Sepa Credit Transfer – Return Flow

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Sepa Credit Transfer RETURN FLOW

“A ‘Return’ occurs when a SEPA Credit Transfer is diverted from normal execution after inter-PSP Settlement and is sent by the Beneficiary PSP to the Originator PSP for a SEPA Credit Transfer that cannot be executed for valid reasons” – EPC rule book. In this article we will discuss SEPA credit transfer RETURN FLOW.

Basically, a return payment is sent by the beneficiary PSP if it is not able to process the original payment. A point to note here is that the original payment must be settled at the inter-bank level. A Pacs.004 is sent by the beneficiary PSP to the originator PSP to return the funds.

This pacs.004 will take the same path as the original pacs.008 but only in the opposite direction. It is also worth remembering that only a beneficiary PSP can send a Pacs.004 and not the originator PSP.

So, if you (a PSP) are receiving a Pacs.004 then you are an Originator PSP.

They are several reasons a beneficiary PSP may decide to return a payment here are a few examples:

  • Account address invalid
  • Account blocked, reason not specified
  • Account closed
  • Account identifier invalid (i.e. invalid IBAN or account number does not exist)
  • PSP identifier incorrect (i.e. invalid BIC)

Once the pacs.004 is received by the originator PSP and is successfully processed the funds will be returned to the originator and it is communicated to the originator or the customer. This is done either using a pain.002/camt.054 message. Based on my conversation with other payments professionals camt.054 is used more commonly. Please me know your thoughts in the same in the comments.

Here is a picture that clearly explains the Sepa Credit Transfer – RETURN FLOW

epa Credit Transfer RETURN FLOW

Link to SCT rulebook . Check out the next article Recall flow

Blog Comments

Nice article, appreciate your efforts for sharing us your knowledge with us.I have also learnt more about the payments flow and how they work by reading your article.
I have query in the return of payment. Since you have mentioned the return payment will be either done by pain.002 /camt.054…my query here is won’t the return payment done via camt.056 file if not please let me know when does camt.056 used ….thanks in advance…

The return will be done by Pacs.004 and it will be communicated to the debtor using a camt.054/pain.002

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