How to set up a SEPA Direct Debit

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Nick Knuppe
Head of Product Marketing
Customer-centric marketer, fanatical about GTM.

Direct debits are a popular form of payment in Europe. The exact percentage varies by country, but customers in Germany and the Netherlands, for example, prefer to pay by bank transfer or direct debit over credit card. In 2020, there were roughly one billion direct debit transactions per month in Germany alone. Consumers aren’t the only ones who have a preference for direct debits. Businesses also like this payment option because there are no additional fees like there are for credit cards. Certain businesses, such as those with a subscription-based model, use direct debit for their instalments or recurring payments. To debit a European customer’s account, you need permission in the form of a SEPA direct debit mandate. It is possible to do this on paper, and many companies still do. But for ecommerce businesses, it is a lot faster to use e-mandates. 

An e-mandate contains all the same information as a paper mandate, including explicit permission from your customer for you to debit their account. The difference is that SEPA e-mandates are generated during the checkout process and stored by your payment processor. Here’s how it all works.

1. Turn on direct debits

When you set up your shop and integrated your payment processor, you were probably asked if you wanted to offer SEPA direct debit as a payment method. If you didn’t select yes, now is the time to go back and do that. The rest of the information you need to provide is needed to satisfy the direct debit mandate requirements. This includes the unique mandate reference (UMR) and creditor identifier. If you have these, enter them. If you don’t, you’ll need about one to two business days to get it sorted.

2. Test the direct debit

Your payment processor should allow you to test that the direct debit payment process is working on your site. Usually this means using a dummy international bank account number, or IBAN, and going through the process as if you were a customer. As long as the test runs work, you’re good to go. Using a payment platform makes the administrative tasks a breeze for you and your customers.

Can I set up a direct debit for my customer in Europe if my business is in the UK?

Yes. Even though the UK is no longer a part of the European Union, it is still a member of SEPA. This means you can set up direct debits for EU customers as easily as you can for those in the UK. There are two key differences, though. The first difference is that in the EU, the business is responsible for storing the e-mandate information. In the UK, the customer’s bank is responsible. Since you are setting up a SEPA direct debit, the European rules apply. The second difference is that SEPA direct debit transfers are for euro-to-euro only. It’s not possible, for example, to set up a EUR-to-USD direct debit. The UK is a special case in that a euro-denominated direct debit can be received into a sterling account.

What if I need to cancel a SEPA direct debit?

Direct debits were designed to be very easy to cancel. You can find your way easily in Mollie or have a look at our guide to cancelling direct debits. 

Make payments and transactions easier with Mollie

When handled manually, there are many administrative tasks associated with managing payments and transactions for your business. Setting up SEPA direct debits doesn't have to be one of them. Join millions of businesses in Europe by processing recurring payments the easy way with SEPA direct debit. Find out how with Mollie.

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