What Non-EU Banks Should Consider When Connecting to SEPA Payments
There are many reasons why non-European financial institutions are interested in SEPA payments. The reasons vary, but the pitfalls are the same. Dmitry Kuvshinov, Executive Director and Head of the Sales and Marketing Department at Bilderlings, explains what to focus on when opening an account in the EEA or UK.
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Last year, we launched a separate direction: transaction accounts for financial institutions, including EMI (Electronic Money Institution) and PI (Payment Institution). The main jurisdictions of our clients are the UK, EU, Canada, Hong Kong, but we also consider other clients on a case-by-case basis.
When should non-European financial institutions open an account in the EEA?
The driving force behind any development is client demand. The most common scenarios are:
1. Clients of a non-European bank (financial institution) earn in the EU but want to spend back home.
2. Among the clients of a non-European bank (financial institution), many are digital nomads, where either the income or, conversely, the expenses are linked to the EEA.
3. Clients of a non-European bank (financial institution) are engaged in online trading in the EEA. Organizing processing for a legal entity from a non-European jurisdiction to collect money in euros and transfer it to the other side of the world is expensive and complex. It’s simpler to collect money in euros, accumulate them in the EEA in a euro account, and then transfer them to their accounts in your national currency. This also allows bank clients to settle with suppliers within Europe quickly, simply, and cheaply.
Considerations for Opening an EU Account if You’re a Non-EU Bank or Fintech
The first is the sanctions restrictions for citizens of Russia and Belarus: these restrictions exist, and one must take them into account.
The second is in what form SEPA payments will be executed, whether they will be direct SEPA details or indirect. For example, a payment from a client of this bank can be executed on behalf of the client, making the client’s work more transparent, understandable, and comfortable. Alternatively, it can be a payment on behalf of the payment institution, from a so-called “wallet,” and the sender will be indicated in the payment details. This depends on the technical capabilities of the payment provider.
The third is the cost of SEPA payments. Unfortunately, there is a wide range of prices in the market. We set a commission based on the risk profile and the business model of the payment institution: either 0.75 euros or 15 euros per payment. Such a difference is due to the administrative expenses incurred by Bilderlings for processing each payment: in some cases, payments are processed automatically under the supervision of AI systems, while in other cases, each payment must be additionally verified or reviewed by a specialist knowledgeable in AML/sanctions matters. But you can even find a commission as high as 40 euros.
And how to open an account?
If you want to work specifically with us, the steps are simple:
1. You fill out an application on the website. It’s not a form, just a request.
2. We contact you and tell you what documents we need from you. We discuss the business model and determine the risk profile of the financial institution. With some of them, we terminate communication at the stage of the first call when we see, for example, that the sanctions policy is nominal.
3. Then we review these documents. We look at the AML-policy, the procedures, and how much the bank’s (financial institution’s) policy aligns with English legislation. We must have not only a similar risk appetite but also a similar approach.
4. And if we are a good fit for each other, then we request the charter documents and everything needed to open the account directly.
5. Next, we sign a document to provide financial services to another financial institution.
6. Bingo! After that, you get access to the personal account and can generate IBAN numbers for your clients and send us payment orders via API or personal account.
Servicing financial institutions has its own specificity. On the other hand, being a financial institution ourselves, we understand the pains and needs of our business colleagues like no one else, and we are happy to be useful wherever we can.
