SEPA Payments Schemes, Instruments, Initiatives and Messages standards

Simply put, SEPA payments are pan-European payments instruments in Euro, created as results of the SEPA project whose aim is to harmonize standards and practices for electronic and cash payments across the SEPA area. The SEPA area consists of 34 countries out of which some do not use Euro as local currency. If you are interested in the details about the SEPA countries, you can read this article.

SEPA covers only payments in Euro currency. It does not aim to replace all types of payments in the SEPA countries and specifically not the payments that are in other currencies. Non-Euro domestic payments still exist and use local payments schemes. This article is about the SEPA payments instruments and initiatives. Let’s list them first to give an overview.

There are four electronic SEPA payments instruments:

  • SEPA Credit Transfer (SCT) live since 28 January 2008
  • SEPA Instant Credit Transfer (SCT inst) live since November 2017
  • SEPA Direct Debit Core (SDD Core) live since 2nd November 2009.
  • SEPA Direct Debit B2B (SDD B2B) live since 2nd November 2009.

There are three main SEPA initiatives:

  • SEPA Cards Framework
  • SEPA goes mobile
  • SEPA for cash

Before we look into these topics, it necessary to set the scene by considering the building blocks upon which SEPA was founded and operates: the SEPA Payments schemes and messages standards.

The SEPA Payments schemes

A SEPA Scheme is a set of rules, practices and standards to achieve interoperability for the provision and operation of a SEPA payment instrument. To become Participants to SEPA Payments Schemes, each Payment Service Provider (PSP) must adhere and implement the scheme rules. This is how interoperability, the ability for PSP to exchange, clear and settle payment transactions independent of their location in the SEPA Area, is achieved. Consumers and companies with just one payment account in any SEPA country can use services provided by PSPs to make euro credit transfers and direct debits not only in their own country, but also in all the SEPA countries. The SEPA Payments schemes are therefore the foundations for the single payments market in the SEPA area.

For each SEPA payment, the scheme rules are prepared and published by the European Payments Council (EPC) and consist of three main documents:

  • The rulebook (Example EPC004-16 2019 SCT Instant Rulebook v1.0.pdf)
  • The Customer to Bank Implementation Guidelines (Example EPC130-08 SDD Core C2B IG 2017 V1.0.pdf)
  • The Interbank Implementation Guidelines (Example EPC115-06 SCT Interbank IG 2019 V1.0.pdf)

The EPC refers to other useful documents for the SEPA payment scheme implementation and provides a list on their website. These documents contain valuable information and it is worth reading or at least going through them if you work on a SEPA Payment project. Below is an example of other useful documents for the SCT scheme implementation: 

  • Guidance on reason codes for SEPA Credit Transfer R-transactions 
  • Quick Response code: Guidelines to enable data capture for the initiation of a SEPA Credit Transfer
  • Recommendation on customer reporting of SCT and SDD
  • SEPA requirements for an extended character set (UNICODE subset) – best practices
  • 2017 payment threats and fraud trends report

Do check these documents for the specific SEPA payment that you are currently working on or implementing. You can download most of them from the EPC Website.

For each SEPA payment, new versions of the three main documents are usually published every year during the month of November after undergoing a similar process. The process milestones are depicted below:

SEPA payments schemes publications calendar
SEPA payments schemes publications – The calendar and main miletones

The generic Four Corner Model for SEPA Payments

All SEPA Payments are based on the Four Corner Model which is itself a simplified open loop model.

Generic Four Corner Model for all SEPA Payments
Generic Four Corner Model for all SEPA Payments

The Four Corners consists of one PSP / Bank and its customer on one side and another PSP / Bank and its customer on the other side. Customers are individuals and companies. PSPs are interconnected through Clearing and Settlement Mechanism (CSM). CSMs do not belong to the Four Corners, but do play a crucial role. A very detailed explanation of clearing mechanisms and the related settlement is provided in this article.

PSPs and banks use national, regional or Pan-European Automated Clearing House (PE-ACH) for the clearing and settlement of SEPA payments. A national CSM interconnects PSPs in one single SEPA country. A regional CSM interconnects Banks in many SEPA countries, but not in all the SEPA area. A PE-ACH is a CSM (or multiple CSMs) that offers complete reachability throughout the SEPA countries. A PE-ACH is a CSM like EBA STEP2. Many national and regional CSMs have partnered with EBA to provide full reachability throughout SEPA. PSPs and Banks can join a CSM as direct participants or as indirect participants.

