Bank transfers in euros are a key part of the European and international finance system. As the main currency of the eurozone, the euro exhibits strength that supports a variety of transactions in Europe and worldwide. The 2023 McKinsey Global Payments Report indicates that global cash usage declined by nearly four percentage points in 2022, while electronic transaction revenue has nearly tripled in the past five years.

The ability to perform fast and safe transfers in euros is important for personal and corporate financial activities. These transfers run the gamut from local payments among European Union (EU) countries, where the euro is the standard, to international transactions, where the euro is often a preferred currency for cross-border exchanges.

For businesses operating in or with the eurozone, it's important to understand how euro bank transfers function. Below, we'll cover what businesses need to know about euro bank transfers: how they work, the methods available, who uses them and how, and the costs and requirements associated with integrating them into a payment system.

What's in this article?

• Types of euro bank transfer
  
• Where are euro bank transfers used?
  
• Who uses euro bank transfers?
  
• How do euro bank transfers work?
  
• Benefits of accepting euro bank transfers
  
• Euro bank transfer security measures
  
• Accepting euro bank transfers as a payment method
  

Types of euro bank transfers

Single Euro Payments Area (SEPA) transfers

SEPA facilitates easy, efficient transfers in euros across 30 countries in Europe, including all EU states and some non-EU countries. These transfers are standardised and are typically used for routine transactions within the SEPA region.

Types

• SEPA Credit Transfer (SCT): Standardised for one-time transactions; typically processed within one working day.

• SEPA Instant Credit Transfer (SCT Inst): Allows for immediate transfers, usually within seconds, of up to €100,000.

• SEPA Direct Debit (SDD): Divided into two services, SDD Core (for customers) and SDD B2B (business to business), each of which enables recurring billing.

• Regulations: Governed by the European Payments Council (EPC), which provides for uniform standards and legal framework.

Electronic transfers

Ideal for urgent and large-value transactions, electronic transfers are a fast method for sending money across the globe, including in euros. However, these transfers may incur higher fees and are used primarily for important or time-sensitive transactions.

• Processing: Relies on networks such as SWIFT for the secure and reliable movement of funds internationally.

• Cost: Typically higher because of processing fees and potential charges by the intermediary bank.

• Speed: Can vary from same day to several working days, depending on the banks and countries involved.

• Use cases: Preferable for large, non-recurring or time-sensitive transactions, including international trade settlements.

Instant transfers

As the name suggests, these transfers are executed almost instantly, offering a quick solution for transferring euros. They are best suited to urgent payments, although there may be limits on the amount that can be transferred at once or in a specific time frame.

• Technology: Uses modern digital infrastructure, such as real-time payment systems.

• Limitations: Subject to caps on transaction amounts, which can vary by bank or payment service.

• Availability: Depends on the bank's participation in instant payment schemes.

Cross-border transfers

Transactions that go beyond the eurozone require cross-border transfers. These may involve currency exchange if the recipient's account is in a different currency and can take longer to process because of various international banking regulations.

• Currency exchange: Involves foreign exchange services, which can affect the total cost because of exchange rates and fees.

• Regulatory compliance: Must adhere to international Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.

Direct debits

This type of transfer is used for recurring payments, such as bills or subscriptions, made in euros. The payer authorises the recipient to withdraw funds from their account, making it a convenient option for regular, fixed payments.

• Authorisation: Requires a mandate from the payer to the recipient allowing withdrawals from the payer's account.

• Reversal policies: Typically allows for a refund period, during which payers can dispute unauthorised transactions.

Internal bank transfers

These take place between accounts in the same bank. They are usually quick and free, making them a convenient option for transferring euros between your personal accounts or to someone who uses the same bank.

• Intrabank networks: Expedited because of being in the same financial institution's network.

• Cost efficiency: Usually free or low cost, making them ideal for intra-business transfers or payroll processing.

