SEPA

SEPA replaced a fragmented system of national bank transfer schemes across Europe with a single set of rules, formats (ISO 20022 XML), and settlement infrastructure. For merchants, SEPA means that collecting a euro payment from a German customer and a Spanish customer is technically and operationally identical — same IBAN format, same scheme rules, same settlement timeframe.

SEPA Credit Transfer (SCT)

SCT is a push payment: the sending bank initiates the transfer. Standard SCT settles in one business day (T+1) during banking hours. Key characteristics:

• No chargeback: SCT payments are irrevocable once sent. Unlike card payments, there is no mechanism for the sender to reverse the transaction through the bank. The merchant bears no chargeback risk.
• High transaction limits: SCT supports transactions up to €999,999,999.99 — effectively unlimited for commercial use.
• Use cases: B2B invoice payments, payroll, large consumer purchases, marketplace disbursements.
• Bank account required: Both payer and payee need SEPA-participating bank accounts. Not available for unbanked consumers.

SEPA Instant Credit Transfer (SCT Inst)

SEPA Instant is the real-time variant of SCT, settling within 10 seconds, 24/7/365. It is built on the same framework as SCT but with near-instant finality. Key points:

• Maximum transaction limit: €100,000 per transaction (as of 2023; EU regulations are pushing banks to raise this).
• Bank participation: Not all European banks participate, though EU regulation now requires all eurozone banks to offer SCT Inst by 2025.
• Near-zero MDR: Like other real-time rails, SCT Inst has minimal transaction fees compared to card interchange.
• No chargeback: Same irrevocability as standard SCT.
• Open banking layer: SEPA Instant is the settlement rail underneath many open banking (PSD2/PSD3) payment initiations in the EU.

SEPA Direct Debit (SDD)

SDD is a pull payment — the merchant initiates the debit from the customer’s account. There are two SDD schemes:

SDD Core: Consumer-facing. Used for utilities, subscriptions, insurance premiums. The customer signs a mandate authorising the merchant to debit their account. Settlement is T+1 to T+3. Consumers have an 8-week no-questions-asked refund right (13 months for unauthorised transactions).

SDD Business-to-Business (B2B): Corporate-facing. Faster confirmation, no consumer refund right. Banks are not required to verify mandates. Suitable for B2B recurring payments where both parties are businesses.

Key operational requirement: merchants must hold a signed mandate (physical or electronic) before initiating any SDD debit, and must provide the customer with pre-notification (typically 14 days, though this can be reduced by agreement).

SEPA vs Card Payments

For euro-denominated transactions:

	Card	SEPA SCT	SEPA Instant	SEPA Direct Debit
Settlement	T+1–T+2	T+1	10 seconds	T+1–T+3
MDR	0.3–1.5%+	Near-zero	Near-zero	Near-zero
Chargeback	Yes (up to 120 days)	No	No	8 weeks (Core)
Consumer auth	3DS2 (SCA)	Bank login	Bank login	Mandate

The zero-MDR advantage of SEPA is significant for high-volume euro merchants. The absence of chargeback rights cuts both ways — good for merchant dispute risk, but consumers have weaker recourse on SEPA transactions.