How do I Accept SEPA Direct Debit and reach more European buyers

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

If you're selling software globally and you're familiar with how complicated handling cross-border payments can be. From ensuring you have the right currencies for each area to ensuring that you support your clients' preferred payment methods, international commerce has its fair share of challenges.

Many buyers within the European Union and surrounding countries prefer paying with SEPA Direct Debit. This not only assists in simplify multi-currency payments, but it also reduces the likelihood of failed payment transactions.

In this piece we'll go over the basic concepts of SEPA Direct Debit and discuss why it's so important to accept it at checkout if you're doing business in Europe.

Table of Contents

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

Are you already a seller and wish to set up SEPA Direct Debit in your business? Send us a support ticket inside the platform or from our Support page.

What Is SEPA Direct Debit?

SEPA Direct Debit is an international wire transfer which allows businesses to receive payments from accounts in the states and territories that are part of the Single European Payments Area (SEPA).

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

Why is it so crucial to Accept SEPA?

In the present, over 529 million people utilize SEPA to pay more than 146 billion electronically-mediated payments each year in the 36 member countries. This accounts for over 30% of online checkout within Europe which makes SEPA an essential payment method that you can use if 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

Additionally, any European having an account with a bank can pay through SEPA. By supporting this single payment option at checkout it will allow you to reach more than 500 million potential customers across 36 nations.

How does SEPA Direct Debit Work?

SEPA transfers function similar to domestic transfer transactions, with a few minor differences that happen in the background. This is how they function in the view of the merchant

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

1. Mandate

In order to collect payments via SEPA Direct Debit, your customer must complete the mandate authorizing you to take payment. Mandates are the legal arrangement signed by a buyer that allows the seller to take any future payments they make through their bank account in Euro currency.

Mandates should contain certain obligatory details.

 Required Items on the Mandate

• Pay amount
• SEPA Mandate ID
• SEPA Date of Mandate
• The name of the company that is used for merchants
• Merchant's Creditor Identification
• Merchant's full address
• Information about Creditors
• Payment method
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Date of Signed
• Signature

Here's an example for's SEPA Mandate:

2. Pre-Notification

As per SEPA guidelines, you are required to notify your customers in advance to inform them when they should expect one payment or regular subscription to take place on their bank account. This notification can be delivered by email, text message and/or phone calls, as well as invoices, or in a letter.

Compliant pre-notifications must include the following:

1. The appropriate notice time (typically fourteen calendar days)
2. Due date, amount Mandat reference, the creditor's ID
3. Merchant's contact information

3. Payment Request

After the pre-notification is delivered after which you are able to initiate the payment by submitting the mandate-related data to the bank that handles transactions for your merchant. It does this automatically for the sellers. The bank forwards this request to the mechanism for clearing and settlement and it will send this to the customer's bank for settlement.

Step 4: Post-Submission

Once you have made the payment, it can need a couple of days to know if a SEPA payment is successful or not. We recommend that you wait at least 48 hours to finish your purchase.

SEPA Benefits and Drawbacks

Benefits

SEPA Direct Debit has 3 crucial advantages for those who collect recurring payments:

• Control: Allows retailers to make sure that clients pay their bill in time each month.
• Retention rates: Eliminates failed payments due to expiry of cards or cancellation. It also increases customer loyalty with a convenient, set-and forget payment method.
• Reduced admin: Reduces the admin time required to collect payments.

SEPA Direct Debit is also great for B2B invoicing:

• Improved cash flow: Payouts are made punctually and promptly in an a speedy way.
• Collection of variable amounts: Using a single upfront contract, sellers can be able to claim a new amount instead of giving banks new instructions each when a modification is required.
• Reduced admin time: Payments can be automated on a scheduled basis.

Other functions SEPA is useful for include:

• Markets with lower card use: In Germany and the Netherlands Credit card usage is less than 50 percent. SEPA Direct Debit is a preferred method for payment in these nations.

Negatives

SEPA is not a good option to:

• Transactions that need immediate clearing: SEPA Direct debit payments cannot be instant even under the faster B2B scheme.
• Transactions that are likely to be charged back A SEPA Core Direct Debit no-questions-asked return policy lets chargebacks (equivalent to refunds under the ACH scheme) simple in the first eight weeks following the transaction.

"'s SEPA Experience

Our system automatically displays an order at the point of checkout. It manages all the necessary steps for processing your buyer's order, so there is no need for you to do anything except enable SEPA for payment option in your account settings.

 Here's what that looks as from the perspective of your customer:

1. The customer selects SEPA Direct Debit, and then enters their bank's name, the IBAN or the bank's code for logging into their bank account.
2. The purchaser agrees to the SEPA Direct Debit Mandate conditions and verifies their bank information for the purpose of submitting the order.
3. After submitting the order after submitting the order, the customer is directed to an order confirmation page to confirm that the transaction is complete.
4. The payment process typically takes at least two days to be processed.