Mobile and online transfers

With the rise of digital banking, transferring euros through mobile or online platforms has become increasingly popular. These platforms often offer user-friendly interfaces and competitive exchange rates for international transfers.

• Platforms: Includes banking apps, fintech services such as Wise (formerly TransferWise) and peer-to-peer payment systems.

• Features: Often integrated with budgeting tools, transaction tracking and enhanced security measures.

• Cross-border capabilities: Some platforms specialise in multi-currency accounts and low-cost international transfers.

Where are euro bank transfers used?

Within the eurozone

• Customer behaviour: In eurozone countries, bank transfers are fundamental to daily transactions. This can be attributed to customers' deep trust in the financial system, the high penetration of banking services and the reliability of SEPA.

• Business trends: Eurozone businesses prefer bank transfers for B2B and business-to-consumer (B2C) transactions because of the efficiency, traceability and standardised regulatory framework provided by SEPA.

• Regulatory environment: The European Central Bank (ECB) and national regulators oversee a stable, transparent and standardised financial environment that promotes the use of bank transfers. Initiatives such as the revised Payment Services Directive (PSD2) further enhance payment security and open the market to innovative payment services.

Between eurozone and non-eurozone EU countries

• Customer and business trends: Euro bank transfers are widely used for transactions between eurozone and non-eurozone EU countries, driven by trade, tourism and a mobile labour force.

• Regulatory conditions: EU regulations facilitate these transfers, and the adoption of the euro by more EU countries is poised to increase their prevalence.

In United Kingdom, post-Brexit

• Business trends: Despite withdrawing from the EU in Brexit, the UK maintains strong trade and financial ties with the eurozone. Businesses often use euro bank transfers for trade and services, reflecting the euro's enduring importance in European markets.

• Regulatory changes: Post-Brexit, there have been adjustments in how these transfers are regulated, with a focus on maintaining smooth financial relations.

United States and North America

• Customer behaviour: American customers and businesses mainly use euro bank transfers for investments, travel and international purchases.

• Business trends: US businesses with a presence in Europe rely on euro bank transfers for operational expenses and payroll. Cross-border mergers and acquisition (M&A) activities also necessitate these transfers.

• Regulatory aspects: Transatlantic transfers are governed by European and American regulations to stay in compliance with international financial standards.

Emerging markets (Asia, Africa and Latin America)

• Customer trends: In these regions, euro bank transfers are often used for remittances, reflecting the migration patterns to European countries.

• Business dynamics: Emerging market businesses that work with European partners use euro bank transfers for trade, tapping into the euro's stability as a reserve currency.

• Regulatory environment: Varies widely, with some countries imposing restrictions on foreign currency transactions.

China and East Asia

• Business trends: Significant use of euro bank transfers in trade because China and other East Asian countries have extensive trade relations with the eurozone. The euro is often preferred for its stability compared with local currencies in more volatile markets.

• Regulatory aspects: The regulatory framework is complex and varies by country, but there is an increasing openness to facilitate euro transactions, especially in major economies such as China, which is eager to diversify its trade and investment currencies.

Middle East and North Africa (MENA)

• Customer behaviour: In this region, euro bank transfers are common among expatriates and for those conducting business or property transactions in the eurozone.

• Business dynamics: The region's businesses, particularly in the oil and gas industries, use euro bank transfers for trading with European partners because the euro serves as an alternative to the US dollar in these markets.

• Regulatory environment: Although there is a trend towards more liberal regulations, some countries in the region still have strict controls on foreign currency transactions.

Australia and Oceania

• Customer trends: Used mainly for personal remittances and travel-related transactions, reflecting the strong ties between Europe and countries such as Australia and New Zealand.

• Business use: Australian and Oceanian businesses mainly use euro bank transfers for importing goods from the eurozone and for joint ventures or investments in European markets.

• Regulatory framework: The regulatory environment is conducive to euro transactions, with minimal restriction and a focus on maintaining transparency and security.

