How to Accept SEPA Direct Debit and reach more European Buyers

 This article has been updated since it was originally published with the most current information on SEPA Direct Debit transactions as of April 2023.

If you sell software internationally You're aware of how challenging managing cross-border transactions can be. 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 many challenges.

Many buyers within the European Union and surrounding countries prefer paying with SEPA Direct Debit. Not only does it help simplify multi-currency payments and reduce the chance of failing payment transactions.

In this piece, we'll break down the basics about SEPA Direct Debit and discuss the reason why it's crucial to take it into consideration at the time of the time of checkout when you're operating in 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

Are you a seller already and would like to enable SEPA Direct Debit in your company? Send us a support ticket within the platform, or via our Support page.

What is SEPA Direct Debit?

SEPA Direct Debit is a wire transfer that allows retailers to take 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) and EFT (Canada) with the exception of some notable variations:

What is the reason it's so important to Acquire SEPA?

In the present, over 529 million citizens use SEPA for more than the 146 billion electronic payments per year within the 36 SEPA member states. This accounts for over 30% of online checkout in Europe and makes SEPA an essential payment method that you can use if selling to European markets. 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 as well as Territories  

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

Furthermore, every European having accounts with banks can make payments through SEPA. If you enable this single payment method at the point of purchase this option will reach over 500 million potential customers across 36 nations.

What is SEPA Direct Debit Function?

SEPA transfers function like domestic transfers however, there are some minor changes that happen in the background. Let's look at how they operate from the merchant's perspective:

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

Step 1: Mandate

In order to collect payments via SEPA Direct Debit, the customer has to complete a mandat authorizing you to take payments. A mandate is the billing agreement given by a buyer to allow the seller to receive the future payment from their Euro-denominated bank account.

Mandates should contain certain obligatory specific information.

 Essential Items to an Mandat:

• Payment amount
• SEPA Mandate ID
• SEPA Date of Mandate
• Merchant company name
• Merchant's creditor identification
• Merchant's full 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:

2. Pre-Notification

According to SEPA regulations, you have to provide your clients with a pre-notification to inform them when they should expect one payment or regular subscription to be withdrawn from their bank accounts. This notification can be delivered via text message, email and/or phone calls, as well as invoices, or in a mailer.

Fully compliant pre-notifications require to meet the following requirements:

1. A proper notice period (typically fourteen calendar days)
2. Amount, due date, mandate reference, and creditor ID
3. Contact information for the merchant

Step 3: Request for Payment

After the pre-notification is delivered, you can initiate payments by sending the mandate-related data to the bank of the seller. It does this automatically for its sellers. The bank then forwards the order to the mechanism for clearing and settlement that will forward it to the bank of the buyer for settlement.

Step 4. Post-Submission

Once you have made an order, it'll take 2-3 business days to determine if the SEPA payment is successful or failed. This is why we suggest waiting minimum of 48 hours to fulfill an purchase.

SEPA Advantages and Negatives

Benefits

SEPA Direct Debit has 3 important advantages for companies that take on recurring payment:

• Control Merchants can ensure that customers pay their bills on time every month.
• Retention rates: Eliminates failed payments due to card expiry or cancellation. Also, it increases the loyalty of customers through a simple set-and-forget option for payment.
• Reduced admin: Reduces the admin amount of time needed to collect payment.

SEPA Direct Debit is also excellent for invoicing B2B

• Enhances cash flow The payments are processed accurately and on time in a timely way.
• Collecting variable amounts: Using a single upfront agreement, businesses can request a new amount instead of giving banks an entirely new set of instructions each whenever a new amount is required.
• The admin process is streamlined: Payments can be automated on a scheduled basis.

Other benefits SEPA can be used for are:

• Markets with lower card use: In Germany and the Netherlands Credit card usage is lower than 50%. SEPA Direct Debit has become the preferred way to make payments in these countries.

Disadvantages

SEPA is not a good option for:

• Transactions that need immediate clearing SEPA Direct Debit transactions are not 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 refund policy makes chargebacks (equivalent to return in the ACH scheme) effortless in the initial eight weeks following the payment.

's SEPA Experience

Our system automatically displays your mandate when you check out and takes care of all the necessary steps for processing your buyer's order, so there is no need for you to change anything other than enabling SEPA for payment option in your account settings.

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

1. The buyer selects SEPA Direct Debit, and then enters their bank name, bank code, or IBAN for logging into the bank account.
2. The customer agrees with accept the SEPA Direct Debit Mandate terms and confirms their bank details in order to complete the transaction.
3. After submitting the order and submitting it, the purchaser is taken to a confirmation page which confirms that the purchase is completed.
4. Payments typically take at least 48 hours for processing.