SEPA Payments Message standards

SEPA Payments messages are based on the ISO 20022 UNIversal Financial Industry (UNIFI) message standards. The syntax used for SEPA messages is the XML (eXtensible Markup Language). But it is theoretically possible to use other syntaxes. Only a subset of ISO 20022 message elements are allowed in SEPA messages as you can see on the next figure.

ISO 20022 and The SEPA payments messages elements
ISO 20022 and The SEPA Payments messages elements

And furthermore, there are specific SEPA rules on how certain fields must be used. As example, the name of a party (debtor and creditor for instance) can have up to 140 characters according to ISO 20022 rules, but in SEPA only 70 characters is allowed. The differences between ISO 20022 and the SEPA rules for the messages elements are highlighted in the Implementation Guidelines, prepared for each scheme.

SEPA messages can carry more data than messages of the replaced domestic schemes. Remittance data is extended (140 characters) and transported end-to-end. It can be unstructured (free text) or structured (XML tags) and enables the beneficiaries to reconcile the incoming funds with invoice-related information. Specific data elements (ultimate debtor and ultimate creditor) indicating the initiation and receipt of ‘on behalf of’ transactions enable corporate customers to outsource their daily payment processing to other service providers inside or outside their companies.

A main goal of the SEPA messages is promote end-to-end straight through processing. Straight-Through Processing (STP) is an automated end-to-end processing of payment transactions without human intervention. STP improves efficiency while at the same time reducing the operational risk. STP also reduces complexity and saves money.

SEPA Payments Additional Optional Services (AOS)

In the above figure, there is a box where it reads: Message elements used in AOS communities. AOS stands for Additional Optional Services. AOS are additional services that PSPs or communities of PSPs can offer on top the SEPA payments schemes, as long as these services meet the compliance requirements of the scheme. These complementary services are provided so as to meet further specific customer expectations.

As the name suggests, AOS are optional for PSPs. They do not have to become participants of AOS. However, in case they want to offer a specific AOS, PSPs must first adhere to the related basic scheme.

With the time many AOS were developed in the different SEPA areas. But most of them remain confined to a specific community (AOS 1 Acceptance Date in Finland or SEPA Credit Transfer Reversal in France). Few AOS, like the AOS Change of Account Information created in France, have been implemented by EBA STEP2 and Banks can join it from everywhere in SEPA.

SEPA Payments Instruments – The SEPA Credit Transfer

The SEPA Credit Transfer is a push payment initiated by the originator (payor or debtor) who instructs his bank to transfer funds from his own account to the beneficiary’s account (payee).

The SCT was launched on January 28th, 2008 and replaced all domestic credit transfers in Euro in the SEPA countries on 1st February 2016.

In this article, The Four Corner Model for the SEPA Credit Transfer is analyzed.

Main features of SCT:

  • IBAN (International Bank Account Number) and BIC (Business Identifier Code) are used in the interbank space as the account identifiers for both payer and payee, NOT national bank sort codes and account numbers. In the Customer-to-Bank space, it is enough for customers to provide only the IBAN in the instructions to the bank (SEPA IBAN Only Rule)
  • The maximum execution time is one business day. It was three business days at the beginning. The Originator’s account debited on acceptance date (D) and the beneficiary account is credited at the latest on the next business date (D+1).
  • The full amount is credited to the payee’s account
  • Remittance data up to 140 characters
  • Ability to send or receive payments ‘on behalf of’.
  • The scheme defines standard formats for messages related to exception handling for wrongly or unsuccessfully processed transactions (See the table below)

The book SEPA Credit Transfer – how to understand and add value to your SCT payment project is a step-by-step guide to understand and master SCT and the payments topic for payments professionals. You can get the ebook below or the hardcover book on amazon.

Look inside Details
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SEPA Credit Transfer eBook

  • It was never so easy to understand payments and implement SEPA Credit Transfer. This book will enable you to save precious time and move to the fast track in your career in banking and payment.

SEPA Payments Instruments – The SEPA Instant Credit Transfer

The SEPA Instant Credit Transfer is a funds transfer executed in 10 seconds (25 to 30 seconds in the worst-case scenarios) from the originator’s account to the to the beneficiary’s account every single day of the year. It is a revolution. Like the SCT, the SCT Inst is initiated by the debtor and is therefore a push payment.

