How to Accept SEPA Direct Debit and reach many more European buyers

 This article has been updated since it was originally released with the latest details on SEPA Direct Debit transactions as of April 2023.

If you are a software vendor selling internationally, you know how difficult dealing with cross-border payments. From ensuring that you show appropriate currencies for each country to accommodating your customers with their preferred payment options, the world of commerce is not without plenty of issues.

Many buyers within the European Union and surrounding countries choose to pay with SEPA Direct Debit. This not only assists in facilitate multi-currency payment, but it also reduces the chance of failing payment transactions.

In this piece we'll go over the basics in SEPA Direct Debit and provide a reason the reason why it's crucial to accept it at checkout if you're doing business within Europe.

Table of Contents

1.   What exactly is SEPA Direct Debit?
2.   What is SEPA Direct Debit work?
3.   SEPA Advantages & Disadvantages
4.   's SEPA Experience

Already a seller and want to allow SEPA Direct Debit to your business? Create a support request from inside the platform or from our help page.

What exactly is SEPA Direct Debit?

SEPA Direct Debit is a wire transfer that allows businesses to receive payment from accounts within the countries and associated territories in the Single European Payments Area (SEPA).

SEPA is very similar to the ACH Debit (US) as well as EFT (Canada) with the exception of there are a few distinct differences:

Why Is It So Important to Acquire SEPA?

In the present, over 529 million citizens make use of SEPA to make over the 146 billion electronically-mediated payments each year within the 36 SEPA member states. This accounts for over 30% of all online transactions within Europe, making it an important payment method for businesses selling your products to the European market.

   European-Economic Area (EEA) SEPA Countries  

• Austria
• Belgium
• Bulgaria
• Croatia
• Cyprus
• Czech Republic
• Denmark
• Estonia
• Finland
• France
• Germany
• Hungary
• Iceland
• Ireland
• Italy
• Latvia
• Liechtenstein
• Lithuania
• Luxembourg
• Malta
• Netherlands
• Norway
• Portugal
• Romania
• Slovakia
• Slovenia
• Spain
• Sweden

   NON-EEA SEPA Countries and Territories  

• Andorra
• Monaco
• San Marino
• Switzerland
• United Kingdom
• Vatican City State
• Saint-Pierre-et-Miquelon
• Guernsey
• Jersey
• Isle of Man

Furthermore, every European with accounts with banks can make payments with SEPA. With this one payment option at checkout it will allow you to reach more than 500 million buyers in 36 nations.

What is SEPA Direct Debit Work?

SEPA transfers work similar to domestic transfer transactions, but with some slight differences happening in the background. Let's look at how they operate from the merchant's perspective:

1. Mandate
2. Pre-notification
3. Payment request
4. Post-submission

1. Mandate

To be able to accept payment through SEPA Direct Debit, your client must complete a Mandat that authorizes you to accept payments. A mandate is a billing agreement given by a buyer to allow the seller to take any future payments they make from their Euro-denominated bank account.

Mandates need to include specific mandatory information.

 Required Items on a Mandate:

• Payment amount
• SEPA Mandate ID
• SEPA Mandate Date
• Merchant company name
• Merchant's creditor identification
• Address of the Merchant's complete address
• Creditor Information
• The type of payment
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Date Signed
• Signature

Here's an example of the SEPA Mandate:

Step 2: Pre-Notification

According to SEPA guidelines, you are required to send your customers a pre-notification to inform them when they should expect one payment or regular subscription to be withdrawn from their bank accounts. These notifications can be sent by email, text message and/or phone calls, as well as invoices, or via a note.

Pre-notifications that are fully compliant require to meet the following requirements:

1. The appropriate notice time (typically fourteen calendar days)
2. The amount, the due date Mandat reference, creditor ID
3. Contact details for merchants

3. Payment Request

Once the pre-notification has been sent, you can initiate payments by sending the mandate-related data to the bank that handles transactions for your merchant. This process is automated for its sellers. The bank forwards this request to the mechanism for clearing and settlement and it will send it to the bank of the buyer to be settled.

Step 4. Post-Submission

When you make the payment, it can need a couple of days to determine if the SEPA payment has succeeded or not. This is why we suggest waiting minimum of 48 hours to finish an purchase.

SEPA Advantages and Disadvantages

Benefits

SEPA Direct Debit has 3 significant advantages for businesses that collect recurring payments:

• Control: Allows retailers to make sure that customers pay their bills in time each month.
• Rates of retention: Eliminates failed payments due to expiry of cards or cancellation. It also increases customer loyalty with a convenient, set-and forget payment method.
• Reducing admin time: Reduces the admin time involved in collecting payments.

SEPA Direct Debit is also ideal for invoices to B2B:

• Better cash flow Payments happen promptly and in an an efficient manner.
• Collecting variable amounts: By signing a one-time agreement, merchants can claim the amount they want instead of giving banks new instructions each whenever a new amount is required.
• Reducing admin time: Payments can be made automated in a schedule.

Other benefits SEPA can be used for are:

• Markets with low usage of credit cards: In Germany and the Netherlands the penetration of credit cards is lower than 50 percent. SEPA Direct Debit has become the preferred way to make payments in these countries.

Negatives

SEPA is not a good choice to:

• Transactions that require immediate clearing SEPA Direct Debit payments cannot be instant even with the B2B faster scheme.
• transactions that could be liable to be charged back: A SEPA Core Direct Debit no-questions-asked return policy lets chargesbacks (equivalent to return in the ACH scheme) easy in the initial eight weeks following the payment.

's SEPA Experience

Our platform will automatically present your mandate when you check out and manages all the steps to process the order of your customer, which means you won't have to do anything except enable SEPA to be a pay option in the settings of your account.

 Here's what that looks in the eyes of your potential buyer:

1. The purchaser chooses SEPA Direct Debit and enters the name of their bank, their IBAN or the bank's code to log in to their bank account.
2. The buyer agrees to accept the SEPA Direct Debit Mandate terms and validates their bank account details to submit the order.
3. Once the purchase is made after submitting the order, the customer is directed to a confirmation page to confirm that the transaction is complete.
4. It usually takes about 48 hours for processing.