Who uses euro bank transfers?

International trade and commerce

• Import and export: Businesses that engage in international trade with eurozone countries often use euro bank transfers for settling invoices because of the euro's stability and wide acceptance.

• Cross-border B2B businesses: Businesses outside the eurozone that work with European clients or suppliers frequently use euro bank transfers because of their ease and potential for averting the risks of currency fluctuation.

Financial markets

• Investment: Used for the purchase and sale of securities, including stocks, bonds and derivatives, especially in European markets.

• Corporate finance: Transfers in euros are important for mergers and acquisitions, raising capital and other large-scale corporate financial operations involving eurozone entities.

Property

• Property transactions: In eurozone nations, real estate purchases, rentals and related transactions are commonly conducted in euros.

• International property investment: Investors buying property in the eurozone often use euro bank transfers for payments regardless of their home currency.

Remittances

• Personal remittances: People who work abroad and send money to their families in the eurozone use the payment method for its reliability and efficiency.

• Pension and social security payments: For expatriates or retirees living outside their home country within the eurozone, pension and social security payments are often made via euro bank transfers.

Digital commerce and online marketplaces

• E-commerce transactions: With the growth of digital commerce, euro bank transfers are widely used for online purchases, especially on platforms that cater to European customers.

• Freelancing and gig economy: Freelancers and service providers with eurozone clients often accept payments via euro bank transfers.

Tourism and travel

• Booking and reservations: For travel within or to the eurozone, hotel bookings, flight reservations and other travel-related expenses are frequently settled in euros through bank transfers.

• Travel agencies and service providers: Businesses in the tourism sector that serve travellers to Europe often make transactions in euros.

Non-profit and aid organisations

• Funding transfers: Non-profits and international aid organisations that work in the region or are funded by euro-based donations and entities use euro bank transfers for donations, grants and operational funding.
  

Educational institutions

• Tuition and fees: Universities and colleges in the eurozone collect tuition and other fees in euros, often through bank transfers, especially from international students.

• Government payments: Used for tax payments, social security disbursements and other government-related financial transactions.

How do euro bank transfers work?

Euro bank transfers operate in a complex network of interconnected systems, regulations and actors. Here's a look at how this system works from a technical and operational perspective for businesses and customers:

The network landscape

• SEPA clearing system (SCT): The European automated clearing house (Euronet) operates the SCT, the backbone for SEPA transfers. It processes high-volume, low-value transactions in the eurozone for real-time settlement and standardised transaction formats.

• Large-value payment system (TARGET2): Managed by the Eurosystem, TARGET2 handles high-value and urgent cross-border transfers in euros. It operates through a network of central banks, enabling almost real-time settlement and secure interbank communications.

• SWIFT network: This global messaging system plays an important role in facilitating communication between banks for electronic transfers outside the SEPA zone. SWIFT transmits encrypted payment instructions to keep cross-border transactions secure.

• Domestic interbank networks: Each EU member state has its own interbank network for domestic transfers. These networks connect banks in their respective countries and facilitate domestic transactions in euros.

Operational mechanisms

• Initiation: The transfer process begins with the payer initiating the transfer through their bank's online platform or mobile app or at a physical branch.

• Routing and clearing: The bank identifies the recipient's bank and determines the optimal route for the transfer based on the network and clearing system involved (e.g. SEPA vs TARGET2).

• Settlement: Funds are transferred from the payer's bank account to the recipient's bank account through the chosen network. Settlement occurs in real time for SEPA and TARGET2 transfers, while other networks may have varying settlement times.

• Messaging and confirmation: Communication between banks about the transfer details and status updates occurs throughout the process using secure messaging systems such as SWIFT. Finally, the payer and recipient receive confirmation of a successful transfer.

Regulation and governance

• SEPA regulation: This EU regulation standardises payment formats, fees and processing times for SEPA transfers for fair and efficient cross-border payments within the eurozone.