The SCT Inst went live in November 2017. It is an optional scheme i.e. PSPs in SEPA are not obliged to adhere to the SCT Inst scheme. Recent statistics show that 2042 payment service providers from 16 countries (representing over 49% of European PSPs) have already adopted it and many PSPs are currently implementing it. So the SCT Inst Scheme will certainly have a bright future!

The Four Corner Model for the SEPA Instant Credit Transfer will be analyzed in a coming article. But the underlying principle are the same as for the classic SEPA Credit Transfer.

SCT Inst has many features in common with the SCT. In addition we can add :

  • Availability 24/7/365 – The services based on the SCT Inst scheme are available 24 hours a day and on all calendar days of the year.
  • An initial maximum duration of ten seconds
  • An initial maximum amount of 15,000 euros
  • Flexibility – SCT Inst scheme participants can agree on either a bilateral or multilateral basis on a shorter execution time and a higher maximum amount.

SEPA Payments Instruments – The SEPA Direct Debit Core

A SEPA Direct Debit is a pull payment initiated by the Creditor (the payee) to collect funds from the debtor’s account (the payer). The debtor signs an electronic or paper mandate to pre-authorise the creditor to send direct debit instructions (collections). Direct debits can be recurring or one-off payments.

The SDD went live on November 2, 2009 and replaced domestic direct debits in Euro in the SEPA countries on 1st February 2016.

Read the article about the Four Corner Model for the SEPA Direct Debit for an in-depth analysis if you are interested.

Main features of SDD Core:

  • IBAN (International Bank Account Number) and BIC (Business Identifier Code) are used in the interbank space as the account identifiers for both payer and payee, NOT national bank sort codes and account numbers. In the Customer-to-Bank space, it is enough for customers to provide only the IBAN in the instructions to the bank (SEPA IBAN Only Rule)
  • Creditor must receive a signed mandate from the debtor and is responsible for holding and modifying it.
  • Presentation deadlines: First, one-off and subsequent SDD at the soonest 14 calendar days and at the latest 1 business day before due date.
  • (No difference now, but they used ot be different in the past)
  • Remittance data up to 140 characters
  • Ability to send or receive payments ‘on behalf of’.

SEPA Payments Instruments – The SEPA Direct Debit B2B

Same things as for the SEPA Direct Debit Core. In order not the repeat myself, I refer you to the previous paragraph. The SDD B2B scheme has a lot in common with the SDD Core Scheme. There are some differences though. This article highlights the main differences between SEPA Direct Debit Core and SEPA Direct Debit B2B Schemes.

Few remarks about SDD B2B (vs. SDD Core):

  • Participation in the SDD B2B scheme is optional.
  • The SDD B2B is used between businesses for funds collections.
  • If the transaction was authorized with a signed mandate, the debtor has no refund rights after the SDD execution.
  • The debtor can obtain a refund only for an unauthorised collection not covered by a valid mandate.

Tables with an overview of the SEPA Payments schemes messages

WP Data Tables

SEPA payments Initiatives – The SEPA Cards Framework

The SEPA Cards Framework is not a new payment instrument, but an interoperability framework in the SEPA Area.

With the SEPA Cards Framework (SCF), the ambition is to create an interoperability framework that establishes common operating rules for all banks, payments, users and card acceptors throughout the SEPA area. The technical, legal or commercial barriers that led to fragmentation of the card networks in Europe must be removed.

The main idea behind the SCF is the following:

[box type=”info” style=”rounded”]Any card, anywhere in SEPA. In other words, any card issued in any SEPA country must be accepted in all countries of the SEPA area.[/box]

The use of a card everywhere in the SEPA area must be as easy as in the country where it was issued. This should be achieved thanks to the harmonization of protocols and materials in the SEPA countries. The payment card has to move from a national card to a European card or SEPA card. The SCF applies to general purpose cards. Store cards of limited acceptance are not concerned. But store card issuers can choose to implement the SCF rules if they wish.

The scope of SCF is limited to payments and withdrawals in euros (so not in other currencies). It is important to distinguish between the currency of the transaction and the currency of the account to which the card is linked. The account can be held in euro or another currency. But the transaction must be in euros and must have been carried out in the SEPA area. Card pricing is also harmonized in the SEPA area for cardholders, accepting merchants and banks. It is no longer allowed to have different prices in different countries within the SEPA area.

