What is the best way to take on SEPA Direct Debit and reach many more European buyers

 The article has been modified since it was initially published with the most current information about SEPA Direct Debit transactions as from April 2023.

If you're selling software globally, you know how difficult handling cross-border payments can be. From ensuring that you show the right currencies for each area to ensuring that you support your clients' preferred payment methods, global commerce can come with many challenges.

Many buyers within the European Union and surrounding countries choose to pay with SEPA Direct Debit. Not only does it help simplify multi-currency payments and reduce the chance of failing payment transactions.

In this article we'll explain the basic concepts of SEPA Direct Debit and provide a reason the reason why it's crucial to take it into consideration at the time of checkout if you're doing business in Europe.

Table of Contents

1.   What is SEPA Direct Debit?
2.   How does SEPA Direct Debit work?
3.   SEPA Advantages & Disadvantages
4.   's SEPA Experience

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

What Is SEPA Direct Debit?

SEPA Direct Debit is a wire transfer service that permits retailers to take payment from accounts within the countries and associated territories in the Single European Payments Area (SEPA).

SEPA is similar to ACH Debit (US) as well as EFT (Canada) however, with a few notable differences:

Why is it so crucial to Accept SEPA?

More than 529 million individuals utilize SEPA to pay more than 146 billion electronically-mediated payments each year in the 36 member countries. It accounts for more than 30% of the online shopping in Europe, making SEPA a crucial payment option to support if you're selling to Europe. 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 as well as Territories  

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

Furthermore, every European who has a bank account can pay with SEPA. By supporting this single option of payment at the checkout, you can reach over 500 million buyers in 36 different countries.

How does SEPA Direct Debit Work?

SEPA transfers function similarly to domestic transfers, with a few minor differences occurring behind the scenes. This is how they function from the merchant's perspective:

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

Step 1: Mandate

To be able to accept payment by SEPA Direct Debit your client must fill out an Mandat authorizing you to take payment. A mandate is a billing arrangement signed by a buyer that allows the seller to take the future payment from their Euro-denominated bank account.

Mandates need to include specific mandatory specific information.

 Required Items on a Mandate:

• Pay amount
• SEPA Mandate ID
• SEPA Date of Mandate
• Name of the merchant company
• Merchant's Creditor Identifier
• Address of the Merchant's complete address
• Information about Creditors
• Type of payment
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Date of Signed
• Signature

Here's an example for's SEPA Mandate:

2. Pre-Notification

According to SEPA guidelines, you are required to provide your clients with a pre-notification to inform them when they will be able to expect a single installment or a regular monthly subscription to leave their bank account. The notifications may be made through text messages, email and/or phone calls, as well as invoices, or in a letter.

Fully compliant pre-notifications require to meet the following requirements:

1. A proper notice period (typically 14 calendar days)
2. Due date, amount, mandate reference, and Creditor ID
3. Merchant's contact information

Step 3: Request for Payment

When the notification has been delivered after which you are able to initiate the payment by submitting all the information related to your mandate to the bank of the seller. does this step automatically for the sellers. The bank then forwards the order to the clearing and settlement mechanism, which will then forward the request to the customer's banking institution to settle.

Step 4: Post-Submission

When you make the payment, it can need a couple of days to know if a SEPA payment has succeeded or not. This is why we suggest waiting minimum of 48 hours to complete your order.

SEPA Advantages and Disadvantages

Benefits

SEPA Direct Debit has 3 significant advantages for businesses that make recurring payments

• Control Merchants can ensure that customers pay their bills at the time they are due each month.
• Retention rates: Eliminates failed payments due to card expiry or cancellation. It also increases customer loyalty through a simple set-and-forget option for payment.
• Lower admin time: Reduces the admin amount of time needed to collect payment.

SEPA Direct Debit is also great for B2B invoicing:

• Enhances cash flow Payments happen promptly and in an an efficient way.
• Collection of variable amounts: By signing a one-time contract, sellers can be able to claim the amount they want instead of supplying a bank with fresh set of instructions every time a change is needed.
• Reducing admin time: Payments can be made automated in a schedule.

Other things SEPA is good for:

• Markets that have low credit use of cards: In Germany and the Netherlands, credit card penetration is not more than 50 percent. SEPA Direct Debit has become the most popular method to pay in these countries.

Negatives

SEPA is not a good alternative for:

• Transactions that need immediate clearing SEPA Direct debit payments cannot be instant even under the faster B2B scheme.
• Transactions that are likely to be charged back A SEPA Core Direct Debit no-questions-asked return policy lets chargesbacks (equivalent to refunds under the ACH scheme) easy in the initial eight weeks after the date of payment.

"'s SEPA Experience

Our platform will automatically present an order at the point of checkout. It handles all of the necessary steps for processing the order of your customer, which means you won't have to do anything except enable SEPA to be a pay option in your account settings.

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

1. The buyer opts for SEPA Direct Debit, and then enters their bank name, IBAN or the bank's code to sign in to their account at the bank.
2. The buyer agrees to the SEPA Direct Debit Mandate terms and confirms their bank details for the purpose of submitting the order.
3. When the order is submitted and submitting it, the purchaser is taken to a confirmation page to confirm that the transaction has been completed.
4. Payments typically take at least 48 hours to process.