Two modes of payment exist in the constantly evolving world of payments: the one-time payment, based on a single periodicity, and the recurring payment, with a defined frequency and amount.
It can sometimes be quite challenging to choose the preferred mode based on your needs and those of your customers. It’s legitimate to wonder about the differences between these two types of payments.
Indeed, depending on the typology of your activity, your services or products, and your customers, one payment mode may be more suitable than another.
We’ll compare these two payment modes by illustrating them with examples to assist you, as a merchant, in your search for payment services.
Finally, amidst the jungle of existing payment methods, we’ll focus on comparing SEPA transfers with other types of payments to explore the perspectives it offers compared to others.
Focus on One-Time Payment: Definition and Key Characteristics
Regardless of the payment method used (credit card, bank transfer, direct debit, cheque), making a one-time payment involves issuing a payment that will be effective only once. Without recurrence, this payment mode can be done instantly (for example, in the case of an instant transfer, a one-time direct debit, or a credit card payment) or with a delay depending on the payment method used.
→ In the case of a traditional SEPA transfer of the SCT type (Sepa Credit Transfer), the associated delay – usually between 1 and 3 working days – must be taken into account for the funds to be received by the beneficiary bank.
This payment mode will be appreciated by your consumer customers when the payment is made to settle a unique service, such as the consumer’s payment for your service or the online purchase of your products.
Focus on Recurring Payment: Definition and Key Characteristics
Recurring payment is a payment that will have a defined frequency at its creation with a fixed amount that has been validated beforehand.
This payment mode is often preferred for a product or service with recurrence, for example, in the case of a subscription or recurring billing.
Once the recurring payment is set up, subsequent payments will be made without the need to validate them beforehand.
In terms of examples, depending on the positioning and sector of your business, you could implement this type of payment for the following use cases:
- Subscriptions to your services (energy, streaming, gym membership, monthly rental, etc.)
- Payment of your monthly contracts (insurance premium, credit, lease, etc.)
Recurring Payments: What Advantages for Merchants and Consumers?
Recurring payments offer a range of significant advantages if you offer subscription-type services requiring regular payment:
- Quick and Unified Initialization: Even though it involves repeated transactions, recurring payments only require the primary information (IBAN, mandate, or card details) to be recorded once.
→ The initial transaction serves as the setup procedure, and subsequent operations are executed based on the previously gathered information.
- Cash Flow Planning: Regular payments with a defined amount allow for the anticipation of received payments.
→ You can forecast your cash flow as payments (assuming no failures) will arrive on the scheduled date.
– A significant time savings: no need to question every month, thanks to the chosen payment method, the payment will be made regularly without the need for human intervention, the same for your customers.
Depending on your activity, prioritizing recurring payments is therefore more favorable in the long term, provided you automate some of your payment processes to simplify your life.
Why Automate Your Payment Processes for One-Time or Recurring Payments?
Automating your payment processes offers a multitude of advantages, especially for merchants.
By using modern technologies and dedicated tools available in the payment market, you can:
- Gain operational efficiency: Today, many solutions exist – including SlimPay – to help you reduce the manual processing of tasks related to managing your company’s payment operations (collection, reimbursem*nt, etc.).
→ Automated processes can help reduce cases of human error and allow you to focus on value-added tasks while contributing to significant resource savings.
- Manage your cash flow more effectively: being able to schedule your received payments (especially recurring payments) makes it easier to manage your future cash accounts by having a good overview of upcoming payments.
- Improve your customers’ experience: modern technologies and tools available on the market allow you to offer smooth, flexible, and tailored payment methods.
→ These solutions also offer a high level of security, as transactions will be made with strong authentication depending on the selected payment method.
Furthermore, there is a diversification of payment methods in the payment world: previously, SEPA transfer was one of the most popular payment methods and nowadays, it is in competition with many others.
Among all the available payment methods, what are the differences between SEPA transfer and its competitors (cheque/cash, direct debit, and credit card)? Why is it declining and which solution should be favored?
What are the characteristics of SEPA transfer for your one-time and recurring payments?
Let’s now focus on SEPA transfer, one of the frequently used means for settling services. This payment method allows you to transfer funds in euros from an issuing bank to a receiving bank within the SEPA zone.
