The power of SEPA transfers and Fintechs

It wasn’t long ago that creating and processing transactions across European country borders was a complex and expensive undertaking. To combat this, transfer schemes were created and implemented to unify cashless euro payments to anywhere in the European Union. This is where Single Euro Payments Area (SEPA) transfers, also known as direct debits, play a large role for Fintechs.

In this article, we will explore the brief history and types of SEPA transfers, whilst looking at the challenges and solutions that it can provide to Fintechs taking their first steps towards competing.

What is the Single Euro Payment Area?

At the beginning of this millennium, the European Union (EU) governments set out a vision for a Single Euro Payments Area (SEPA), where a single euro account could be utilised in all participating countries. They wished to make the EU more dynamic and competitive with other global markets by reducing unnecessary complications and fees when transactions cross borders, allowing for easy Euro transfers.

To fulfil this goal, in 2008, the SEPA Credit Transfer (SCT) scheme was launched by the EU authorities in conjunction with the European Payments Council (EPC) and the European Central Bank.

Which countries are included in SEPA?

The SEPA region spans 36 countries, including EU and non-EU members. The countries are:

  • Austria
  • Belgium
  • Bulgaria
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Iceland
  • Ireland
  • Italy
  • Latvia
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Malta
  • Monaco
  • Netherlands
  • Norway
  • Poland
  • Portugal
  • Romania
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • United Kingdom
  • Vatican City
  • San Marino
  • Andorra

What is a SEPA payment?

SEPA streamlines electronic euro payments in Europe, offering a direct debit and secure alternative to traditional bank transfers.

How SEPA Works:

  • Account Details: International Bank Account Number (IBAN) and occasionally BIC ensure seamless cross-border payments.
  • Efficient Processing: SEPA prioritizes euro transactions for quick delivery.
  • Prompt Arrival: Funds typically reach the recipient bank account within one business day.

What are the different types of SEPA payments?

There are three different SEPA payment schemes:

SEPA Credit Transfers

The SEPA Credit Transfer scheme is typically used for one-off transfers, utilizing the IBAN and occasionally the BIC numbers of both payment account and recipient bank accounts to initiate a direct debit. This allows for quick movement of money between accounts. Once authorized, the recipient can expect to receive direct deposit payments within one business day.

SEPA Instant Credit Transfer

In 2017, the SEPA Instant Credit Transfer (SCT Inst) scheme, also known as SEPA Instant Payment, was introduced. This focused entirely on the speed of transactions by using a direct routing method between the sender’s and beneficiary’s banks. This allowed funds to be available in the destination account within 10 seconds of the transfer being confirmed.

In contrast to traditional banking processes, SEPA Instant Credit Transfers operate seamlessly 24/7, 365 days a year, without any delays on weekends or public holidays.

SEPA Direct Debit Transfer

Released in 2009, the SEPA Direct Debit (SDD) scheme is commonly used for recurring payments, such as rent, bills, and subscriptions. The previous two schemes are mostly used for once-off for most one-off transactions. SDD also uses the IBAN and occasionally the BIC of the sender’s and beneficiary’s accounts, however, the process is reversed.

Instead of the sender pushing their funds to the beneficiary, direct debits are pulled from them at the behest of the beneficiary. Hence, the beneficiary initiates the request for recurring payments and the sender can sign a mandate to authorise them. This can take a minimum of 2-3 business days to be received.

This transfer scheme further branches into two schemes:

  • Core SDD must be offered by all banks who have agreed to the SEPA scheme and is available to individual users.
  • B2B SDD is only for businesses unless a bank decides to offer it to their customers as well.

What is a SEPA Instant payment?

In 2017, the SEPA Instant Credit Transfer (SCT Inst) scheme, also known as SEPA Instant payment, was introduced. This focused entirely on the speed of transactions by using a direct routing method between the sender’s and beneficiary’s banks. This allowed funds to be available in the destination account within 10 seconds of the transfer being confirmed.

How long does a SEPA transfer take?

SEPA payments are typically settled within one business day. However, banks in SEPA member countries have introduced SEPA Instant Credit Transfers since November 2017. This system enables payments up to €15,000 to be settled within 10 seconds.

