Your guide to SEPA Direct Debit

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.

When it comes to accepting and processing global payments, it’s ideal to understand SEPA Direct Debit. This European bank-to-bank transfer system allows businesses to pull payments directly from customer accounts.

SEPA Direct Debit is the standard method for collecting Euro-denominated payments in the 27 member states of the EU, three countries in the European Economic Area (EEA), and six non-EEA countries.

This guide will cover what SEPA Direct Debit is, how to make a SEPA Direct Debit, and other key considerations.

What is SEPA Direct Debit (SDD)?

Single Euro Payments Area (SEPA) is a payment network regulated by the European Payments Council (EPC). It was created in 2008 to make cross-border payments easy and seamless for anyone living in Europe or an associated area. 

SEPA Direct Debit (SDD) is used specifically for recurring payments, such as monthly or quarterly bills or subscriptions. 

What separates SEPA Direct Debit from other types of payments is that the business controls the entire payment process. That is, the business issues a request to be paid to the customer’s bank, notifies the customer that they’ve done so, and then receives payment. These payments must be in euros. Currently, 36 countries use the SEPA Direct Debit system.

How to set up SEPA Direct Debit payment

To process SEPA Direct Debit as a business, you need to set up a mandate, a form your customer fills out to give permission for money to be pulled from their account. 

The form includes the customer’s name, address, bank account number, type of payment, and other details. The bank account number is usually called the international bank account number (IBAN).

There are a few different ways to set up a mandate:

  • A paper mandate form: You can have customers fill out a form on paper with their information, then scan it and upload it or mail it to you.

  • An electronic mandate form: You can have customers fill out a form via an electronic channel. 

  • An e-mandate form (not available at every bank): Some banks offer an e-mandate form that allows customers to complete their mandate directly using their online banking.

After your customer has completed their signed mandate, you’ll need to inform their bank so that you can collect payments. This allows you to make direct debit collection(s). 

You can submit these mandates to the bank using XML files that contain the relevant information. You’ll then have an active SEPA Direct Debit and can pull payments as agreed with the customer. Each time you ask for another payment, you’ll need to resubmit the XML file, which many payment services can do on your behalf.

Rules of the SEPA Direct Debit mandate

A SEPA Direct Debit mandate authorises you to pull payments from a customer’s European bank account at any time (while letting your customers know in advance – this is called prenotification). But there are rules for each mandate – they must include information that makes sure your customer is aware of their rights and obligations.

The EPC provides official rule books for SEPA Direct Debit Core and SEPA Direct Debit B2B for more information on rules and implementation. You can read the relevant rulebook on the EPC’s site.

Are there transfer limits with SEPA Direct Debit?

Yes and no. There is no limit on the amount of money that can be transferred by SEPA Direct Debit as long as it does not exceed the sum the customer agreed to in the mandate.

Which countries use SEPA Direct Debit?

Using SEPA Direct Debit, you can accept payments from 36 countries quickly and easily. These countries include a few that are not part of the European area or the EU.

EU/EEA SEPA Countries

  • Austria

  • Belgium

  • Bulgaria

  • Croatia

  • Cyprus

  • Czech Republic

  • Denmark

  • Estonia

  • Finland

  • France 

  • Germany

  • Greece

  • Iceland

  • Ireland

  • Italy

  • Latvia

  • Liechtenstein

  • Lithuania

  • Luxembourg

  • Malta

  • Netherlands

  • Norway

  • Poland

  • Portugal

  • Romania

  • Slovakia

  • Slovenia

  • Spain 

  • Sweden

Non-EEA SEPA Countries

  • Andorra

  • Monaco

  • San Marino

  • Switzerland

  • United Kingdom

  • Vatican City State

Non-EEA Territories

  • Saint-Pierre-et-Miquelon

  • Guernsey

  • Jersey

  • Isle of Man

What's the difference between Direct Debit and SEPA Direct Debit?

A Direct Debit is an authorisation from an individual or business that allows a business to collect payments from their account. A SEPA Direct Debit is simply a direct debit that happens within the SEPA area. Mostly, this is Europe, with a few other countries you can see in the list above.

