What are SEPA Transfers? Simplifying Cross-Border Payments

What Are SEPA Transfers?

The Single Euro Payments Area (SEPA) is a payment system that makes euro transfers identical across 36 participating countries. These transactions turn cross-border payments into domestic ones, removing the friction of sending money between European nations.

SEPA includes:

• All 27 EU member states
• EEA non-EU members: Iceland, Liechtenstein & Norway
• Switzerland
• Monaco, San Marino, Vatican City & Andorra
• United Kingdom

SEPA has standardised payment tools, cut transaction costs and sped up euro payments. This especially helps businesses with operations in multiple European countries by simplifying their finances and reducing the hassle of managing banking relationships in different countries.

3 Types of SEPA Transfers

SEPA offers three distinct types of transfers, each designed for different payment needs within the European economic area:

1. SEPA Credit Transfer (SCT)

SEPA Credit Transfers are one-time euro transfers between banks in the SEPA zone. These transfers complete within one business day (T+1) and require IBAN and BIC identifiers. SCTs use ISO 20022 XML formats to standardise transfers across all participating financial institutions.

They are perfect for one-off payments, business transactions and consumer payments like utility bills.

2. SEPA Direct Debit (SDD)

SEPA Direct Debits are recurring payments authorised by the payer, where funds are pulled directly from the payer’s account. This system operates through a mandate process, enabling automatic payment collection.

SDDs come in two variants:

1. Core Direct Debit for consumers (with an 8-week refund timeline)
2. B2B Direct Debit for businesses (no refund option)

SDDs typically take 2-3 business days to process, making them ideal for regular, predictable payments.

3. SEPA Instant Credit Transfer (SCT Inst)

SEPA Instant Credit Transfers provide real-time payments in euros, available 24/7/365, and processed within 10 seconds. This innovative payment method has a standard transfer limit of €100,000, although participating banks may agree to higher limits.

The immediate availability of funds makes SCT Inst particularly valuable for time-sensitive payments and improves cash flow management for businesses.

How SEPA Transfers Work

SEPA transfers follow a standardised process. To start a SEPA transfer, you’ll need:

• IBAN (International Bank Account Number) of both sender and recipient
• BIC (Bank Identifier Code) of the recipient’s bank (sometimes optional)
• Transfer amount in euros
• Purpose of payment

With these details in hand, here’s what happens:

1. You initiate the transfer through your bank or payment service provider
2. Your bank processes the request and routes it through the SEPA clearing system
3. The SEPA clearing system checks the transaction and forwards it to the recipient’s bank
4. The recipient’s bank adds the funds to the specified account

What Are the Benefits of SEPA Transfers?

SEPA transfers offer substantial advantages that make financial operations across Europe more efficient:

Speed

SEPA Credit Transfers complete within one business day, much faster than traditional cross-border business payments that often take 2-5 days. Even more impressive, SEPA Instant Credit Transfers process payments in real-time, with funds transferred within 10 seconds. By enabling instant payouts, business operations and customer satisfaction improve dramatically. 

Cost-Effectiveness

SEPA eliminates price differences between domestic and cross-border payments within the entire zone. This standardisation has led to substantial cost reductions, particularly beneficial for small and medium-sized businesses.

The absence of intermediary fees and currency conversion costs (for euro payments) adds to the savings.

Simplicity

SEPA introduces standardised procedures across member countries. Businesses now need only one SEPA-compliant bank account to manage all euro payments across 36 countries, instead of multiple accounts in different jurisdictions.

Security

SEPA transfers benefit from strong security measures, as they follow strict regulatory standards like the Payment Services Directive (PSD) and PSD2. These regulations mean transactions are subject to rigorous fraud detection and prevention mechanisms.

The standardised authentication procedures and built-in security features provide businesses and consumers with greater confidence in their financial transactions.

Limitations of SEPA Transfers

While SEPA transfers offer numerous benefits, you should consider several important limitations:

Exchange Rates

SEPA is optimised for euro-denominated transfers. When transactions involve non-euro accounts, exchange rate considerations come into play. This introduces additional costs and complexity, especially for businesses operating across multiple currency zones. Factor in potential currency conversion fees and exchange rate fluctuations when planning cross-currency SEPA transactions.

Non-SEPA Countries and Currencies

SEPA’s scope is limited to its 36 participating countries and is designed specifically for euro transactions. Payments to or from countries outside the SEPA zone, or those involving non-euro currencies, may require local payment methods or additional processing steps.

SEPA Instant Credit Transfer Considerations

While SCT Inst offers near-real-time payments, consider that:

1. Not all banks participate in the SCT Inst scheme yet, which may limit availability for some transactions
2. There’s typically a €100,000 transfer limit for SCT Inst, though this varies between banks
3. Some financial institutions charge additional fees for instant transfers

Check with your bank to see if they have specific SCT Inst capabilities and associated costs.

How Rapyd Supports SEPA Transfers

Rapyd Payments Solutions makes SEPA transactions more efficient through our API-based infrastructure, which allows businesses to integrate payment solutions easily.

Our capabilities for SEPA transactions include:

• APIs: Rapyd provides a developer-friendly API that simplifies the process of sending, receiving and automating euro payments.
• SEPA Instant Credit Transfers: Rapyd supports near-instantaneous euro transfers, operating 24/7. Funds transfer within seconds.
• Recurring payments: Rapyd facilitates SEPA Direct Debit options for automating recurring payments like subscriptions. Find more details in our documentation.
• Cross-border multi-currency payments: For businesses operating beyond SEPA’s euro framework, Rapyd enables multi-currency, cross-border transactions.

Take Advantage of SEPA Transfers

SEPA transfers have transformed European payments by removing the complexity and cost of cross-border euro transactions. The system’s key benefits include faster processing (10 seconds for instant transfers), reduced costs, simplified procedures and improved cash management across 36 countries.

This standardisation allows businesses to operate with just one account for all euro payments throughout the SEPA zone.

For companies operating in Europe’s integrated economy, SEPA transfers are a must. And when you work with a payments processor like Rapyd, you won’t have to combine multiple solutions to succeed in both regional and global markets.