What is the best way to accept SEPA Direct Debit and get in touch with more European buyers?

This article has changed since it was initially published it now has the most up-to-date information on SEPA Direct Debit transactions as on April 20, 2023.

If you're selling software globally and you're aware of the it can be challenging to deal with payments across borders. From making sure that you have the right currencies for each country to accommodating your customers' preferred payment methods, the world of commerce is not without plenty of problems.

Many buyers within the European Union and surrounding countries are more comfortable paying using SEPA Direct Debit. It does not just help making multi-currency payments easier, but also decreases the chance of unsuccessful transaction.

In this piece, we'll break down the fundamentals of SEPA Direct Debit and discuss the reason why it's crucial to take it into consideration at the time of checkout when you conduct business in Europe.
    Table of Contents

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

Already a seller and want to establish SEPA Direct Debit on behalf of your business? Submit a support ticket from within the platform or on our Support page.

What exactly is SEPA Direct Debit?

SEPA Direct Debit is an electronic wire transfer system that permits retailers to take cash from accounts that are located in countries and associated territories within the Single European Payments Area (SEPA).

SEPA is similar to the ACH Debit (US) and EFT (Canada) with an exception that makes some important distinctions:

What is the reason it's crucial in order to Acquire SEPA?

More than 529 million people utilize SEPA to complete the one billion annual electronic transactions in the 36 members countries. SEPA is responsible for over 30% of internet-based shopping in Europe and makes SEPA an important method of payment for businesses selling into 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

countries that are not SEPA members and Territories

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

Furthermore, every European person who has an account at banks is able to make payments via SEPA. When you allow this one payment method in the moment of purchase it will allow you to reach the more than 500 million consumers from 36 countries.

What is SEPA Direct Debit Work?

SEPA transfer functions like traditional transfer, however there are some minor changes that take place at the back of the scene. Let's look at how they operate in the perspective of a merchant.

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

1. Mandate

To be able to accept payment through SEPA Direct Debit your customer has to sign the mandate that authorizes you to accept payments. A mandate is a billing contract that is signed by the buyer that allows an individual to take the future payment through their bank account using Euro currency.

Mandates need to contain certain mandatory specific information.

Essential Items to an Mandat:

• Payment amount
• SEPA Mandate ID
• SEPA Mandate Date
• The name of the company which is used to identify merchants
• Identification of the creditor for the merchant
• Complete address of the merchant's address
• Information on Creditors
• Method of payment
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Date of Signing
• Signature

Here's an example from what's known as the SEPA Mandate:

Step 2: Pre-Notification

As per SEPA guidelines, you are required to provide your clients with a pre-notification to let them know when they are expected to receive a certain payment or subscription that will leave their bank account. This notice can be sent by email, text message and/or phone calls, in addition to invoices, or perhaps in a written mailer.

The pre-notifications required to be compliant should comply with the following criteria:

1. A proper notification time (typically fourteen calendar days)
2. The sum, the Due date, the reference to Mandat the identity of the creditor.
3. Contact details for merchants

3. Payment Request

When the pre-notification arrives, following which you can to start the payment process by sending the mandate-related data to the bank that handles the transactions on behalf of your business. It does this automatically for its sellers. The bank then forwards the request to the mechanism for clearing and settlement that will forward it to the bank that the buyer is using to settle.

Step 4. Post-Submission

After you have made a payment you will require several days to see if your SEPA payment has succeeded or failed. We recommend that you wait minimum of 48 hours in order to fulfill the order.

SEPA Benefits and Negatives

Benefits

SEPA Direct Debit has 3 major advantages for those who use recurring payment methods:

• Control: Merchants have the ability to make sure that customers pay their bills in time each month.
• Rates of retention: Eliminates failed payments due to expiry of cards or cancellation. In addition, it increases customers' loyalty through a simple, set-and forget payment method.
• Lower admin time: It reduces the amount of time needed for collecting payment.

SEPA Direct Debit is also ideal for invoices B2B

• Improved cash flow: The payouts are completed quickly and punctually in a timely way.
• Collecting variable amounts: Using a single upfront contract, sellers can get an amount that is brand new instead of giving banks fresh instruction each time a modification is required.
• The admin process is simple: Payments can be automated on a regular basis.

Other functions SEPA serves include:

• Markets with lower use of credit cards: In Germany and the Netherlands the penetration of credit cards is less than 50 percent. SEPA Direct Debit (SEPA) is a preferred method for payment in these nations.

Negatives

SEPA isn't the best alternative to

• transactions that need instant clearing: SEPA Direct debit payments do not happen instantaneously, even with the B2B speedier scheme.
• Transactions which are most likely to be charged back: It is the SEPA Core Direct Debit no-questions-asked reimbursement policy that allows chargebacks (equivalent to refunds in the ACH scheme) effortless in the initial eight weeks after the transaction.

"'s SEPA Experience

Our system will automatically display your order at the time you pay and takes care of all the procedures to process your customer's order, so you don't have to do anything more then the option to enable SEPA to pay in the account setting.

This is how it looks in the eyes of a prospective buyer

1. The customer chooses SEPA Direct Debit, and then enters their bank's name, the IBAN or banking code in order to sign into their bank account.
2. The customer agrees with the SEPA Direct Debit Mandate Terms and validates the details of their bank account in order to complete the transaction.
3. After the purchase has been made after submitting the order and the buyer will be directed to a webpage to confirm the order, which confirms that the purchase is complete.
4. The process usually takes two days for processing.

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