SEPA Direct Debit has now been implemented in all eurozone countries. In these countries all Euro-denominated payments must be collected via the SEPA payment scheme.

The SEPA scheme currently operates alongside national Direct Debit schemes in non-eurozone SEPA countries, including the UK. As such, it is still possible to collect Direct Debit payments through both SEPA and/or a national scheme in these countries (until 31 October 2016).

This guide summarizes the main features of the SEPA Direct Debit schemes from a merchant’s perspective to help you understand what it means for your business.

Key features of SEPA Direct Debit

SEPA Direct Debit is broadly similar to UK Direct Debit:

  • SEPA Direct Debit is pull based. Once given a mandate by their customer it is the merchant who initiates payments.
  • SEPA Direct Debit payments are bank-to-bank. There are no card networks involved in the SEPA Direct Debit scheme. All communications happen directly between the banks.

However, SEPA Direct Debit differs from UK Direct Debit in five key ways:

1. Currency

All SEPA Direct Debit transactions happen in Euros (even if the relevant accounts aren’t in Euros). Any currency exchange required is up to the payer’s and merchant’s banks.

2. Chargebacks

Payers can get a refund from their bank for unauthorized SEPA payments for up to 13 months. Under the UK Direct Debit Guarantee, the indemnity claim period is unlimited.

3. Bank details

To collect SEPA payments, you need a customer’s BIC and IBAN rather than their account number and sort code.

4. Customers

Businesses and consumers can be treated differently (see SEPA Direct Debit refers to two schemes below).

5. Implementation

Several implementation details of SEPA Direct Debit differ from its UK counterpart including:

  • Payment timings
  • How mandates are stored
  • Submission process

SEPA Direct Debit refers to two schemes

SEPA Direct Debit refers to two schemes: SEPA Core Direct Debit and SEPA B2B Direct Debit. In short, the B2B scheme is only available if you are collecting Direct Debit payments from other businesses.

The Core scheme is mandatory for all SEPA banks offering Euro-denominated Direct Debits. However, the B2B scheme is an optional scheme, meaning that not all banks are able to offer it.

When deciding on which scheme to adopt, the following should be considered to select the scheme that best suits your needs:

  • Customers – The SEPA B2B Direct Debit scheme can only be used for payers who are businesses – not private individuals or microenterprises. The Core scheme can be used with all payers.
  • Indemnity claim protections – SEPA B2B Direct Debit customers are not entitled to refunds of authorised transactions. Refunds for unauthorised transactions are only possible if the payer proves that he did not agree to a B2B mandate (up to 13 months after the debit date).
  • Timing – SEPA B2B Direct Debit offers a shorter timeline for payment submission (1 day before the collection) and a faster response time from the banks in case of technical failure or unability to realise the collection (2 days after collection).

Throughout this blog references to SEPA Direct Debit are, unless explicitly stated, to both the Core and B2B schemes.

Manage your SEPA mandates online

Your first document is free

Leave a Reply