SEPA Instant – A complete guide (2023)

SEPA Instant – A complete guide (2023)

SEPA Instant – A complete guide (2023)

February 22, 2023

Feb 22, 2023

SEPA Instant Credit Transfer is used for over 1.2 million transactions across Europe every day, with a total daily volume of approximately €750 million. But most importantly, it’s changing what both consumers and businesses expect from their payments experience. 

If you want to know more about this exciting development in finance, we’ve got you covered. This guide will give you everything you need to know about SEPA Instant payments, but feel free to reach out to us if you have any further questions. 

What is SEPA Instant? 

SEPA Instant Credit Transfer (SCT Inst) is a payment rail that allows businesses and consumers to make EUR payments across Europe in real-time. Transactions take a maximum of 10 seconds and are available in 29 countries, 24/7, every day of the year. 

A maximum amount of €100,000 can be sent via SEPA Instant, and while the bank or payment service provider of both the sender and recipient need to support the SEPA Instant payment scheme for a transaction to take place, 71% of European payment service providers in the Single Euro Payments Area (SEPA) currently support it, with that number expected to rise. 

How and why SEPA Instant came about 

The SEPA Credit Transfer (SEPA CT) was first introduced in 2008, with SEPA Direct Debit available a year later. They were established by the European banking and payments industry with support from national governments, the European Commission, and other authorities. 

Their goal? To improve the efficiency and competitiveness of the European economy as a whole - removing differences in cross-border payment standards and therefore drastically increasing speed, and removing friction, around European payments. 

Since its inception, the SEPA CT payment rail has been a huge success, accounting for more than 95% of bank-based payments in the European Union, with the SEPA zone now currently including 36 countries - several of which are outside the EU. 

In 2017, SEPA Instant was introduced. As the name suggests, the key difference between a standard SEPA Credit Transfer and SEPA Instant Credit Transfer is the speed, however, there are other nuances between the two. For example, the maximum amount of a SEPA CT payment is almost €1 billion. 

The number of countries offering SCT Inst is also less than SEPA CT (29 to 36), though given SEPA Instant’s increasing popularity, this isn’t likely to be the case for long. 

It's worth noting the difference between the SEPA zone and the Eurozone. While the Eurozone refers to the 20 countries that use the Euro currency, the SEPA zone includes these 20 countries and additional nations using different currencies, such as the UK, Sweden, and Denmark.

Use Cases for SEPA Instant

A report by the European Payment Council identified four categories of use cases for instant payments.

Person-to-person (P2P)

SEPA instant facilitates transactions between consumers, it is used as a substitute for cash and cheques and reduces the need for face-to-face interaction when buying items on online marketplaces. P2P instant payments also improve the customer experience of remittance services, allowing family and friends to receive funds and emergency deposits instantly. 

Person-to-business (P2B)

The introduction of instant transfers eases cash flow challenges that particularly affect small businesses. Whether shopping at a small online retailer or paying a tradesperson who has completed a task, SEPA Instant payments allow SMEs to receive funds in real time and use those funds to pay staff, business costs, and more. As such, they benefit from improved cash flow.

This is particularly relevant for transactions that are time sensitive, such as for payments within live streams or when depositing funds in a sports betting website.

Business-to-person (B2P)

Instant payments also improve the flow from the business to the consumer. Using SEPA Instant, a retailer could offer a refund for a returned item instantly to the customer, making their customer experience far better than the norm.

Its high-speed nature is also advantageous for companies such as insurance providers, enabling their claimants to access their funds immediately after a claim has been approved. Again, this significantly enhances their offering and makes them stand out against competitors. 

Companies that make a lot of pay-outs, such as cryptocurrency exchanges, whereas with SEPA CT they relied on processing a big batch of transactions several times in a business day, with SCT Inst, each payment can be processed individually and faster.

Business-to-business (B2B)

Finally, B2B payments can be made more efficiently and streamline operations through the SEPA Instant scheme. Whether paying a supplier on a non-regular basis, making intercompany transfers to address short-term treasury needs, or simply reconciling business funds into a centralized account, there is no business scenario that doesn’t benefit from instant access to funds. 

The consumer view of instant payments

This step forward in payment innovation is by no means just top-down, there is a growing desire for real-time payments from those that can’t access them and an increasing expectation of them from those that can. 

A recent study by the US Federal Reserve, where real-time payments are lagging behind Europe, shows the level of appetite from consumers: 

  • About 70% of consumers say access to enhanced faster payment capabilities from their current financial institution(s) is an important satisfaction driver.

  • Nearly 80% are interested in leveraging faster payments to pay businesses.

  • More than 60% want a real-time view of their account balance and immediate posting of payments they initiate.

In Europe, where SEPA Instant and UK’s Faster Payments are well established, businesses not offering access to these real-time payment rails put themselves at a disadvantage. 

The regulators' view of SEPA instant transfer

It's not just consumers that want instant bank transfers and instant card payments, the European central bank is strongly committed to faster services from payment providers.

In the past year, the European Commission has introduced a draft regulation to encourage a switch from SEPA CT to SEPA instant payments as much as possible. This regulation would require European payment service providers to be able to receive instant payments within 6 months, and be able to send instant payments to other European PSPs within 12 months.

Other aspects of the regulation include taking steps to ensure instant payments are priced appropriately and not seen as a premium product.

How FinXP gives you access to real-time payments

FinXP’s IBAN4U is a Euro IBAN Account service designed for businesses that want to transact in SEPA countries as well as carry out cross-border payments. 

IBAN4U is connected to the SEPA Instant payment rail, meaning that you can settle in real-time in EUR within the SEPA zone.  

IBAN4U also provides API access to PISPs and AISPs allowing for exciting open banking possibilities.

How far will SEPA instant payments go?

In the six years since its creation, SEPA Instant has taken strong steps forward from being a ‘nice-to-have’ to an absolute essentiality for businesses operating within Europe. Instant transfers offer businesses a way to drastically enhance their customer experience and keep at the forefront of modern payment expectations. 

In the near future, SEPA Instant will undoubtedly account for the lion’s share of payments within Europe.

FinXP’s IBAN4U ensures your business is offering the best service it can, both in Europe and across the globe. 

If you’re ready to take that step, get in touch with us today. Alternatively, sign up for our newsletter here for monthly insights on payment trends and advice on making payment solutions work to your competitive advantage.