What you need to know about direct debits processing

Familie & Finanzen: So gehen Familien in Deutschland mit Geld umFamilie & Finanzen: So gehen Familien in Deutschland mit Geld um
Nick Knuppe
Head of Product Marketing
Customer-centric marketer, fanatical about GTM.

Direct debits payments are the backbone of business in the UK and Europe. In 2020, there were more than 15 billion direct debit transactions initiated in Germany and France alone and another 4.5 billion in the UK. SEPA Direct Debits are usually processed within 12 hours of the draw date. So if a payment is due to be withdrawn on 12 April, the funds should arrive in your account on the morning of the 13th. Weekends and public holidays can delay this, but generally SEPA Direct Debits are processed quickly. A recurring credit card charge is immediate, but you will have to pay the credit card fee of around 3% for the privilege.

How are direct debits processed?

Here’s what the direct debit processing cycle looks like. 

For this example, let’s say the payment is due on Wednesday, 17 March. 

  • 16 March: A payment request from your bank is submitted between 7:00 am and 10:30 pm. 

  • 17 March: Your customer’s bank receives the request around 6:00 am and prepares to debit their account. 

  • 18 March: Both banks take action. Your account is credited. If the payment doesn’t go through, your bank will receive a note explaining why.

Are direct debits processed on weekends?

No, direct debits are not processed on weekends or public holidays. The payment is taken the next business day instead.

Can I take a direct debit in advance?

You can create a mandate via the Mandates API and then create a Direct Debit payment without consent of the consumer. 

But in reality, direct debits cannot be taken in advance of the agreed payment date, unless you have notified the customer at least 10 days in advance.

When do I find out a direct debit was declined?

If a direct debit payment bounces, one common reason is usually that the customer’s account doesn’t have enough money to cover the payment. When this happens, you will receive a notice that the direct debit failed and the payment will be reversed. The customer’s bank then reverses the payment. Since you’ll likely use a payment processor like Mollie to manage your direct debits, it should be pretty straightforward to find and automate responses to these messages. You’ll just need to make a formal request via our help centre.

Failed direct debit reason codes (EU)

AM04 - insufficient funds 

MS02 - debtor refuses collection 

MS03 - reason not specified - banks may use this code instead of AM04 or MS02 for data privacy reasons (full list of codes)

Can I collect a failed direct debit again?

You are allowed to try again to collect payment for a failed direct debit. Consent for this is implicit in the direct debit mandate you collected at the first payment. Once a payment has failed, the merchant could create a new payment for the same mandate to retry the payment.

Here’s how to collect a failed direct debit in the EU

Because you get much less information in the failure notification, it can be more difficult to evaluate the likelihood of a successful collection. 

Also, it is common for the bank to charge a small fee every time a direct debit fails. 

The third factor is time. Depending on which countries the two banks are in, it can take up to 14 days to get the message that the direct debit has failed. This leaves only 14 days to take action before the time limit is reached. It is good practice to inform your customer that you will be trying the payment again, but it is not required. You can also charge them a fee for having to retry the payment. 

Recover failed direct debits with Mollie

Most payment processors offer some sort of automated direct debit recovery process. Usually, you can configure factors like the number of times you’d like the processor to try again, which error codes trigger the automation and any transaction value limits that prevent it.

Mollie makes collecting recurring payments through SEPA Direct Debit easy. Our free, open-source packages and plugins work with most coding languages and ecommerce platforms. This makes for easy integration into any site.

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