SEPA, SWIFT and Faster Payments (FPS) – what’s best for your business?

 

 

Advances in technology and banking systems means there are more ways than ever to make overseas payments. But with so many payment types out there, which are best for your business? Here we look at some of the main transfer methods. 

SEPA 

 

SEPA stands for the Single European Payments Area and is an initiative designed to simplify payments transactions in Euro between 36 countries in the Eurozone. As a result of SEPA, account holders can make cross-border payments between these countries in exactly the same way they would within their own country. It’s also possible to set up direct debits that are payable in another country. One bank account covers the entire SEPA system. 

To use SEPA, all you need is an IBAN (International Bank Account Number) and a BIC (Bank Identifier Code) in order to identify your account when it comes to making payments or receiving money. Typically, payments are processed within a day.  

However, charges by traditional banks can put customers off when it comes to paying this way, as these institutions can charge both the sender and the recipient. This is why it’s best to use newer, online payment solutions, such as KoalaPays, in order to reduce or avoid these fees altogether. 

Nevertheless, with its standardised payments structure, SEPA does have a number of advantages for business, such as increased transparency and faster settlement times when making cross-border payments.  

SWIFT 

 

The SWIFT (Society for Worldwide InterBank Financial Telecommunications) payment system also standardises the act of performing financial transactions between banks in two distinct countries. SWIFT does not actually send money; instead, it sends messages between the two banks who already have a direct relationship – or via an intermediary. This is a more convoluted process which can take longer and, while, SWIFT means you can send payments outside the Eurozone, charges with high street banks can be high.  

If the two banks involved in a SWIFT transaction don’t have an existing relationship (as in a commercial account with the other party), things get more complicated, as they then must use an intermediary. Obviously, this takes longer and involves more fees. FX fees can increase the total charge further. 

The good news is, carrying out SEPA and SWIFT transfers through a payment service provider, such as KoalaPays, can be much quicker and cheaper, as our technology automates many of these processes.  

Faster Payments 

 

Faster Payments Service (FPS) launched more recently, when New Payment System Operator (NPSO) took over responsibility of the BACS system. It’s a UK initiative to accelerate the process of making multiple small transactions – so it’s ideal for businesses that sell in the UK.  

While limits are set by individual banks, it is possible to transfer up to £250,000 using the system. Payments typically take few minutes to two hours to process. However, there is no guarantee on timescale and some may not be processed until the next business day.  

There are four ways businesses can use Faster Payments: 

 

  • Single Immediate Payment – A single payment that can be sent instantly, by mobile, online or in-branch banking.  
  • Forward-Dated Payment – A one-off payment at an arranged time, for example, when a bill becomes due. 
  • Standing Orders – Payments made on a specified date each month. 
  • Direct Corporate Access Payments – Designed especially for business customers where payment messages can be sent in bulk.   

 

It’s worth pointing out that not every banking institution offer FPS. At present, 21 banks and building societies have signed up to the service. 

Choose a platform that gives you more choice 

 

The preferred system of payment for most firms will largely depend on their business model and where they tradeScale of transactions will also have an impact on the choice of system used. 

It’s worth remembering, however, the more options you can give your customers, when it comes to paying, the happier they’ll be and the more business you’ll get. Ultimately, most firms will opt for a flexible payment solutions provider, such as KoalaPays. That way, they get access to all the services they need under one roof through a single dedicated account.   

What is a virtual IBAN and how does it benefit my business?

 

 

If you have a bank account, then you’ll have an IBAN or International Bank Account Number. It is based on a standardised international numbering system to identify a bank account anywhere in the world. Consisting of 34 alphanumeric characters, IBANs have been around for over 20 years and are clearly an essential tool when it comes to sending and receiving money between accounts separated by international borders, but they aren’t ideal for the needs of companies that do a lot of business online.  

Which is why an alternative type of IBAN has now emerged – the ‘virtual IBAN’. Instead of directing a transaction to a physical bank, the virtual IBAN directs the transaction to an online bank account. While the virtual IBAN acts in exactly the same way as the IBAN with your main bank, it has a number of distinct advantages for businesses.  Here’s why: 

 

Virtual IBANS are better for business 

Setting up a business account is easier

Virtual IBANs avoid much of the bureaucracy involved with setting up an account at a traditional banking establishment. As many entrepreneurs know, setting up a business account can be a convoluted and lengthy process with traditional banks. That’s not the case with a virtual IBAN from an online platform. For instance, with a virtual IBAN, there is no requirement to reside in the same country of the bank offering the account.  

More functionality 

You can do a lot more with a virtual IBAN. For example, instead of payments being directed to one bank account, business owners can direct payments from different countries to separate accounts, in preferred currencies, to make them easier to manage. This makes reporting and accounting simpler because you can create sub-accounts and statements for different product ranges, or even sort it by customer.  

The cost-savings can be significant 

Some companies have found that using a virtual IBAN can cut banking fees by as much as 20% – especially those that do a lot of business online in different global markets. This is because many traditional banks will charge high FX and transfer fees for converting every individual payment that comes in.  

Improved Security

When it comes to security, virtual IBANs are kept in redundant, encrypted servers in the cloud with very low risk of fraud or downtime. It’s also easier for businesses to comply with AML (Anti-Money Laundering) and KYC (Know Your Customer) rules due to end-to-end transparency and segregation of funds.  

Accelerated business

Virtual IBANs speed up all transactions greatly. Businesses can use KoalaPays network to make and receive most payments instantly. Even EU transfers can be processed the same day. 

 

Put a virtual IBAN to work for your business 

Virtual IBAN accounts provide a wide variety of benefits for companies, especially if you do business overseas. Your virtual IBAN allows you to have a multi-currency, multi-jurisdictional banking solution without the need for managing many different banking services.  

Contact our team today and find out how an IBAN from KoalaPays can help streamline your business processes.

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