Understanding payments - Types of payment

How do the most popular electronic payment instruments in Europe work?

Credit transfer

A credit transfer is a payment initiated by the payer. The payer sends a payment instruction to his/her payment service provider (PSP), e.g. a bank. The payer’s PSP moves the funds to the payee’s PSP. This can be carried out via several intermediaries.

Direct debit

A direct debit is a transfer initiated by the payee via his/her payment service provider. Direct debits are often used for recurring payments, such as utility bills. They require a pre-authorisation (or “mandate”) from the payer. Direct debits are also used for one-off payments. In this case, the payer authorises an individual payment.

Debit card / credit card payment

Debit cards allow the cardholder to charge purchases directly to his/her bank account. Credit cards provide the cardholder with a certain credit limit, within which he/she can make purchases. The credit card holder must pay off the balance in full by the end of a specified period. Alternatively, he/she can pay off part of the balance. The remaining balance is taken as extended credit on which the cardholder must pay interest.

Growth in electronic payment instruments per capita per year in the EU

All figures for download