The difference between SEPA and SEPA Instant

Excluding the difference in pace, these two payment methods differ in a couple of ways. SEPA Instant payments are available all year round, whereas SEPA payments may be delayed over the weekend and on public holidays.

However, SEPA Instant payments require both the sender’s and beneficiary’s banks to be registered as SEPA Instant members.

In addition, SEPA Instant payments have a transaction limit of 100,000 EUR compared to SEPA payments’ 999,999,999.99 EUR – it is also only available in 23 of the 36 SEPA countries in the.


Is the UK still in the Single Euro Payments Area?

The UK, commonly referred to as Great Britain, formally departed from the EU on February 1, 2021. Despite this exit, it continues to be a participant in the SEPA zone, as SEPA membership extends beyond EU countries. Consequently, banking service providers continue to provide cross-border transfer services within the UK.

What is the difference between SEPA and bank transfer?

SEPA represents a specialized form of bank transfer tailored for efficient euro payments within the SEPA zone, providing swifter processing and reduced fees. In contrast, "bank transfer" is a more comprehensive term encompassing a variety of electronic money transfer methods, including SEPA.

Is SEPA the same as Swift?

SEPA serves as a payment system facilitating quick and straightforward money transfers within Europe, whereas SWIFT operates as a global payment system enabling the sending and receiving of funds worldwide. Opt for SEPA when making payments within Europe, and choose SWIFT for international money transfers.

How does SEPA Instant Transfer work?

It is commonplace for banks to process transactions in bulk one to two days after receiving them. This is to reduce the large amount of manual work required to clear transactions. This may result in the funds only arriving at the beneficiary account later than expected.

Thanks to Open Banking, SEPA Instant payments can be recognised and processed in real-time so the bank can treat each transaction individually rather than in batches. Hence, it can achieve a transfer rate that traditional European banking procedures can not.

Sending vs Receiving

However, SEPA Instant transfers can be more complicated. Some banks limit accounts to only receive SEPA Instant payments and make them unable to initiate their own. Cross-border transactions can also be obstructed by adding unnecessary steps when it recognises the IBAN, which locates the account. This can dissuade users from creating or completing the payment, decreasing their use.

SEPA Instant coverage and adoption

Unfortunately, SEPA Instant payments are not widely accessible across the SEPA. As mentioned, only 23 out of the 36 countries participate in this scheme and only Slovenia has it offered in all of its banks. Less than half of the banks in these countries offer it as a service. It must also be noted that the SEPA Instant scheme can operate on two different systems that cannot communicate with each other. As a result, some banks are unable to create SEPA Instant payments for each other as they don’t use the same system.

The inhibition to adopting this scheme is large because it is not mandatory for banks. It is even common for this payment method to be charged a fee, which makes the scheme less desirable compared to its slower, cheaper alternatives.

Benefits of SEPA Instant for Fintechs

In this digital market, there is a growing expectation for everything to be expeditious, including transactions. Fintechs that make SEPA Instant available to customers can guarantee that a pan-European transfer will complete or fail within 10 seconds so they can meet this expectation and deal with any interruptions in real-time. They would also be able to complete transfers at any time of the day or week.

Therefore, SEPA Instant payments provide flexibility to a Fintech’s customers so they can make payments where they want and when they want to. With a transaction limit of 100,000 EUR, this scheme also allows payments to be processed quickly whilst preventing large, suspicious transactions from occurring with the same ease. Thus, it can compromise a Fintech’s regulatory responsibilities and customer’s demands.

Access Sepa Instant Payments with Integrated Finance

API-first Fintech infrastructure technology makes fintechs of any size global by default through a single point of access to multiple cross-border banking providers in an agnostic manner. So why not take advantage of local payment networks to attract more customers? You’ll be able to reduce transaction costs and settle funds faster.

You don't have to own the financial infrastructure technology to power up your digital banking solution. Your Fintech product can sit on top of our financial infrastructure to save development time and upfront costs needed to build complex integrations.

We support local payment systems across 100+ countries. If you want to offer real-time local methods such as Sepa Instant, request a demo, and we’ll show you how you can go global in weeks rather than months.

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