How does SEPA instant payments scheme work?
Every year our life is getting faster and faster. The speed of financial operations stands on the top of the business mountain. That is why instant payments are so popular today.
Suppose the creation of a single euro payments area (SEPA) previously seemed distant today. In that case, the largest financial institutions are working to create a pan-European network of instant transfers in euros (SEPA Instant). It will bring SEPA payments to an entirely new and higher level. There is practically no doubt that all efforts connected with the creation of SEPA Instant are going to pay off.
Is SEPA Instant really necessary?
Everybody knows that where there is no development, there is degradation. Once seemed to be irreplaceable, the most popular banking products have become a thing of the past. Customers of banks and major companies expect the highest level of service and higher quality of all services.
Just think of card payments. For a long time, many people associated them with complexity and loss of time. Still, now they can be done instantly, and customers worldwide simply do not understand how they can pay for goods and services otherwise. The 3DS2 authentication protocol will make them even more accessible and more convenient. All of this motivates companies to make all transactions instantaneous as well.
But what do we see? In reality, many payments are far from being called instant because it will take several banking days to make them.
Transactions from one company to another are often delayed due to system incompatibilities. All this increases the complexity of the payment and, of course, increases the fees, which no company will be happy about. To solve these problems, Norway, Germany, and other countries began creating their own payment solutions. But the problem was that these solutions were often only available domestically.
Europe needed a perfect instant payment system, as mobile as possible and with a lot of possibilities. At that time, the idea of creating a network of instant bank transfers which has no analogs in Europe was firstborn. Thanks to Instant SEPA Transfer, all companies and individuals in Europe could make money transfers in euros on the territory of all European countries as easy as within their own country.
What is SEPA Instant?
SEPA Instant is a technology of bank transfers that makes all transactions in EUR are processed almost instantly, no matter if it is day or night, working day or weekend.
The speed of transactions does not depend on the calculation of suppliers, clearing mechanisms, and other factors. In other words, to make a payment between two banks in 10 seconds (most often even faster), it is only necessary for them to participate in the SEPA Instant network.
How are SEPA transfers processed?
Throughout the business day, the bank receives a considerable number of payments from companies and individuals. It is not reasonable to process every incoming payment, so banks combine all these transfers into batches. Each of these payments has its code. Subsequently, at the end of the business day, the batch of payments is transferred for clearing.
It is how standard bank payments are traditionally processed. However, SEPA instant payments are processed quite differently. Payments are not grouped into batches, but on the contrary, each transaction is processed separately in real-time. The payment services provider using Open Banking can very quickly recognize a SEPA transaction and understand that it is instant payment. He processes and clears the payment. And the payment is processed so fast that banks can only dream of such speed.
The positive effects of SEPA Instant and expert comments
Today, the whole world feels the positive influence of SEPA Instant technology because it gives an opportunity not to waste time and to process transactions instantly. Such an option allows companies to manage their cash flow in real-time effectively. Firms can achieve incredible savings in both time and money through more efficient use of their funds and significant optimization of the payment reconciliation process.
SIA director and payment services market expert Andrea Galeazzi was one of the first to realize the real potential of SEPA Instant. When payment service providers were eager to implement and experience SEPA Instant’s features as quickly as possible, Andrea fully supported their aspirations. He also decided to share his expert opinion on how this payment system would impact the payments landscape:
“Whatever types of payments we look at, we will immediately notice that SEPA Instant can make them even more efficient. With it, businesses get new opportunities that they could only dream of before. Whether automotive, finance, oil or e-commerce, SEPA Instant will be of great help”.
Factors that make SEPA Instant successful in the world of business payments
Right now we’re going to take a look at a few factors and understand why SEPA Instant will bring incredible benefits to companies and businesses.
- Increase of maximum transfer amount up to 100.000 euros. It is essential to every company how much money they can transfer in one payment. The larger the amount and the faster the transaction, the better the cash flow of the company will be
- Instantaneous speed of payments. As you know, most payments are made within up to 3 business days. With SEPA Instant, payments are made in seconds. Thus, the company that sends the payment is sure that the money will reach the recipient quickly and can not worry about continuing its activities without interruption.
- Versatility and flexibility. It does not matter whether you transfer money by credit card, credit transfer, or other way. You can always use the service of instant payments. Types of settlements and clearing do not affect it either.
- Wide availability. Many payments are only made when banks are open and operating. For instant payments, this makes no difference. They are available 24 hours a day and 7 days a week, with these payments being made online and in just seconds. Now you won’t have to think about whether a financial institution has a working day or not.
The list of factors that make SEPA Instant Payments so popular could go on and on. But you can probably already see the promise of SEPA Instant Payments.
Of course, as with other innovations, there are some risks, but the benefits of SEPA Instant outweigh them. Many banks already use this system in Europe, and each of them is satisfied with the result. In terms of figures, the system is used in 2272 financial institutions, which is more than 50% of all financial institutions in Europe. There is no doubt that this system will continue to be adopted by banks, each of which will feel all the benefits for themselves, improving the results of their activities and improving the quality of customer service.