How do I take on SEPA Direct Debit and reach more European buyers

 This article was updated since it was originally published with the most current details on SEPA Direct Debit transactions as from April 2023.

If you're selling software globally You're aware of how challenging handling cross-border payments can be. From making sure you display appropriate currencies for each region to supporting your customers with their preferred payment options, global commerce can come with plenty of issues.

That's why many buyers in the European Union and surrounding countries prefer paying with SEPA Direct Debit. It not only helps simplify multi-currency payments and reduce the chance of failing payment transactions.

In this article we'll go over the basic concepts in SEPA Direct Debit and discuss the reasons why it's important to take it into consideration at the time of checkout if you're doing business in Europe.

Table of Contents

1.   What exactly is SEPA Direct Debit?
2.   What is SEPA Direct Debit work?
3.   SEPA Advantages & Disadvantages
4.   "' SEPA Experience

Are you already a seller and wish to set up SEPA Direct Debit to your business? Create a support request from inside the platform or from our Support page.

What exactly is SEPA Direct Debit?

SEPA Direct Debit is a wire transfer which allows retailers to take payment from accounts within the states and territories that are part of the Single European Payments Area (SEPA).

SEPA is similar to ACH Debit (US) as well as EFT (Canada) however, there are a few distinct differences:

Why Is It So Important to Adopt SEPA?

Today, more than 529 million individuals use SEPA to make over 150 billion annual electronic transactions in the 36 member countries. The SEPA system accounts for 30% of the online shopping in Europe, making SEPA an essential payment method that you can use if selling to European markets. European market.

   European-Economic Area (EEA) SEPA Countries  

• Austria
• Belgium
• Bulgaria
• Croatia
• Cyprus
• Czech Republic
• Denmark
• Estonia
• Finland
• France
• Germany
• Hungary
• Iceland
• Ireland
• Italy
• Latvia
• Liechtenstein
• Lithuania
• Luxembourg
• Malta
• Netherlands
• Norway
• Portugal
• Romania
• Slovakia
• Slovenia
• Spain
• Sweden

   Non-EEA SEPA Countries and Territories  

• Andorra
• Monaco
• San Marino
• Switzerland
• United Kingdom
• Vatican City State
• Saint-Pierre-et-Miquelon
• Guernsey
• Jersey
• Isle of Man

In addition, any European with a bank account can pay through SEPA. By supporting this single payment method at the point of purchase this option will reach over 500 million potential buyers across 36 countries.

What is SEPA Direct Debit Function?

SEPA transfers work like domestic transfers with a few minor differences that happen at the back of the scene. Let's look at how they operate from the perspective of a merchant:

1. Mandate
2. Pre-notification
3. Request for payment
4. Post-submission

1. Mandate

Before you can collect payment by SEPA Direct Debit, your customer must sign the Mandat which authorizes you to collect payments. A mandate is a billing agreement given by a buyer to allow the seller to receive the future payment via their account with a Euro denomination.

Mandates need to include specific mandatory information.

 Required Items on a Mandate:

• Payment amount
• SEPA Mandate ID
• SEPA Date of Mandate
• Merchant company name
• Merchant's Creditor Identification
• The full address of the merchant
• Information about Creditors
• Payment method
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Date of Signed
• Signature

Here's an example for's SEPA Mandate:

2. Pre-Notification

In accordance with SEPA guidelines, you are required to provide your clients with a pre-notification to let them know when they will be able to expect a single payment or subscription that will be withdrawn from their bank accounts. This notification can be delivered via text message, email and/or phone calls, as well as invoices, or via a mailer.

Compliant pre-notifications must include to meet the following requirements:

1. A proper notice period (typically the period of 14 days)
2. Due date, amount Mandat reference, the creditor's ID
3. Contact details for merchants

Step 3: Payment Request

Once the pre-notification has been sent After the pre-notification is delivered, you can start payments by sending any mandate-related information to the merchant's bank. does this step automatically for the sellers. The bank forwards the order to the clearing and settlement mechanism, which will then forward it to the bank of the buyer to be settled.

Step 4. Post-Submission

When you make the payment, it can take 2-3 business days to determine if the SEPA payment was successful or not. This is why we suggest waiting minimum of 48 hours to fulfill an purchase.

SEPA Advantages and Disadvantages

Benefits

SEPA Direct Debit has 3 important advantages for companies that take on recurring payment:

• Control Allows retailers to make sure that customers pay their bills on time every month.
• Retention rates: Eliminates failed payments because of card expiry or cancellation. Additionally, it improves customer loyalty with a convenient, set-and forget option for payment.
• Reducing admin time: Reduces the admin time required to collect payments.

SEPA Direct Debit is also great for B2B invoicing:

• Enhances cash flow The payments are processed punctually and promptly in an an efficient manner.
• The collection of variable amounts With a single, upfront agreement, merchants can claim an amount that is new instead of giving a bank an entirely new set of instructions each whenever a new amount is required.
• The admin process is streamlined: Payments can be made automated in a schedule.

Other benefits SEPA is useful for include:

• Markets with low card use: In Germany and the Netherlands the penetration of credit cards is lower than 50 percent. SEPA Direct Debit has become the preferred way to make payments in these countries.

Disadvantages

SEPA isn't a great option to:

• Transactions that require immediate clearing: SEPA Direct Debit payments cannot be instant even under the faster B2B scheme.
• Transactions which are most likely to be charged back: A SEPA Core Direct Debit no-questions-asked return policy lets chargesbacks (equivalent to returns in the ACH scheme) simple in the first eight weeks after the date of payment.

"'s SEPA Experience

Our system automatically displays the mandate at checkout and manages all the necessary steps for processing the order of your customer, which means there is no need for you to make any changes other than enable SEPA to be a pay option in your account settings.

 What does that look in the eyes of your potential buyer:

1. The buyer chooses SEPA Direct Debit. They enter their bank name, IBAN, or bank code for logging into the bank account.
2. The customer agrees with accept the SEPA Direct Debit Mandate Terms and verifies their bank information to submit the order.
3. Once the purchase is made after submitting the order, the customer is directed to an order confirmation page, confirming that the payment is complete.
4. Payments typically take at least 48 hours to process.