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 released with the latest information on SEPA Direct Debit transactions as in April 2023.

If you sell software internationally You're aware of how challenging dealing with cross-border payments. From ensuring that you show the right currencies for each region to supporting your customers with their preferred payment options, global commerce can come with its fair share of challenges.

Many buyers within the European Union and surrounding countries are more comfortable paying using SEPA Direct Debit. It not only helps simplify multi-currency payments however it reduces the likelihood of failed payment transactions.

In this post we'll explain the fundamentals of SEPA Direct Debit and provide a reason the reason why it's crucial to use it when you checkout if you're doing business within Europe.

Table of Contents

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

Already a seller and want to enable SEPA Direct Debit in your business? Submit a support ticket from inside the platform or from our Support page.

What Is SEPA Direct Debit?

SEPA Direct Debit is an international wire transfer which allows merchants to collect money from accounts located in countries and associated territories in the Single European Payments Area (SEPA).

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

Why Is It So Important to Acquire SEPA?

In the present, over 529 million people use SEPA to pay more than 150 billion electronically-mediated payments each year within the 36 SEPA member states. This accounts for over 30% of all online transactions across Europe and makes SEPA a crucial payment option to support if you're selling into 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 and 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 accounts with banks can make payments through SEPA. With this one option of payment at the checkout it will allow you to reach more than 500 million potential customers across 36 different countries.

How Does SEPA Direct Debit Function?

SEPA transfers work similarly to domestic transfers, with a few minor differences occurring behind the scenes. Let's look at how they operate from 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 via SEPA Direct Debit, the customer has to fill out a Mandat which authorizes you to collect payments. A mandate is a billing agreement given by a buyer that allows a seller to collect future payments from them via their account with a Euro denomination.

Mandates need to include specific mandatory specific information.

 Required Items on a Mandate:

• Payment amount
• SEPA Mandate ID
• SEPA Mandate Date
• Name of the merchant company
• Merchant's creditor identification
• Merchant's full address
• Creditor Information
• The type of payment
• International Bank Account Number (IBAN)
• Bank Identifier Code (BIC)
• Date Signed
• Signature

Here's an example for's SEPA Mandate:

2. Pre-Notification

In accordance with SEPA rules, you must send your customers a pre-notification to inform them when they can expect a single payment or subscription that will take place on their bank account. This notification can be delivered through text messages, email or phone call, an invoice or via a mailer.

Pre-notifications that are fully compliant require to meet the following requirements:

1. The appropriate notice time (typically fourteen calendar days)
2. The amount, the due date the mandate number, Creditor ID
3. Contact details for merchants

3. Payment Request

When the notification has been delivered after which you are able to initiate the payments by sending the mandate-related data to the bank of the seller. does this step automatically for sellers. The bank forwards the order to the mechanism for clearing and settlement and it will send the request to the customer's banking institution to be settled.

Step 4. Post-Submission

Once you have made a payment, it will take 2-3 business days to know if a SEPA payment is successful or failed. We recommend that you wait minimum of 48 hours to complete the order.

SEPA Advantages and Disadvantages

Advantages

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

• Control Enables merchants to ensure that customers pay their bills on time every month.
• Retention rates: Eliminates failed payments because of card expiry or cancellation. Also, it increases the loyalty of customers by offering a convenient set-and-forget method of payment.
• Reducing admin time: Reduces the admin time required to collect payments.

SEPA Direct Debit is also excellent for invoicing B2B

• Better cash flow Payments happen accurately and on time in a speedy way.
• Collecting variable amounts: By signing a one-time contract, sellers can be able to claim a new amount instead of giving banks fresh set of instructions every when a modification is required.
• The admin process is streamlined: Payments can be automatized on a regular basis.

Other benefits SEPA is good for:

• Markets with low card use: In Germany and the Netherlands Credit card usage is not more than 50%. SEPA Direct Debit (SEPA) is the preferred way to make payments in these countries.

Negatives

SEPA isn't a great choice to:

• transactions that require immediate clearing SEPA Direct debit payments are not instant, even under the faster B2B scheme.
• Transactions which are most likely to be charged back The SEPA Core Direct Debit no-questions-asked refund policy makes chargesbacks (equivalent to returns in the ACH scheme) easy in the initial eight weeks following the payment.

"'s SEPA Experience

Our platform automatically presents your mandate when you check out and handles all of the necessary steps for processing your buyer's order, so you won't have to do anything except enable SEPA for payment option within your account settings.

 This is what it looks like from your buyer's perspective:

1. The customer chooses SEPA Direct Debit and enters their bank's name, the IBAN or the bank's code for logging into their account at the bank.
2. The purchaser agrees to the SEPA Direct Debit Mandate Terms and validates their bank account details to submit the order.
3. When the order is submitted, the buyer is redirected to a page for confirmation of order, confirming that the payment is completed.
4. It usually takes about 48 hours for processing.