It is characterized by:
- The beneficiary’s bank account number (IBAN)
- The beneficiary bank’s identifier (BIC)
Firstly, note that there are three types of SEPA transfers:
- The traditional SEPA transfer or SCT (Sepa Credit Transfer): it is the first type of transfer that was launched on the market after the creation of the SEPA zone.
It allows the transfer of funds from account to account, in other words, from one bank to another, within one to two business days.
In general, the consumer receives the bank details of their provider to whom they must pay a bill.
Its main characteristic is that it can be immediate (if the requested execution date corresponds to the current date) or deferred (if the requested execution date is after the current date).
- Permanent SEPA transfers: this is an extension of the traditional SEPA transfer.
By using it, the consumer can automatically make a transfer scheduled for a fixed date with a defined amount with their bank.
If you choose this type of payment for your customers, it should be noted that the duration during which transfer operations can be carried out is configurable via your financial institution’s application or website, and it is possible to suspend the issuance of a permanent transfer at any time.
- Instant SEPA transfer or IP (Instant Payment): also known as instant transfer, it should be noted that it is actually completed within a 10-second interval.
Thus, funds are transferred quickly between the debtor’s bank and the creditor’s bank, allowing your customers to settle their bills and services within a short time frame.
Another characteristic of instant transfers is that they are accessible 24/7 from the moment the receiving bank and the issuing bank offer this functionality.
However, it should be noted that this type of transfer is often subject to fees in traditional banks that offer it, even if new players and PSPs offer this service at low costs.
For transactions between businesses, for example, expect around €1 for instant transfer with a capped amount around 100,000€ per settled transaction, configurable according to banking establishments (on average, traditional banks set this authorization around 15,000€).
Regulation is underway to force traditional banks to offer IP at a rate equivalent to SCT for individual, professional, and business customers.
In summary, here are the different types of SEPA transfers and their periodicity:
| Type of SEPA transfer | Frequency |
|---|---|
| Traditional SCT transfer | One-time payment |
| Permanent transfer | Recurring payment |
| Instant transfer | One-time payment |
Several developments are under consideration, including the possibility of offering defined clients (individuals, professionals, or companies) permanent instant transfers, combining the advantages of these two types of transfers.
SEPA Transfer: A Useful Payment Method for One-Time Payments?
Currently, if you want to receive a one-time payment, you can use either an SCT transfer, if you want to delay the payment date into the future, or an IP transfer, if you prefer an instant option.
As a merchant, you have several use cases to manage the payment of your services for a one-time payment, in addition to various payment methods, which we will discuss in more detail later in the article.
As previously mentioned, to use SEPA transfers for regular invoices, the permanent transfer is preferable if you do not want your client to have to perform the operation multiple times.
You could opt for your customers to make a classic SCT transfer, but this has no advantage for regular transactions.
If you offer a classic SEPA transfer for your subscriptions, your clients will have to re-enter the transfers regularly to make their payments, which is not advantageous for them or you.
Now that all this has been said, let’s analyze the fundamental differences between SEPA transfers and other payment methods available today to see what might be the best alternative for you.
SEPA Transfer vs. Physical Currency
By physical currency, we mean checks or cash, some of the oldest payment methods. However, in this article, we will deliberately focus on checks, which are a traceable payment method unlike cash, and when it comes to business payments, traceability is essential!
So, SEPA transfer or check for B2B payments?
In terms of costs for your clients, the check wins, as it is the only payment method that is always free, regardless of the financial institution.
Even though the rules are changing regarding the fees for IP transfers, most traditional banks currently charge around 0.80 cents for this operation.
Your clients will, by default, be more reluctant to use this payment method regularly.
For you, it’s the same in either case, as all operations will be in your customers’ hands and you will just have to wait…
Now, let’s talk about the delays…
Using a check involves a long and tedious process for both your clients and you.
On the client side, they will need to fill out a check in a world where most actions are now digital, send it by mail, and wait for it to be cashed, which, depending on the timing and anticipation, could result in rejections if not managed properly.
On your side, it’s pretty much the same. You’ll need to ensure the funds are deposited by communicating the check to your financial institution and then wait 24 to 48 hours for the operations to be completed.
