How to take on SEPA Direct Debit and reach many more European Buyers

 The article has been updated since it was originally published, and now contains the most up-to-date details on SEPA Direct Debit transactions as from April 2023.

If you're selling software globally, you know how difficult handling cross-border payments can be. From ensuring you have the right currencies for each region to supporting 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 prefer paying with SEPA Direct Debit. It not only helps facilitate multi-currency payment however it reduces the likelihood of failed payment transactions.

In this article, we'll break down the basics about SEPA Direct Debit and discuss why it's so important to take it into consideration at the time of check-out if you're conducting business within Europe.

Table of Contents

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

Are you a seller already and would like to enable SEPA Direct Debit to your company? Create a support request from within the platform or on our help page.

What Is SEPA Direct Debit?

SEPA Direct Debit is an international wire transfer service that permits merchants to collect money from accounts located in countries as well as the territories associated with the Single European Payments Area (SEPA).

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

Why Is It So Important to Acquire SEPA?

Today, more than 529 million citizens use SEPA to make over 146 billion electronic payments per year in the 36 member countries. The SEPA system accounts for 30% of online checkout across Europe and makes SEPA an essential payment method that you can use if selling into Europe. 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

Additionally, any European having a bank account can pay with SEPA. If you enable this single payment method at the point of purchase this option will reach over 500 million potential buyers across 36 different countries.

How Does SEPA Direct Debit Work?

SEPA transfers operate like domestic transfers with a few minor differences occurring at the back of the scene. Here's how they work from the perspective of a merchant:

1. Mandate
2. Pre-notification
3. Request for payment
4. Post-submission

1. Mandate

Before you can collect payment by SEPA Direct Debit, the customer has to sign the Mandat which authorizes you to collect payment. A mandate is a billing arrangement signed by a buyer to allow the seller to receive the future payment from their Euro-denominated bank account.

Mandates need to include specific mandatory information.

 Required Items on a Mandate:

• The amount of payment
• SEPA Mandate ID
• SEPA Date of Mandate
• Name of the merchant company
• Merchant's Creditor Identifier
• Merchant's full address
• Information about Creditors
• The type of payment
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Signed Date
• Signature

Here's an example of the SEPA Mandate:

2. Pre-Notification

According to SEPA rules, you must provide your clients with a pre-notification informing them of the date they will be able to expect a single installment or a regular monthly subscription to leave their bank account. The notifications may be made by email, text message, phone, invoice, or in a mailer.

Fully compliant pre-notifications require these things:

1. The appropriate notice time (typically 14 calendar days)
2. The amount, the due date, mandate reference, and the creditor's ID
3. Contact details for merchants

3. Payment Request

Once the pre-notification has been sent, you can initiate payment by providing all the information related to your mandate to the bank that handles transactions for your merchant. does this step automatically for sellers. The bank forwards the order to the clearing and settlement mechanism and it will send it to the bank of the buyer for settlement.

Step 4. Post-Submission

Once you have made the payment, it can require a minimum of 2 business days before you know whether a SEPA payment has succeeded or not. This is why we suggest waiting for at least 48 hours before you complete your order.

SEPA Benefits and Drawbacks

Advantages

SEPA Direct Debit has 3 important advantages for companies that collect recurring payments:

• Control: Merchants can ensure that customers pay their bills on time every month.
• Retention rates: Eliminates failed payments because of card expiry or cancellation. Additionally, it improves customer loyalty by offering a convenient set-and-forget method of payment.
• Reducing admin time: Reduces the admin time required to collect payments.

SEPA Direct Debit is also excellent for invoicing B2B

• Enhances cash flow Payments happen punctually and promptly in an an efficient manner.
• Collection of variable amounts: Using a single upfront contract, sellers can be able to claim the amount they want instead of giving banks an entirely new set of instructions each time a change is needed.
• The admin process is streamlined: Payments can be automatized on a regular basis.

Other things SEPA is good for:

• Markets with low use of cards: In Germany and the Netherlands the penetration of credit cards is less than 50 percent. SEPA Direct Debit has become a preferred method to pay in these countries.

Advantages

SEPA is not a good option to:

• Transactions that require immediate clearing SEPA Direct Debit payments cannot be instant even with the B2B faster scheme.
• Transactions which are most likely to be charged back It is the SEPA Core Direct Debit no-questions-asked reimbursement policy allows chargesbacks (equivalent to return in the ACH scheme) easy in the initial eight weeks following the transaction.

"s SEPA Experience

Our platform automatically presents your mandate when you check out and manages all the necessary steps for processing the order of your customer, which means there is no need for you to change anything other than enabling SEPA to be a pay method in your account settings.

 This is what it looks in the eyes of your potential buyer:

1. The purchaser selects SEPA Direct Debit. They enter their bank's name, the IBAN or the bank's code to sign in to their account at the bank.
2. The purchaser agrees to the SEPA Direct Debit Mandate Terms and verifies their bank information to submit the order.
3. When the order is submitted, the buyer is redirected to a confirmation page, confirming that the payment is completed.
4. Payments typically take at least two days to be processed.