What is SEPA Direct Debit?
SEPA DD is a pull based system. Once a customer transfers his account details and signs a mandate, the merchant can initiate payments. The customer only needs to have a European bank account.These payments are bank to bank, ie, there are no card companies involved. Some key features of this system are:
- All payments are in Euros
- Customer protection; customers can demand a refund for unauthorized transactions for up to 13 months
- IBAN/BIC is used rather than Account number and Bank codes.
What are the different schemes involved?
There are 2 variants of the SEPA Direct Debit:
- SEPA Core Direct Debit (SDD CORE)
- SEPA B2B Direct Debit
The SEPA Core Direct Debit scheme is based on the following concept: “I request money from someone, with their prior approval, and credit it to myself”. The payer and the biller must both hold an account with a PSP within the SEPA Zone.
- For the SDD CORE scheme the lead time is 1 business day.
- Debtor and the creditor can agreed on a reduced pre-notification time. Since we are not a lawyer we are not allowed to tell you how to do that exactly. But we see some examples, how other merchants choose their language in their terms and conditions: German Example:“Die Frist für die Vorabinformation der SEPA-Lastschrift verkürzt sich auf einen Tag.” Or translated to English: “SEPA direct debit pre-notification period is reduced to one day.”See also: http://single-euro-payments-area.de/vorabinformation-pre-notification
The SEPA Direct Debit B2B scheme allows business customers to make payments in the form of direct debit. It offers significant efficiency gains and automation of payment processing. This goes a great way in optimizing the cash management processes.
- For the SDD B2B scheme, one-off, first time or subsequent direct debits must be submitted to the paying agent 1 business day before the due date.
Why should I implement Core Direct Debit?
SEPA Direct Debit has numerous advantages for Businesses, some of which are listed below:
- Optimizing cash management
- Reliability in cash flow
- Lower costs
- Expanding your business across the SEPA member states
- Automation and Simplicity
How do I implement it?
There are 2 ways to set up SEPA Direct Debit:
a. Do it yourself.
b. Use a Direct Debit enabler, like SEPAone.
Setting up SEPA Direct Debits can often be complicated and time consuming. SEPAone, a company founded by payment industry veterans, is an online Direct Debit enabler. We handle the whole process for you, straight from implementation of the system, to receiving payments.
For more information, please refer to our Blog post titled “How do I implement SEPA Direct Debit”.
What is a SEPA Direct Debit Mandate?
The SEPA Direct Debit Mandate is an legal tender that is signed by a payer and provided to a Business. This allows the Business to collect payments from the customer at future dates. An advance notice of payment amount and collection date must be provided to the customer. These Mandates can be either a paper mandate, electronic mandate or any other legally binding form of agreement (including a click mandate).
What are the contents of a Mandate?
- A heading titled “SEPA Direct Debit Mandate”
- A legal text containing the name of the Business involved and the rights of the customer.
- SEPA Direct Debit Scheme Type (CORE or B2B)
- Name, Address and IBAN/BIC of Payer
- Name, Address and Creditor Identifier of Business
- Type of Payment
- Signature, Place and Date
What should I know about managing Mandates?
- All Paper Mandates must be stored by the Business either in the original form or as a digitized document. The data in Click Mandates must be stored as presented by the customer.
- These mandates must be stored for as long as they are valid, or for a minimum of 14 months after the last collection.
- Both the customer and the Business can modify a Mandate at any time, in some cases based on mutual agreement.
What kind of changes can be made to a Mandate?
On the Business side:
- Changing Unique Mandate Reference
- Changing the Name
- Changing the Creditor Identifier
On the customer side:
- Changing bank accounts within a bank
- Changing bank account to a different bank; this requires creation of a new Mandate
Banks must be informed of any the above changes to Mandates.
In case of cancellation, by either the customer or the Business, there must be a mutual agreement. Banks do not need to be informed in this case.
How do I initiate payments with SEPA Direct Debit?
Once a Mandate has been signed and set up, Business can collect payments from the customer at any time, with a 14 day advance notice. The following points must be noted:
- Once a Mandate has been signed and the customer has been notified, the Business can collect payments by submitting a request to the Business’s bank.
- If payment collection is is regular and a fixed amount, the customer has to be notified only once.
- In case of variable payments, the customer must be notified 14 days in advance of any payment collection (it is possible to discuss a shorter notice period with the customer)
How long does it take to receive payments?
For the SEPA Direct Debit CORE scheme, 1st time Direct Debits have to be submitted to the paying agent 5 business days before the due date. For subsequent payments, this becomes 2 business days. For one-time payments, the lead time is 5 business days.
For the SEPA Direct Debit COR1 scheme, the lead time is 1 business day.
How much control do customers have?
- Block certain Businesses from SEPA Direct Debit collections while allowing other Businesses to collect payments.
- Block all Businesses from SEPA Direct Debit Collection.
- Set a maximum payment limit and time period.
- Request refunds for authorized and unauthorized SEPA Direct Debit transactions.
What are the rules involved in refunds?
There are 2 types of refunds:
- Refunds from Authorized Transactions
- Refunds from Unauthorized Transactions
Refunds that are requested within 8 weeks of a payment being debited are honored by the customers bank with a no-questions-asked policy. The bank will then notify the Business of the refund with a reason code, and the refund amount is automatically debited from the Business’s account.
If a customer wishes to claim a refund for an unauthorized transaction, they must provide this request along with any evidence to their bank, up to 13 months after the transaction date. A transaction is considered unauthorized if:
- If there is no Mandate.
- If the Mandate is considered invalid.
- If the Mandate has expired.
How can a Business dispute refunds?
If a Business disagrees with a refund claim, it must contact the customer directly. At SEPAone, we can help you handle any refund claims.
I’m interested. How can SEPAone help me?
SEPAone will provide you with all the technology and assistance required to set up Direct Debit, receive payments and handle any return transactions. And everything else inbetween.
Here is a sample of what we provide:
- Great User Experience. We provide native integration (no redirects).
- Simplicity. No intermediaries, no wallets, no passwords. IBAN/BIC is also not required. We automatically calculate this from the Account number/Sort code
- Easy integration with RESTful API.
- Peace of mind. We handle chargebacks and reminders.
- No Bank integration is needed.
- Cross platform. PC, Mobile and Tablets.