In the US, direct debit is called ACH and is used to pay recurring bills for utilities and services such as electricity or an internet connection. In Europe, Direct Debit is commonly used for one-off transactions as well as recurring payments.

SEPA Core Direct Debit vs. SEPA B2B Direct Debit: What’s the difference?

There are two payment types within SEPA Direct Debit:

  1. SEPA Core Direct Debit - business to customer

  2. SEPA B2B Direct Debit - business to business

SEPA Core Direct Debit allows someone to request money from someone else and collect it, as long as prior approval has been made. Both the requester and the payer must have an account in the SEPA and the funds must be in euros or another SEPA currency. Transfers always take place in euros.

A SEPA B2B Direct Debit is for business to business transactions. The main difference between the two types of direct debits is that refunds or chargebacks are not possible with B2B except in cases where the transaction was unauthorised or fraudulent.

Like the Core Direct Debit, both bank accounts must be inside the SEPA area and be denominated in Euros or another SEPA currency (sterling, kroner etc). Transfers happen in euros.

When is a SEPA Direct Debit debited? How long does it take?

A SEPA direct debit is not instant. The process usually takes two business days for a B2B Direct Debit and three days for a Core Direct Debit.  Once you have a mandate from your customer and the direct debit instructions are set up, the money is collected on the same day every month without any further action from you. If a direct debit falls on the weekend or a bank holiday, the withdrawal will be delayed until the next banking day. You are not allowed to take payments early because of a holiday unless you get explicit permission from your customer first.

Do I have to tell customers I am taking payment from their account?

If the payment sum is the same each month, like for subscription or instalments, you are not required to notify your customer each month that you are going to debit their account. Assuming, of course, that you already have a completed direct debit mandate on file. If the sum changes each month, like a mobile phone bill, you must inform your customer two weeks before you debit their account.

What are the benefits of SEPA Direct Debit?

SEPA Direct Debit provides benefits for both businesses and customers, including:

  • Control and confidence for businesses: automatic collection means companies can be confident that customer bills will be paid quickly. This improves cash flow and allows more control of payment processing.

  • A simple method for customers: Customers like SEPA Direct Debit because they don’t have to remember to pay a bill and can avoid late fees.

  • Completely automatic: For both businesses and consumers, SEPA Direct Debit offers an opportunity to ‘set it and forget it’. That is, they can authorise payments once and not have to think about them again. 

Less admin: Accepting manual transfers from your customers means spending a significant amount of time checking in with them about late payments and updating credit card information. These processes can be very time-consuming.

What are the different types of SEPA payments?

Although this guide covers SEPA Direct Debit transactions, there are other types of SEPA payments outlined by the European Payments Council (EPC). 

  • SEPA Direct Debit Core – business to customer for recurring payments.

  • SEPA Direct Debit B2B – business to business for recurring payments

  • SEPA Credit Transfer – one-time bank transfer

  • SEPA Instant Credit Transfer – one-time transfer but instant. The funds arrive in less than 10 seconds. Banks may charge a fee for the instant service.

Is SEPA transfer free? Do banks charge for SEPA payments?

Generally, SEPA transfers are free. Some banks still charge to receive a SEPA transfer. Because banks have different rules, it’s worth double-checking with your bank.

How do I accept a SEPA Direct Debit?

Once you have a SEPA Direct Debit mandate from your customer, you can accept payment using a payment processor.

Remember, when payments have variable amounts, you must notify customers that funds will be leaving their account. However, if it is a fixed amount, you only need to provide a single notification that contains the amount and expected frequency.

How to integrate SEPA Direct Debit into my payments 

With Mollie, integrating SEPA Direct Debit into your payment system is simple. It only takes 10 minutes to start receiving payments through SEPA bank transfer, and there are no hidden fees – you only pay for successful transactions.

At Mollie, we offer all major and locally preferred payment methods through a single integration. We have dedicated bank accounts for Belgium, France, Germany, and the Netherlands, which means consumers from these countries transfer funds to a familiar, localised IBAN. 

You’ll also receive instant updates when a payment goes through, and our advanced API makes refunds and data export seamless.