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What is a SEPA credit transfer?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedNov 20224 min read

In the post-Brexit commercial landscape, UK businesses that trade within Europe can benefit greatly from any measures that save them time, money and unnecessary complications. If your business accepts payments from within Europe, the SEPA credit transfer scheme helps you to do exactly that. SEPA credit transfer makes it easier to transfer money from one international bank to another. So, what is a SEPA credit transfer exactly, and how does the scheme work?

Here’s what you should know before transferring euros across international borders.

What is SEPA?

The Single Euro Payments Area (SEPA) is an international transaction system created by the European Union. However, it is not restricted only to EU members. As well as including the 27 EU member states, it also encompasses the four members of the European Free Trade Association (EFTA).

These are:

Iceland
Liechtenstein
Norway
Switzerland

Other members include:

Monaco
San Marino
Andorra
United Kingdom
Vatican City State
Mayotte
Saint-Pierre-et Miquelon
Guernsey
Jersey
Isle of Man

SEPA is an EU initiative designed to make cashless payments easier throughout the Eurozone. Users can send and receive SEPA payments, transferring money between international bank accounts with the same ease as domestic bank transfers. The initiative can be used by consumers, businesses and public administrations alike, provided that payments are sent in euros.

What is the SEPA credit transfer scheme?

The SEPA credit transfer scheme (SCT) is simply part of the SEPA initiative, introduced by the European Payment Council in 2008. Under SEPA rules, there are four types of eligible cashless payments. Let’s take a look at each.

Credit transfers

SEPA credit transfers are a safe, affordable, and transparently-priced way to send funds from one bank within the SEPA to another. They are usually used for one-off payments and tend to clear within one working day. To send or receive a SEPA credit transfer, the service provider must be a SEPA participant. Transfers are processed in euros using identifying details including the applicable international bank account number (IBAN) and business identifier code (BIC).

It’s important to note that SEPA credit transfers can only be made in Euros.

Instant credit transfers

The reason why SEPA credit transfers take one working day to process is that they are processed in large batches, and submitted for clearing and settlement at the end of the business day. SEPA instant credit transfers, however, are processed on a transaction level.

This system represents a significant step forward as it facilitates real-time cross-border payments across participating banks. SEPA instant credit transfers can be used to facilitate payments between businesses, between people, or between people and businesses. Unlike SEPA credit transfers, instant credit transfers are not affected by weekends or bank holidays.

Card payments

The SEPA Cards Framework (SCF) has established an infrastructure and set of standards that are upheld by card systems providers, payment service providers, card systems and other entities to ensure that card payments within the SEPA are processed as quickly and securely as they are in their country of origin.

Direct debit payments

While SEPA credit transfers are typically used for one-time transfers, SEPA direct debits are better suited for recurring payments. A SEPA Direct Debit is a bank-to-bank payment. Because communications take place exclusively between banks, there are no card networks involved, and hence lower fees. SEPA Direct Debits are pull-based, meaning that the merchant initiates payment once given a mandate by the customer.

What are the benefits of the SEPA credit transfer scheme?

It streamlines domestic and European bank transfers into a single system.
It facilitates faster and more secure cross-border payments with unified standards.
It enables citizens studying or working in one SEPA country to use existing accounts in their home country.
Accepting payments via SEPA transfer can engender trust from customers and clients in Europe
SEPA transfers do not incur fees, unlike other transfer systems like SWIFT.

Can UK businesses send and receive SEPA credit transfer payments?

Brexit changes currently have no bearing on the UK’s involvement in the SEPA scheme. UK businesses can still send and receive SEPA payments, including credit transfers, to countries throughout the Eurozone.

GoCardless makes it easy to collect SEPA payments from your European customers. It's also cheaper and you'll get paid on time – click here to find out why GoCardless is your best solution to getting paid on time by European customers.

How do SEPA credit transfer payments work?

There are a few factors to keep in mind when setting up SEPA credit transfer payments. We’ve already noted the key criteria above:

The payment must be in euros
It must be transferred between banks in participating SEPA countries
The banks must be members of the SEPA credit transfer scheme
Payments of up to €1bn per transaction are permitted

Credit transfers are generally one-off payments, but they can be recurring payments, e.g. a standing order. They can also be single or bulk payments. For example, a single payment could be used by an EU-based customer to pay for services from a UK-based business. A bulk payment could be used by a UK-based business to cover multiple credits to EU-based employees.

How to set up a SEPA credit transfer

SEPA credit transfer payments are processed in full for the original amount, without deductions. Any fees are added on and charged separately by the sender or recipient’s own bank.

To set up a transfer, you must enter the beneficiary’s IBAN and BIC numbers.
To receive a transfer, you must provide your business’s IBAN and BIC to the sender.
If you’re using a UK business account in GBP, the currency is automatically converted into EUR.

How long do SEPA credit transfers take?

SEPA credit transfers typically take one business day for processing. If you need to process the payment more rapidly, SEPA instant credit transfers move funds in under ten seconds. The cost varies depending on the bank and whether a foreign exchange conversion applies. GoCardless is ideal for sending and receiving international payments. We provide pull-based payments for businesses globally, enabling cross-border payments at the real exchange rate.

We Can Help

GoCardless processes SEPA Direct Debit payments on your behalf. This includes notifying customers, submitting payment requests and ensuring that funds are collected quickly.

It also helps you automate payment collection, cutting down on the amount of admin your team needs to deal with. Find out how GoCardless can help you with ad hoc payments or recurring payments.