Decoding European B2B payments

Every day, more than 170 million Single Euro Payments Area (SEPA) payments and 240 million card payments are sent in Europe. And every day, millions of finance and accounting professionals try to make sense of those payments, asking what they were, why they happened, and how to book them.

To make things worse, there are bank transfers, direct debits, debit cards, delayed debit cards, credits, cheques, remittances, and legacy niches. The business payments jungle is opaque and associated with drastically different costs across methods.

We’ve been baffled that this is the status quo. That’s why we’re building Airbank with a radical principle:

Businesses should not need to care about payment types

… and by default use the one that is cheapest, quickest, and most intuitive.

Moving money is an infrastructural commodity. In practice, the only payments experience a business should have is A → B. Easy.

To make this a reality, we need to understand and utilize all the different payment rails available.

Payment rails in Europe have different importance

We measure importance from transaction volumes and value. Volume, for usage behavior and value in €, for relevance.

Diving into payments data which the European Central Bank published shows: Germany has the largest SEPA payments volume in Europe. SEPA payments are bank transactions and direct debits in Europe. In Germany alone, these are totalling at more than 17 billion transactions every year. Debit and Credit Card volumes in Germany (25%) are far less important than bank transfers (73%) and credit cards in Germany are nearly negligible.

2 categories of SEPA payments: Credit Transfer and Direct Debits
2 categories of SEPA payments: Credit Transfer and Direct Debits

So what actually are SEPA payments? There are two categories: One is the classic bank transfers from one account to the other — also called credit transfer. The other is pre-authorized payments as you might know it from paying your landlord — also called direct debits.

In Europe, Germany is the only country to processes more SEPA transfers than card transfers in terms of volume. France, on the other hand, transacts the highest volumes through debit cards.

Credit cards transactions are highest in the UK, accounting for half of Europe’s credit card transactions.

# of transactions in million in Europe
# of transactions in million in Europe
# of payment transactions in millions in Europe

*Aggregate EU data is missing data from individual countries. Data includes B2B, B2C, C2C channels.

In terms of usage, on pan-European level seems to be a balance between bank transfers (SEPA) and card payments. However, when we measure the relevance of these rails by looking at transaction value, the balance between bank transfers and card payments shifts.

By value, credit card payments are really negligible when measured in Euro value with only €9 billion transacted in Germany and €615 billion across Europe (again, UK accounting for most of it). Debit card payments are moving more money, but in total, card rails are not moving the needle at all when put into context:

The European payments market (incl. UK) transfers about €300 trillion annually. This makes Visa’s €1.8 trillion transaction value in Europe look rather small. Visa is playing in the €3.48 trillion debit and credit cards network.

So what is the most important payment rail?

It clearly is SEPA payments, not card payments. The relevance of SEPA bank transfers is above 95% for most countries, measured by € value. And the best part is that the costs of SEPA payments are regulated: a bank must not charge you more than the cost of a domestic transfer. This makes it, ideally, free. But beware, it is still at the banks’ discretion to charge for a domestic transfer. At Airbank, we notify you if a bank charges you too much for domestic fees!

Transaction value in billion € in Europe across payment methods
Transaction value in billion € in Europe across payment methods
Transaction value in billion € in Europe across payment methods

*Aggregate EU data is missing data from individual countries. Data includes B2B, B2C, C2C channels.
** Note: We’re not going into SWIFT data at this point yet since it’s a global proprietary service, not European one.

Solving cash flows with Airbank

Bank transfers is where the party’s at. And we know one thing for sure: Stone-age banking portals and solutions relying on legacy protocols such as 1995-introduced EBICS have failed to heave business banking into the 21st century.

In order to build a delightful payments experience, you need to build a delightful banking experience. That’s what we’re doing at Airbank. No matter if the preferred channels are through SEPA or card networks, at one bank or the other, paying someone online should be as simple as handing someone a coin in real life.

Integrated finance is the key for smooth businesses processes, from banking and payments to cash flow management. Airbank enables small and growing businesses across Europe to marry bank statements with business logic for an enriched history of payment transactions.

That way we empower finance teams to focus on solving the mission-critical problems of the business instead of having to piece together the jigsaw puzzle of bank transactions by hand.

If you are a founder or CFO at a small or growing business, sign up to the Airbank waitlist today and we’ll onboard you as soon as we roll out across Europe. We can’t wait to show you around!

Cash Management for modern businesses