SEPA Credit Transfer: The Complete Guide

According to the European Central Bank, with over 184.2 trillion euros worth of transactions in 2021, credit transfers account for 93% of all amounts exchanged in the euro zone. It is number 1 in cashless payments (by value), well ahead of direct debits and payments through cards.

Credit transfers are favored by companies and public authorities for large-value transfers, as well as for smaller B2C and C2C transactions. Indeed, it offers numerous advantages in terms of fraud prevention and speed of transaction execution. 

For cross-border transactions, credit transfers are also in the majority in terms of value, particularly in the euro zone. It should be noted that the creation of SEPA (Single Euro Payments Area) has largely contributed to the democratization of this means of payment. Today, it’s a matter of course for businesses and private individuals alike to be able to send and receive credit transfers in Europe at no extra cost. 

Treezor invites you to take a closer look at the main features and operation of the SEPA Credit Transfer, to better understand why it’s essential to offer this payment method to your customers.

1. SCT: what is it?

Definition of a SEPA credit transfer

SCT stands for SEPA Credit Transfer. It is used to transfer funds in euros between the payment account of an originator and that of a beneficiary located in one of the institutions in the SEPA zone. The SEPA zone comprises 36 countries: 

• the 27 members of the European Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden)
• the 4 EFTA (European Free Trade Association) states: Iceland, Liechtenstein, Norway and Switzerland;
• Monaco, San Marino, Andorra, Vatican City;
• the United Kingdom.

The Single Euro Payments Area has harmonized procedures and reduced transaction costs. There are two types of SEPA credit transfer: 

• the standard SCT, operational since January 2008;
• the instant SCT (SCT Inst), introduced in 2017 by the European Payments Council.

Unlike direct debits, both are initiated by the payer, and rely primarily on IBAN and BIC entries.

SEPA Credit Transfer features

The SEPA Credit Transfer can be used to settle a supplier invoice or to pay for an online purchase, regardless of the amount involved. To understand the flexibility of this payment method, let’s take a closer look at a few key facts.

Payment ceilings: in theory, there is no cap for standard SCT. In practice, the bank or financial institution sets the actual maximum amount according to its own criteria for managing flows and combating fraud, money laundering and the financing of terrorism. For SCT Inst, transfers are authorized up to €100,000. 

Availability: if a standard SCT is entered after 6pm, on Saturdays, Sundays or public holidays, it will be processed on the next bank working day. SCT Inst is available 24/7.

Periodicity: transfers can be one-off, in which case the payment order is valid only once. It can also be regular, involving the transfer of a defined amount on a specific date at recurring intervals. The SCT Inst applies in the case of a single transfer. 

Execution time: one business day from receipt of the transfer order for standard SCTs.

• The opening hours of the bank issuing the transfer must be taken into account.
• A transfer issued at 6:01 p.m. for an establishment closed at 6:00 p.m. will be issued the next business day, when it opens.

With an SCT Inst transfer, funds are disbursed in less than 10 seconds.

Irrevocability: once a transfer order has been received by the bank, it cannot be canceled. This applies to all types of transfers (standard and instant SCTs).

Disputes: the sender has 13 months from the date of debit to issue a funds recall and dispute a transfer that has been incorrectly executed by the sender’s bank. However, if the funds are no longer available, the issuer’s claim may be refused.

2. How SEPA credit transfers work

The SEPA credit transfer is based on a European interbank network.

The SCT process

An account holder uses a credit transfer to transfer funds to another account, or to settle a debt with a third party (private individual, company or public authority), as follows: 

1. He or she sends a transfer order to their financial institution with the beneficiary’s bank details.
2. The financial institution transfers the funds to the beneficiary’s bank.
3. The bank credits the account indicated on the transfer order.

Essential information

To issue a transfer, the account holder must provide certain information: 

• the beneficiary’s identity (name for individuals and company name for businesses);
• IBAN;
• BIC code;
• transaction amount;
• the execution date and frequency (one-off or ongoing).

Focus on IBAN and BIC codes

The IBAN, or International Bank Account Number, is a code of up to 34 characters that corresponds to the account number in European format. In France, it has 27 characters, representing:

• the country code (FR);
• a 2-digit control key;
• the 23-digit RIB (bank code, branch code, account number and RIB key).

The BIC or Bank Identifier Code is an 11-character international bank identifier.

3. Benefits of a SEPA Credit Transfer in detail

On a day-to-day basis, the SEPA Credit Transfer facilitates B2B and B2C commercial transactions, as well as transactions between private individuals.

Access to standard and instant SEPA credit transfers

With its two payment types, the SEPA credit transfer meets users’ expectations in terms of ceilings, availability and execution time. Issuers opt for one or other of these solutions, depending on the urgency of the payment or the amount to be transferred. 

For example, to avoid late payment penalties, a company can settle its debt with a supplier or the authorities via an instant transfer. On the other hand, to set up recurring transfers, it will choose the standard SCT.

As a reminder, here is a table of the main features of standard and instant SCTs.

Reliable and secure payment method

The SEPA credit transfer has made a major contribution to simplifying exchanges within Europe and reducing the risk of payment fraud. The creation of SEPA has reduced transaction costs and harmonized cross-border payment rules.

For companies, SCT improves receivables and payables management, and helps maintain a positive net cash position. It is a payment solution that is difficult to replace for all players in the economy.

That’s why it’s essential to include standard and instant SCT in your range of payment methods. Integrating an API, such as Treezor’s, is easy to use and offers additional services such as automated accounting reconciliation.