SEPA Direct Debit

What is SEPA Direct Debit?

SEPA Direct Debit is a payment service that enables companies to collect funds automatically from their customers’ bank accounts. SEPA stands for Single Euro Payments Area, a European Union initiative to standardize electronic payments across the EU member states. SEPA Direct Debit can be used for both one-off and recurring payments, making it ideal for businesses with a regular billing cycle.

How does SEPA Direct Debit work?

To use SEPA Direct Debit, the biller (the company collecting payments) must first obtain a mandate from their customer. A mandate is an agreement between the biller and the customer, authorizing the biller to collect payments from the customer’s bank account. The mandate contains the customer’s bank account information, the amount and frequency of the payments, and the customer’s authorization.

The SEPA Direct Debit scheme is governed by the European Payment Council (EPC), which sets the rules and standards for the service. The EPC ensures that SEPA Direct Debit transactions are secure, efficient, and transparent.

Creating a SEPA Direct Debit Mandate

To use SEPA Direct Debit, a mandate is needed from the customer. The mandate can be created directly through us or externally. If you transfer the mandate to us, it is necessary to send the UMR=Unique Mandate Reference of the mandate to which this payment should be assigned, along with other parameters.

To create a mandate via TrustPay, the following steps need to be taken:

1. Provide the Mandate Form

The biller needs to provide a form to the customer, which contains information about the payment, the customer’s bank account information, and authorization for the payment.

 2. Customer Completes the Mandate Form

The customer should complete it, including signing and dating it, to indicate their agreement to the terms and conditions. The customer should return the form to the biller.

3. Submit the Mandate Form to the Bank

The biller should submit the form to their bank for verification and processing. The bank will verify the information and ensure the mandate complies with the SEPA Direct Debit rules and regulations.

4. Confirmation of the Mandate

Once the mandate has been processed, the customer will receive confirmation from their bank that the mandate has been set up. The biller will also be notified that the mandate has been processed, and they can start collecting payments.

The customer must complete and sign the mandate form, indicating their agreement to the terms and conditions. Once the mandate is signed, the biller must submit it to their bank for verification and processing.

SEPA Direct Debit is a convenient and secure way to make recurring payments. By obtaining a mandate from customers, billers can collect payments automatically, saving time and effort. If you’re a business looking to streamline your billing process, SEPA Direct Debit could be the solution you’re looking for.

Reversibility

Unlike some other payment methods, SEPA Direct Debit offers limited reversibility. Once payment has been authorized and collected from the customer’s account, it becomes challenging to reverse the transaction unilaterally. The primary reason behind this limited reversibility is the authorization process, which grants businesses a certain level of trust and authority to collect payments.

Returns

To address situations where a merchant wishes to dispute a transaction or request a refund, the SDD scheme provides a returns process. Returns allow merchants to initiate the refund process for specific transactions.

Nowadays, the process of initiating returns has become more accessible and convenient. Many banks now offer a simple action button or online portal where merchants can easily request returns. This streamlines the process and enhances satisfaction.

The returns period in SDD is subject to specific guidelines. There are the first eight weeks without needing to provide a specific reason to request a return. Additionally, there is a total of 11 months from the date of the first transaction, during which it is possible to make a claim. However, after this period, the process becomes irreversible.

It’s important to note that SEPA Direct Debit differs from card payments in terms of reversibility. With card payments, customers have the option to represent disputed transactions and potentially win a case even after a chargeback has occurred. This level of flexibility is not available in SDD, where the returns process provides a finite timeline for customers to make claims.

Merchants are encouraged to evaluate the appropriateness of utilizing SDD as a payment method. Particularly for merchants specializing in digital goods, it is advisable to prioritize SDD over those dealing with physical goods. This is because of the reversible nature of SDD, as merchants handling physical goods face heightened risks in the event of a return, for which they lack effective defensive measures.

Preventing Issues and Ensuring Customer Satisfaction

To minimize potential disputes and issues related to reversibility, chargebacks, and returns, businesses utilizing SEPA Direct Debit should prioritize clear communication, transparent billing practices, and robust customer support. Providing timely and accurate information about upcoming charges, transaction descriptions, and contact details for customer inquiries can help foster trust and mitigate misunderstandings.

Any questions regarding SEPA direct debit? Contact your account manager or our team at sales@trustpay.eu and we will be happy to answer your questions!