• TARGET2 regulation: The Eurosystem oversees TARGET2 and sets rules for its operation to guarantee secure and efficient high-value transactions.

• National regulations: Each EU member state has its own regulations governing domestic bank transfers within its borders.

• Oversight by the ECB and national authorities: The ECB and national authorities monitor and enforce regulations to foster the stability and security of the system.

Engaging with businesses and customers

• Businesses: Businesses can initiate and receive euro bank transfers through their bank's online platforms, through integrations with their accounting software or via dedicated business banking tools. They can also choose specialised payment service providers (PSPs) for tailored solutions.

• Customers: Customers typically initiate transfers through their bank's online banking portal or mobile app. Some banks offer additional services, such as bill payments and direct debits for recurring payments. Customers can also use third-party payment platforms for online transactions.

Benefits of accepting euro bank transfers

• Market expansion: Tapping in to the eurozone's market means accessing more than 340 million customers and a GDP exceeding $14 trillion. This large customer base, coupled with the euro's global acceptance, allows businesses to easily enter markets within and outside the eurozone. The euro's widespread use facilitates easier transactions for European customers, leading to improved conversion rates.

• Increased efficiency and cost savings: Adopting the euro streamlines transactions and minimises administrative tasks. In the SEPA region, competitive fees are a significant advantage, contributing to higher profit margins. Real-time settlement is another key benefit, enabling faster access to funds and enhancing liquidity. The European Payments Council reports more than 20 billion SEPA transfers annually, demonstrating the system's widespread usage.

• Customer satisfaction and loyalty: The euro is a dependable, familiar payment option for many customers. Using euro bank transfers provides transparency and nurtures trust thanks to standardised formats and clear fee structures. These factors contribute to a positive brand image, and customers view them favourably.

• Additional benefits: Using the euro can reduce the risk of chargebacks, compared with credit cards. The predictability of cash flows is improved with recurring direct debits. Standardised formats simplify reconciliation and accounting processes. The euro also provides access to international financing and investment opportunities, offering businesses a broader platform for growth and development.

Euro bank transfer security measures

Euro bank transfers in the EU are safeguarded by an extensive set of security measures designed to protect the integrity and safety of these transactions. Here's a detailed rundown of these measures:

• SEPA compliance: SEPA standards govern most euro bank transfers. The goal of the initiative is to make cross-border euro transactions as easy as those within the same country. This compliance provides for standardised procedures that are conducted safely and efficiently.
  

Encryption and secure communication

• Advanced encryption protocols: Banks use sophisticated encryption protocols such as Advanced Encryption Standard (AES) 256 for data during transfers, making it unreadable to unauthorised individuals.

• Dedicated secure networks: Systems such as SWIFTNet and the SEPA Clearing System provide highly protected networks for safe transfer communications.

• Electronic signatures and certificates: These technologies verify the authenticity of messages, reducing the chance of fraudulent messages, such as phishing attempts.

Authentication and authorisation

• Multilayered authentication: Involves additional layers of verification, such as one-off codes or biometric scans, to cut down on unauthorised access.

• Strong authentication under PSD2: This regulation requires thorough procedures, such as two-step verification for online payments.

• Controlled access: Financial institutions have strict controls to limit access to sensitive information, based on the roles and permissions of members of staff and users.

Monitoring and fraud detection

• Sophisticated algorithms for fraud detection: Banks use advanced algorithms and machine learning to spot unusual patterns in transactions.

• Databases for fraud prevention: Shared databases of known fraud risks help banks identify and stop risky transactions.

• Ongoing monitoring and updating risk models: Banks continually update their systems to stay ahead of new fraud methods.

Regulation and compliance

• EU payment directives: PSD2 sets strict security requirements for payment services, including mandatory encryption and fraud prevention.

• Oversight by national bodies: Each EU member state has a regulatory body that ensures banks follow these rules.

