europe as main payment technology
Almost every European business has heard or even used SEPA payments. But do you know what this acronym stands for, where it came from, and what its future holds?
If not, then this article is for you. Monoup has prepared a brief overview of the history of SEPA technology and a glimpse into its future prospects. Although the system is quite young, it has already gone through several stages of development and shown significant growth in volumes. Unification and simplification are the basic principles of European Union, which allows countries in the Eurozone to interact more easily with each other, and payment flow is one of the top priorities. Although not all countries use euro as their national currency, payments in euros are possible everywhere, and that is precisely why SEPA is necessary.
What is SEPA?
SEPA (Single Euro Payments Area) is a payment infrastructure that allows sending and receiving of payments in euros within the Eurozone. The system was created in the 90s to unify payment processes in European Union and simplify international payments. Although in this case, the payments are still international, as they are made between different countries, thanks to the SEPA system, they are combined into a common structure and considered a single zone regionally. SEPA was the result of efforts by banks and financial institutions from many European countries working to improve and reduce the cost of transfers between them. Because each country had its own currency and financial rules, transfers were more expensive and could take a longer time. With the advent of SEPA, life for Europeans became easier, and financial institutions were able to save significantly on fees.
The system is quite young, as despite its emergence in the 90s, full implementation only occurred in 2008, meaning it has been operating for less than 20 years. But during this time, SEPA has changed and even modernized.
Among the most important improvements is SEPA Instant, which finally allows payments to be received instantly, without waiting for several hours. It is worth mentioning that this service has been long awaited, as a standard transfer in Europe usually took from several hours to several days. How long the transfer would take depended on countries, type of business, and amount of the transfer. In case of additional verification delays, transfers could take up to several days. At the same time, SEPA still is a step forward compared to SWIFT transfers in different currencies for Europe.
How SEPA differs from SWIFT
When examining European payment structure in detail, would worth to compate it with the global one. SWIFT is essentially a full-fledged analog of SEPA but for international payments. It operates worldwide, supports many currencies, not just euro, and differs in its own system of data encryption and communication between banks.
A SWIFT message is sent from one bank to another and contains the necessary information about each payment. To maintain this method of communication, correspondent banks are required. Since a payment cannot directly "jump" from one bank to another, it goes through several intermediaries on this path. In this case, the more intermediaries a particular bank has (i.e., correspondents), the better for its clients. Because it will be able to receive payments from a larger number of countries due to established routes. Ensuring a partnership between every bank in the world with every other bank is a very labor-intensive process, so to avoid it, correspondent service was introduced.
We are sure that these two payment networks coexist and complement each other rather than replace each other. Although SWIFT payments can be sent across Europe, it is unlikely that anyone would do so, as such a payment carries a multitude of additional costs, which SEPA was designed to avoid. SEPA allows savings, unites Europe into a single ecosystem, and speeds up transfers. After all, a SWIFT payment can take up to one week, which is certainly not advantageous for most businesses engaged in international activities.
How Gaming merchants use SEPA
As we have already said, almost all businesses in European Union use SEPA payment structure. Gaming sites are no exception and can participate in this technology in several ways. The first one is to accept payments on the website through bank transfers. Although it may seem not the best payment method due to long transaction processing, SEPA Instant can be a good option here.
The second way is operational business payments made from a bank account. For example, paying for marketing services, technical services, and employee salaries. For this, business has to open account in a bank or, more often, in an EMI (Electronic Money Institution), which will provide it with IBAN and access to the system.
At this stage, several difficulties may arise, such as finding a suitable EMI and going through the compliance process to open an account. The compliance procedure (literally compliance with some standards) often adds headache to merchants, as it seems complicated and illogical. In fact, the bureaucracy of the process is indeed high, but it has a number of prerequisites. Compliance is conducted so that payment system or financial institution can ensure that your business is actually engaged in what is stated on the website or in the questionnaire. Since cases of fraud are very common, especially in financial matters, payment systems are vigilant and check their future clients. Often, difficulties in passing compliance in a payment system or EMI can arise due to the innovative or highly specialized business model, which payment system employees cannot understand. More popular and simple businesses have an easier deal, but new gaming mechanics, tokens, or crypto projects are not among them. Their activities carry the risk of financial losses and are often too complex for quick analysis. Therefore, payment systems try to avoid such cases and not work with risky clients.
But you still have chances for successful account opening! And with us, they double, because Monoup has extensive experience in positive compliance for various types of businesses. Among them are crypto exchanges, gaming sites, skin websites, online stores, and different service companies. Text us, and we will open an IBAN account for you in a European bank or financial company, and you will gain access to SEPA within weeks or even days.
