What Are SEPA payments?
SEPA (Single Euro Payments Area) schemes make cross-border electronic payments in euro (€) as fast, secure and easy as domestic payments. Using SEPA, businesses, and consumers can make and receive credit transfers or direct debit. There are three types of SEPA payments:
SEPA payments are carried out directly between the sender and recipient’s bank accounts and do not involve cards or card schemes. It only requires the IBAN (International Bank Account Number) and the BIC (Business Identifier Code) of the sender and recipient’s bank accounts. Hence, it is a cost-effective way to make cross-border payments. Currently, you can make SEPA payments in 36 countries that are a part of the SEPA scheme (see list of countries here).
How To Use SEPA Payments?
You can use the three different SEPA bank transfers based on your needs. Here’s a quick view:
SEPA Instant Credit Transfer (SCT Inst) – If you want to transfer money immediately, this is your choice. You can send or receive up to €100,000 at a time, at any time, on any day throughout the year. Unlike other credit transfers, SEPA Instant Credit Transfers happen in real-time.
It is optional for the PSPs to be a part of the SCT Inst scheme. Currently, 60% of European PSPs have joined this scheme. Also, the sender and the recipient’s banks must be registered SEPA Instant members.
Maximum transfer limit: Up to €100,000 at a time
How long does it take: Less than 10 seconds
SEPA Credit Transfer (SCT) – You can use these transfers for one-off or recurring payments. Also, you can also make single or bulk payments (one debit from the payer’s account credited to multiple recipients, for example, in the case of payroll). In SCT transfers, the payer can share 140 characters of remittance information to help the recipient understand why they have received the funds and reconcile incoming funds with invoice data. For SCT Transfers, your payment service provider (PSP) must be a participant in the SCT scheme.
Maximum transfer limit: Up to one billion euros (to be precise, €999,999,999.99)
How long does it take: One business day
SEPA Direct Debit (SDD) – You can use SDDs for one-off and for recurring payments (for example, monthly electricity bills, rent, subscriptions). In this case, the merchant/ biller requests money from a payer based on prior approval. Once the payee allows the request, the amount flows from their account into the biller’s account.
Before any money transfer happens, the payer has to sign a mandate (paper or electronic) allowing the biller to collect the money from the payer’s account. SDDs allow recurring bill payments to be processed automatically, ensuring the biller can collect the money even if a customer forgets to pay the bill.
There are two SDD schemes – SEPA Direct Debit Core, designed mainly for consumers, and SEPA Direct Debit B2B, which is exclusively for businesses. All banks participating in the SEPA scheme must offer SDD Core, but it is not mandatory for banks to offer SDD B2B, though they can. In both schemes, the biller stores the original mandate and any info related to changes in the same.
Maximum transfer limit: No fixed transfer limit; the amount is as agreed upon between the recipient and the sender
How long does it take: 2 business days (for SEPA Core Direct Debit); 3 business days (for SEPA B2B Direct Debit)
Are there any extra processing fees or other charges?
SEPA payments cost the same as domestic ones. So, equal charges apply for domestic and cross-border payments made in euros. However, banks may charge an extra FX conversion fee if multiple currencies are at play. You should check with your bank before accepting a SEPA payment in a different currency.
Why Should A Business Use SEPA Payments?
SEPA payments can be quite convenient for B2B payments, compared to other methods such as paper checks or cards, which are slow and costly. Some clear advantages of using SEPA payments are:
SEPA transfers are quick. With SEPA Instant Credit transfer, the money comes in within ten seconds. SEPA Credit Transfers are settled in one business day, while SEPA Direct Debits take a minimum of 2-3 business days. Indeed, receiving funds sooner can have a significant impact on a business’s cashflows.
Larger amounts per transfer
SEPA payments allow you to send and receive larger amounts per transfer. For example, SEPA Instant Credit allows you to transfer up to € 100,000 at a time, which is quite a significant amount. With SEPA payments, businesses can send or receive more money in lesser time, giving much-needed relief to those who rely on cash.
SEPA payments are made directly between banks using the IBAN (International Bank Account Number) and the BIC (Business Identifier Code) of the sender and recipient’s bank accounts. SEPA schemes offer complete protection to the payer, as they require higher security controls in all transactions. However, PSPs have to bear the risk in case of fraud.
You can make SEPA Instant Credit Transfers 24/7 on all calendar days, which can be terrific. Additionally, it allows businesses to initiate payments outside of regular business hours, ensuring business continuity around the year.
How Can Novalnet Help?
Many of Europe’s leading brands trust us with their payments. So, we can guide you on how to use SEPA transfers for your business. We help you accept payments globally in 125+ currencies in 150+ automated country-specific payment methods. Set up your payments within minutes with minimal coding using our instant payment plug-ins. With our AI-based risk management solutions and advanced analytics, you can design the best payment experiences for your customers, all in a fully secure environment.
Reach out to us to know more about SEPA payments and how to use them to grow your business.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.