Guest Article written by Eddie Harrison, Chief Growth Officer, Navro
Ever since it was introduced for credit transfers in 2008, the Single Euro Payments Area (SEPA) has helped make the EU economy more efficient by eliminating the differences between national and cross-border payments and harmonising standards. Since then, SEPA has been extended to cover direct debits (2009) and was fully implemented across the Eurozone and non-Eurozone SEPA countries by 2016.
In January last year, SEPA evolved further with the introduction of the 10-second rule. The rule stipulates that transactions must settle within this timeframe, 24/7, across all participating countries. The ability to receive instant payments has therefore become a regulatory imperative for all banks and payment providers in SEPA countries.
Later in the year, further changes to the SEPA rulebook meant that regulated banks must also be able to send payments instantly. While non-Eurozone countries still have a few more years in which to get their affairs in order, they will eventually be subject to the same regulatory framework. And looking ahead to April 2027, Eurozone Payment Institutions (PIs) and Electronic Money Institutions (EMIs) will also need to comply, extending the obligation to non-bank providers like fintechs, wallet providers, and payment platforms.
What does all this change mean? What was once an optional capability becomes a mandatory part of the payments infrastructure for all non-bank providers.
Hidden compliance challenges hamper payments
The recent updates to SEPA aim to further increase the efficiency and effectiveness of payments in the regulated zone. However, for many enterprises, SEPA presents a strategic challenge as well as a competitive advantage,
For one, the regulation has done nothing to address the complexity of complying with Know Your Customer (KYC) and Anti-Money Laundering (AML) rules, sanctions screening, or General Data Protection Regulation (GDPR) obligations. It’s little wonder that 51% of financial services professionals see regulatory challenges as their top operational burden.
Cross-border compliance concerns can dramatically slow down payment processes. Navigating the rules mandated under GDPR, for instance, often requires additional due diligence, legal reviews, and in some cases, the establishment of local data processing infrastructure to avoid cross-border transfers altogether. These layers of complexity can delay payment execution, increase administrative overhead, and introduce operational friction into otherwise automated payment flows.
The challenges facing multinational businesses
The compliance challenge is most acute for businesses handling payroll, pensions, or high-volume business-to-business payment flows. For these multinational companies, SEPA leaves a range of key challenges unaddressed. Most notably, SEPA is limited to Euro payments. Transactions involving other currencies still require the use of SWIFT, correspondent banking networks, or alternative systems to manage foreign exchange and cross-border flows.
Moreover, despite SEPA’s harmonisation efforts, local banking practices remain fragmented. Differences in local clearing mechanisms, account structures, cutoff times, and regulatory requirements often necessitate maintaining local bank accounts, particularly for tax compliance and statutory reporting at the subsidiary level.
Beyond these structural limitations, operational challenges persist. For example, variations in payment references, remittance data, and statement formats make it difficult to automate and standardise financial reporting across multiple banks and countries. This can lead to data validation gaps. For example, to process a pension payment, banks in Country A may require a ‘statement of purpose’ with additional codes to authorise the payment, whereas those in Country B require a social security number or other local identity information.
Where these mandatory datasets are missing, the pension payment can be delayed, leaving pensions waiting to access their own money.
Likewise, payroll providers must navigate a complex, multi-tiered system that includes mandatory contributions such as taxes and social security, which are governed by country-specific regulations. Additionally, providers are frequently responsible for administering non-statutory benefits, including health insurance and meal vouchers. Ensuring these payments are processed accurately, punctually, and in full compliance with local legislation presents a significant challenge.
For treasury teams, meanwhile, managing liquidity across borders through cash pooling, in-house banks, or payment factories still demands sophisticated infrastructure and strategic oversight, which SEPA alone cannot provide.
Indeed, the payments challenges SEPA-jurisdiction companies face reflect a global reality: that real-time payment systems, while efficient domestically, struggle with cross-border complexity.
Issues such as regulatory fragmentation, currency limitations, inconsistent banking practices, and lack of interoperability characterise payment frameworks around the globe. SEPA’s limitations, such as Euro-only support, local mandate rules, and fragmented reconciliation, mirror similar frictions in systems like FedNow or Faster Payments. These challenges highlight the need for truly cross-border, interoperable solutions that address regulatory, legal, and operational harmonisation.
Enhancing cross-border payments and compliance
The fintech sector is already at work delivering just such solutions. One approach that has gathered a great deal of traction is payments orchestration, whereby users manage multiple payment providers and gateways through a centralised platform, streamlining the settlement process across diverse financial ecosystems.
However, orchestration alone is not a comprehensive solution. It typically focuses solely on payment acceptance or receivables – routing and processing transactions between payment providers – with limited support for downstream collection or payout processes. As a result, businesses have to manage numerous provider contracts, KYC obligations, and disparate Application Programming Interfaces (APIs), leaving much of the operational complexity unresolved.
Scalability presents an additional constraint. While orchestration platforms deliver efficiencies, they’re generally unregulated and cannot operate within the flow of funds. This structural limitation hampers their ability to scale rapidly or seamlessly across markets, often resulting in higher operational costs and constrained growth potential.
As a result, payments orchestration isn’t a viable solution to complex or international fund flows or payments. You need something deeper that captures all of the complexities – payments curation. Payments curation enables organisations to access a global network of best-in-class payment providers through a single contract and unified API. This model allows firms to activate a complete payments stack, including payment acceptance, settlement accounts, and outbound payouts, without the need to manage multiple vendors or complex integrations.
In addition, payments curation enables organisations to take advantage of sophisticated data validation tools capable of meeting the diverse requirements of each jurisdiction. Powered by AI, these engines can automatically verify the completeness and accuracy of every payment instruction, significantly reducing error rates and minimising transaction failures.
Curated payment platforms also facilitate access to local payment rails, bypassing the inefficiencies of traditional correspondent banking networks. By routing payments locally, providers can achieve faster settlement times and lower transaction costs, enhancing operational efficiency and improving the overall customer experience.
Towards a more efficient and compliant future
SEPA has done much to encourage a more efficient payments infrastructure. However, the complexity of a fragmented payments landscape, as well as increasing regulatory scrutiny, means that more is needed to create a truly efficient payments system in Europe and beyond. Fintech innovations such as payments curation and live, AI-enabled data verification point the way forward. What’s more, organisations that pivot to these emerging technologies stand to gain a significant competitive advantage.
Image provided by Navro
