How can I accept SEPA Direct Debit and connect with more European buyers

The article has been updated since when it first appeared, and is now updated with the most current information regarding SEPA Direct Debit transfers as in April 2023.

If you're a software seller globally and you're aware of how complicated handling cross-border payments could be. From making sure that you've got the correct currency in each region, to making sure you are able to support your customers' preferred payment methods International commerce comes with plenty of issues.

Many buyers within Europe, the European Union and surrounding countries choose to pay using SEPA Direct Debit. This not only assists in the ease of multi-currency payment, but it also decreases the chance of failed payment transactions.

In this post, we'll go over the basic notions in SEPA Direct Debit and then discuss the reasons why it's so important to be able to accept it when you check-out if you're conducting 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 already a seller, and wish to set up SEPA Direct Debit in your business? Make a support request within the platform or via our support page.

What is SEPA Direct Debit?

SEPA Direct Debit is an international wire transfer which allows businesses to receive payments through accounts located in states and territories that are part of the Single European Payments Area (SEPA).

SEPA is akin to ACH Debit (US) and in EFT (Canada) with the exception of with a couple of notable distinctions:

Why is it so crucial for you to Accept SEPA?

In the present, over 529 million people utilize SEPA to pay more than 146 billion electronically-mediated payments each year in the 36 member countries. This accounts for over 30% of the online shopping within Europe that is what makes SEPA an indispensable payment method that you can use if selling your products to consumers in the 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 Territories and Countries Territories

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

Additionally, any European that has an account in the bank is able to pay using SEPA. When you enable this single payment method during checkout, this will enable customers to be able to contact over 500 million potential customers across 36 nations.

What exactly is SEPA Direct Debit Work?

SEPA transfers work similarly as domestic transfers, with a few minor differences which take place in the background. They function as such in the view of the seller

1. Mandate
2. Pre-notification
3. Payment request
4. Post-submission

1. Mandate

In order to collect payments via SEPA Direct Debit your customer must fill out the mandate which authorizes the company to collect payments. Mandates are legal agreements signed by a buyer that permits the seller to collect any payments that they wish to make by way of their bank account Euro currency.

Mandates must contain specific obligatory information.

Required Items on the Mandate

• The amount to be paid
• SEPA Mandate ID
• SEPA Date of Mandate
• The name of the business which is used to identify the merchants
• Merchant's Creditor Identification
• Merchant's full address
• Information on Creditors
• Method of payment
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Date of Signature
• Signature

Here's an example of the SEPA Mandate:

2. Pre-Notification

According to SEPA guidelines, you're obliged to inform your customers in advance to inform them of the date they can expect a installment or a regular subscription to take place on their bank account. The notification could be sent through text messages, emails or telephone calls, in addition to invoices, or even in a written letter.

Pre-notifications that are compliant must contain the following:

1. The appropriate notice time (typically fourteen calendar days)
2. Deadline, Reference to a Mandatory reference, creditor's ID
3. Merchant's contact information

3. Payment Request

After the pre-notification is delivered at which point you're able to start the transaction by submitting the mandate-related data to the bank that handles transactions for your merchant. It does this automatically for the seller. The bank will forward this request to the mechanism for clearing and settlement, and then send this to the customer's bank for settlement.

Step 4. Post-Submission

When you've completed the payment, it will take some time to determine if the SEPA payment has been effective or not. We suggest waiting minimum of 48 hours to finish your purchase.

SEPA Benefits and Drawbacks

Benefits

SEPA Direct Debit has 3 important advantages for people who manage recurring payments

• Control It allows retailers to make sure that their customers pay for their purchases in time each month.
• Rates of retention: Eliminates failed payments due to card expiration or cancelation. Also, it increases the customer's loyalty with a convenient system of setting-and-forget payment.
• Lower admin time: Reduces the admin time needed to collect payment.

SEPA Direct Debit is also ideal for invoices to B2B:

• Improved cash flow: Payments are processed on time and in a speedy way.
• The collection of variable sums: Using a single upfront contract, sellers will be able to claim the amount they want rather than giving banks fresh instructions each time a modification needs to be made.
• Reducing admin time: Payments can be automated on a scheduled basis.

Other purposes SEPA can be useful for are:

• Markets with less card use In Germany as well as the Netherlands Credit card usage is less than 50 percent. SEPA Direct Debit is a preferred method for payment in these countries.

Negatives

SEPA isn't a great alternative to:

• transactions that require immediate clearing SEPA Direct debit payments cannot be immediately cleared, even under the more rapid B2B scheme.
• Transactions that are likely to result in a chargeback A SEPA Core Direct Debit returns with no questions policy lets the chargeback process (equivalent to refunds under the ACH scheme) simple in the first eight weeks following the event.

"'s SEPA Experience

The system displays your order right at checkout. It handles all of the steps for processing your buyer's order, so there is no requirement to do anything except enable SEPA to pay in your account's settings.

This is what it looks like as from the perspective of your customer:

1. The client opts for SEPA Direct Debit and the bank's name is entered, the IBAN or bank's number for accessing their bank account.
2. The purchaser agrees to the SEPA Direct Debit Mandate conditions and validates their bank account details for the purpose of submitting the purchase.
3. Following the submission of an order, when the order is submitted, the user is redirected to a confirmation page to verify that the transaction was successful.
4. The process of payment typically will take at most two days to process.

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