Imagine having to repeat these operations every month for managing your subscriptions?
We agree, there are more optimal ways, right? 🙂
| On-time payment | Recurring payment | |
| SEPA transfer | Possible if instant or traditional transfer but at the customer’s discretion | Possible if permanent transfer but at the hand of the customer |
| Check | Possible | Possible, but need to send payments regularly.This is clearly not preferred, especially for business-to-business payments. |
SEPA Transfer vs. Credit Card
An important difference is to be noted regarding the use of these two means of payment: mentioning a bank card implies the utilization of existing networks, mainly dominated by the American giants Visa, MasterCard, and American Express.
These networks charge significant fees (interchange fees, network fees, and bank commissions), some of which depend on the amount being sent.
In contrast, for SEPA payments, the fee for an SCT or IP transfer is fixed in advance and does not depend on the amount your customer sends.
In terms of costs, the advantage goes to the SEPA transfer, as you can know the fee amount by consulting the tariff guides of your financial institutions.
Regarding security, traditional transfers are considered safer because IBAN fraud is much less common than credit card fraud, at least nowadays.
Finally, if we consider the amounts paid, credit cards are generally used for paying smaller bills, whereas SEPA transfers are preferable for larger payments.
The last criterion to consider is the failure rate versus the acceptance rate: on this point, SEPA transfer also comes out ahead. Indeed, for all payments made by card or transfer, a higher failure rate is observed for the former than for the latter.
Summary table of differences between SEPA transfer and credit card for one-time and recurring payments:
| On-time payment | Recurring payment | |
| SEPA transfer | Possible if instant or traditional transfer but at the hands of the consumer | Possible if permanent transfer but in the hands of the consumer |
| Credit card | Possible | Possible if the information linked to the bank card is recorded beforehand |
SEPA transfer vs. SEPA direct debit?
These two terms are often mistakenly conflated because they involve the same actors but operate on entirely different payment processes, especially regarding the originator.
In the case of a SEPA transfer, it’s important to understand that the payment will solely be in the hands of your end consumers.
They will choose the transfer date and amount, even if you can advise them beforehand. It’s up to them to send the funds whenever they please 🙂
And as you know, consumer-initiated transactions also entail the risk of manual errors in the amount, which can adversely affect your finances and lead to back-and-forth with your customers that could have been avoided.
Even worse, if the customer “forgets” to make the transfer on the correct date, your cash flow will suffer, despite being preventable.
How can you avoid this?
By keeping the payment process under your control (or under the control of the payment service provider you’ve chosen to meet your needs and challenges).
In practical terms, using automatic direct debit instead of transfers puts you in charge of initiating the payment request, whether for a one-off or recurring payment.
What are the advantages for you?
Firstly, the ability to forecast your cash flow by managing collection dates and ensuring funds are indeed debited on those dates.
Secondly, as a merchant, you can be confident that the correct amount will be debited from the customer’s account without errors.
| On-time payment | Recurring payment | |
| SEPA transfer | Possible if instant or classic transferat the customer’s hand | Possible if permanent transfer to the customer’s hand |
| SEPA direct debit | Possible if one-time collection from your handNeed to specify when creating the sample that it will only be carried out once (One Off type) | Possible if recurring withdrawal to your handNeed to specify when creating the direct debit that it will be recurring with a recurrence to be defined |
To conclude this article, in a world dominated by digital payments, there are several interesting possibilities for your business, whether for one-time or recurring payments.
From the customer’s perspective, the traditional SCT transfer has the advantage of being mostly free with a low rejection rate, unlike the instant IP transfer, which is generally paid (for B2B payments), but offers the advantage of transferring funds in 10 seconds.
So, for you, it comes down to choosing between charging your customers to receive your funds quickly or waiting several days for it to be free for them..
While these types of payments represent a possible avenue for you, they are certainly not the most optimal. The major drawback is that you are not in control of the collection process.
In addition to transfers, direct debit offers you, as merchants collecting funds, the opportunity to influence the payment process: you will initiate the payment (date, amount, and frequency).
By offering direct debit as part of your payment options, you can anticipate your financial flows while improving customer satisfaction, which should contribute to long-term loyalty as no manual action will be required on their part.