Finally, the SCF is also pursuing the goal of harmonizing and strengthening the security of card transactions. Card payments must comply with the EMV security standard. Cards must have a chip and payments should be authenticated by entering a Personal Identification Number (PIN).

[box type=”info” style=”rounded”]The SEPA Cards Framework is a reality now in the SEPA Area. Its implementation started in 2005 and was completed in 2015.[/box]

In summary, the SEPA Card Framework is based on three fundamental principles:

  • Cardholders of general-purpose cards issued in a country in the SEPA zone must be able to make payments or withdrawals in euros under the same conditions throughout the SEPA zone.
  • Merchants must accept the cards regardless of the SEPA country where it was issued.
  • Card payments must be based on the EMV security standard and PIN authentication.

SEPA Payments Initiatives – SEPA goes mobile

With this initiative, the EPC aims to facilitate the initiation and use of all SEPA instruments with mobile devices.

Mobile payments (payment made using a mobile device) are gaining acceptance among consumers in the SEPA area and all over the world. The type of mobile payments are numerous and rely on different technologies (Near-Field Communication payments, Sound waves-based payment, Magnetic Secure Transmission payments, Mobile wallets, SMS payments, Internet payments, Quick Response code payments, etc.). This can lead to fragmented mobile payments space and where the consumers have to deal with a lot of solutions that are not interoperable.

Therefore, “The EPC’s work aims to support the development of mobile proximity payments by providing guidelines facilitating the interoperability of different solutions at European level and increasing their security.”

SEPA Payments Initiatives – SEPA for cash

We talk and read a lot about non-cash payments. But Cash is still the predominant method of payment in most European countries and remains a very expensive payment instrument. The practices and usages related to issuing, distribution and recycling of cash are various and not always efficient in the SEPA countries.

The EPC has set up a framework with the objective of developing a common set of rules and best practices for the distribution and recycling of wholesale and retail euro cash in the Eurozone. It is called the SECA Framework. SECA stands for Single Euro Cash Area.

In short, with the SEPA for Cash initiative the EPC pursues two main goals: first to reduce the cost of cash, and second to harmonise cash services across Europe.

You can find more information on the SEPA for cash page on the EPC website. The SECA Framework document is available for download here.

The book SEPA Credit Transfer – how to understand and add value to your SCT payment project is a step-by-step guide to understand and master SCT and the payments topic for payments professionals. Key concepts in payments like clearing, settlement, direct and indirect participants, booking and accounting are presented and explained in a clear manner.

You can get the ebook below or the hardcover book on amazon.

Look inside Details
Pay with Card (€16.99)
Preview Buy (€16.99)

SEPA Credit Transfer eBook

  • It was never so easy to understand payments and implement SEPA Credit Transfer. This book will enable you to save precious time and move to the fast track in your career in banking and payment.


  1. Hi Jean…. Very new cell article… A complete idea of SEPA in a nut shell.

    A quick question what is current status of SEPA cards Framework and SEPA for Cash schemes.

    Are these implemented in pilot mode anywhere ?

    • Hi Basha,
      First I want to thank you for your appreciation. I try to do my best!

      In short, SEPA Cards Framework is complete in the SEPA Area.
      You have two main card networks in the SEPA Area: Visa and MasterCard.
      Interoperability was already working to some extent and with SEPA it was accelerated.
      Major projects began in 2007-2010 and are complete now.
      Today all european can use their bank cards in any SEPA countries, no matter in which country the card was issued.

      The SEPA Cash Initiative is still ongoing.
      Cash is a very sensitive area and it is a real challenge to standardize the practices everywhere in SEPA.

  2. Hi Jean..

    Can you please also update with the correspondance ISO current version message types (e.g. Pacs.008 ,Pacs.002) for the different flow of SEPA (SCT, Request for Return of Fund, RFP)

    • Hi Elton,
      In SEPA, the camt.056 is supported in the SEPA Credit Transfer Scheme. It is a request to cancel an SCT transaction. In SDD core, the creditor bank sends the pacs.007 to reverse funds that have been mistakenly debited. However, banks can provide the possibility to send camt.055 to corporations that want to cancel a pain.008. When the bank receives the camt.055, the transaction is cancelled if it has not been executed yet. If not, the bank would send a pacs.007, not a camt.056 to reverse the funds. I hope this helps.

  3. Hi

    Please can anyone help with the purpose of Local Instrument code in SEPA Credit Transfer? Available option and when to use these option?


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