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SEPA Direct Debit: Overview



Reminder: SEPA

SEPA covers 34 countries in Europe. SEPA is a great opportunity to do international business across the biggest unified market in the world, comprising 34 European countries, over 4000 banks and 210 million households, which is valued at 11,000 billion euros.

SEPA payment merchants reap its benefits, especially for repeat purchases and recurring payments.

But what is SEPA? SEPA stands for Single Euro Payments Area.

It is a European initiative, launched in 2002 by European financial institutions, and aims to ease and improve the efficiency of cross-border payments and turn the fragmented national markets for euro payments into a single and unified domestic market. SEPA intends to make international payments as fast, easy and secured as domestic payments.

The overall goal of SEPA is to simplify procedures and reduce costs of moving capital around Europe by allowing companies to centralise the management of their payments.

The SEPA initiative allows any debtor to make cashless euro payments to any creditor located in the SEPA area using a single bank account (IBAN) and 3 types of common financial instruments:

  • The SEPA Credit Transfer system (SCT)
  • The SEPA Direct Debit system (SDD)
  • The SEPA Cards Framework (SCF)

SEPA Direct Debit: Overview

SEPA Direct Debit is a payment method that is now fully deployed and operated in 34 Eurozone countries.

It’s a pull-based payment method that allows a creditor (i.e. a merchant) to directly debit a debtor (i.e. a consumer) bank account, provided that a valid mandate has been signed by the debtor to allow the merchant to withdraw money on their bank account.

Known as Prélèvement bancaire in France, Domiciliacion bancaria in Spain, Domiciliation bancaire in Belgium or Elektronisches Lastschriftverfahren in Germany, it’s a widely used payment instrument employed by millions of Europeans to pay for subscriptions and repeat expenses (taxes, electricity, rent, etc).


What are the challenges?

Direct debit is not a new payment method; companies, institutions and governments have been using it for decades, with the help of their banks for managing the whole process (mandate collection and archiving, order preparation and execution).

This new SEPA Direct Debit scheme introduced some significant changes regarding the management process, which have become important challenges for creditors:

  • Creditors are now responsible for the whole SEPA mandate management flow (user mandate signature, digitization, archiving, unique reference number attribution). It was previously their bank’s responsibility
  • Creditors have to handle a new interbank communication file format
  • Creditors have to deal with a specific SEPA Direct Debit Timeline 
  • Creditors cash-flow may be impacted by returns and rejects (R-transactions) on the debtor side, with two important deadlines (8 weeks and 13 months)

SDD, what is it?

It is the acronym for SEPA Direct Debit. SEPA is the European standard that harmonizes bank transfers in Euro throughout the SEPA zone.


What are the differences between SDD Core and SDD B2B?

The SDD B2B (business to business) can be used only between companies (legal entity). It is forbidden for a creditor to debit a private individual with a SDD B2B (SDD Core is the scheme to use for private individuals). 

It is compulsory for the debtor's bank to verify the validity of the mandate with his/her client before processing any payments via SDD B2B. In practice, banks ask their clients to declare it in advance in order to integrate SDD B2B mandate references and then accept payments. 

Good to know: 

  • SDD B2B mandates establish the debtor's agreement to pay by SDD B2B
  • It states the absence of a reimbursement right
  • The debtor has the obligation to inform his/her bank of any modification or suppression of the mandate
  • The creditor can submit payment orders up to the day before the execution date, subject to the cut-off time defined by the clearing house (to ensure payments are process the next day, orders must be submitted to SlimPay before 3am UTC)
  • The maximum period of bank's returns is 3 days* after the due date 
  • For the SDD B2B, there is no fixed reserve

 *Period modified by the EPC in 2017. 

If you want to learn more about the SDD B2B, go check out our blog article here.


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