SEPA, or Single Euro Payments Area, is a program initiated by the European Commission. It provides a standard to process bank payments in member countries. Basically, all euro payments both national and cross-border will be considered domestic, irrespective of the country where organization, individual, and bank are located. The project's aim is to improve the efficiency of cross-border payments in Euro currency. Through SEPA direct debit, it is possible to accept payments from one country to another across Europe.
SEPA involves 28 European Union (EU) member states plus Andorra, Iceland, Liechtenstein, Norway, Switzerland, Monaco, San Marino, and Vatican City. SEPA enables individuals and businesses to reduce the amount of various payment formats and simplifies into a single market for bank transfers within the area.
Goal of SEPA Direct Debit
SEPA direct debit is a payment process which streamlines the European payment structure. A SEPA direct debit is an easy way for merchants to take bank payments from a shopper's account. However, this process requires a legal agreement between the customer and the merchant. A signed mandate from customer depicts that customer has authorized the merchant to collect funds from their bank account and inform the customer’s bank to pay the collection.
Functional across the 36 SEPA countries, SEPA direct debit is an incredibly powerful tool for domestic as well as cross-border direct debit transactions within the Eurozone countries.
Two main schemes available are:
- SEPA Core Direct Debit
- SEPA Business to Business (B2B) Direct Debit
SEPA Core Direct Debit Scheme tends to be more applicable to online merchants.
What is the Core Direct Debit scheme?
The SEPA Core Direct Debit Scheme is the easiest one with following key features:
- Even if the bank account isn't in Euros, all SEPA transactions happen in Euros.
- The customer and merchant must have a payment account with a service provider located within SEPA region.
- Payer (customer) must provide a signed mandate to the payee (merchant).
- Generally, the merchant can only debit under a valid mandate. If a biller doesn't debit for 36 months after last initiated debit, the mandate expires. At that point, the merchant must cancel the mandate and cannot initiate debits until they receive a new mandate from the customer.
- The merchant must keep copy of mandates (these are typically a digital format) while they are valid. It is suggested to store mandates for a period of at least 14 months after the latest debit.
- Both single (one-off) and recurring direct debit payments can use the SEPA Core Direct Debit Scheme.
- Refunds for customers are possible only for up to eight weeks after the debit date.
What Are Mandates?
A mandate is a legal agreement between debtor and creditor. It shows consent of a customer towards the merchant to initiate the debt from specified account and to the customer's bank to comply with such instruction. The customer creates the mandate either in paper form or electronically. Usually, a mandate has a validity period of 36 months after the direct debit transaction.
Refunding With SEPA Direct Debit
Both schemes of SEPA Direct Debit entitle customers with a certain right to request refunds. If it is an authorized transaction, customer can recall during an 8-week period after the debit date, with no obligation of submitting the reason of refund. However, in case of unauthorized transactions, customers can ask for return for an extended period of 13 months after the debit date.
Apply for SEPA Direct Debit Acceptance Now!
At IntegralPay we provide direct debit acceptance solutions with multi-language payment forms for customers in all 36 SEPA countries.