• Regular independent checks: Banks undergo frequent checks by independent third parties to test their security protocols.

• International bank account number (IBAN) and bank identifier code (BIC) use: These alphanumeric codes help to correctly identify accounts and banks in transactions, adding a layer of safety and directing funds properly.

• Customer identity verification: Banks verify the identity of their customers to prevent identity theft and fraud.

Extra layers of safety

• Session time-outs and limits on transfers: Banks use timers to automatically end and sign out of idle sessions and set limits on transfer amounts to reduce risks.

• Systems for data safety and intrusion detection: Tools such as data loss prevention (DLP) and intrusion detection systems (IDS) further protect sensitive data and network infrastructure.

Accepting euro bank transfers as a payment method

To start using euro bank transfers for payments, businesses must meet several requirements whether they are based in the EU or abroad. These requirements can depend on the type of payment (e.g. SEPA payments or SWIFT international transfers) and the location of the business. Here's a detailed breakdown:

For EU-based businesses

SEPA payments (for eurozone countries)

• Bank account requirements: Make sure the business bank account can handle SEPA credit transfers and direct debits. This often means the account should be based in a SEPA member country.

• Using IBAN and BIC: Use IBAN and BIC for all transactions. IBAN facilitates the accurate processing of cross-border payments within Europe, while BIC identifies the specific bank involved in the transaction.

• KYC documentation: Submit detailed documentation for KYC compliance, including business registration documents, proof of business address, and identification documents for the business owners and major stakeholders.

• SEPA mandate management: For direct debits, set up SEPA mandates with customers. This involves obtaining written permission from customers to debit their accounts, clearly stating the mandate reference, creditor identifier and the customer's bank details.

SWIFT transfers (for non-eurozone transactions)

• International banking relationships: Establish relationships with banks that have a wide international network and are connected to the SWIFT network.

• Currency exchange contracts: Negotiate favourable currency exchange rates and understand the fees involved in converting to and from euros.

• Compliance with international payment regulations: Stay up to date on international payment regulations, including AML and counterterrorism financing laws.

For businesses not based in the EU

SEPA payments (for transactions within the eurozone)

• Euro-denominated bank account setup: Set up a euro-denominated account in your business's home country or in a SEPA country. This may involve finding a local bank that has banking relationships with banks in the SEPA area.

• SEPA participation agreement: Make sure the bank has a SEPA participation agreement to facilitate euro transactions.

SWIFT transfers (for global transactions in euros)

• Understanding the SWIFT network: Familiarise yourself with the SWIFT network – a vast messaging network used by banks and other financial institutions to send and receive information such as money transfer instructions quickly, accurately and securely.

• Be clear about the fee structure: Make yourself fully aware of the fee structure, which can include sending fees, receiving fees and currency conversion fees, if applicable.

Common requirements for all businesses

• AML and compliance training: Train all relevant staff on AML policies to adhere to international financial compliance standards.

• Technical setup for payment processing: Integrate payment processing solutions that support euro transactions. This involves technical setup for online payments, including choosing a reliable payment gateway that offers support for SEPA or SWIFT transactions.

• Data security protocols: Implement strong cybersecurity measures to protect customer data and transaction details. This includes complying with data protection regulations, such as the General Data Protection Regulation (GDPR) for EU customers.

• Regular audits and compliance checks: Conduct regular audits of financial transactions to ensure compliance with local and international regulations.

• Set transaction policies: Develop clear policies for euro transactions, including refund policies, chargeback procedures and how to handle transaction disputes.

Other factors to consider

• Market research: Understand the market dynamics in the eurozone, including customers' preferences for payment methods and local banking practices.

• Tax implications: Consult a tax advisor to understand how accepting euros affects your tax liabilities at home and in the EU.

• Customer support setup: Establish customer support mechanisms to handle questions about euro transactions, including about exchange rates, transaction times and fees.