A guide to SEPA direct debit

This explainer takes you through all the basics of how SEPA direct debit works. Learn the key advantages it offers to merchants and customers, along with downsides and use case examples.

SEPA Direct Debit: main uses, advantages and disadvantages

Just over a decade ago, cross-border direct debit payments in Europe were rather complicated. Before the pan-European SEPA (Single Euro Payments Area) standard was introduced, differences in national banking systems meant receiving a payment from abroad was time-consuming and costly.

With the introduction of the SEPA Direct Debit scheme, the regulations have been simplified and no longer distinguish between direct debits collected in, for example, Germany and Italy or the Netherlands. More than 600 million people in 36 European countries and territories can now make use of this direct debit system to make one-off or recurring transactions.

Let’s take a closer look at what the SEPA Direct Debit scheme is, how it works, and what benefits it brings to merchants and consumers across Europe.

What is SEPA Direct Debit?

SEPA Direct Debit is an international direct debit system for initiating domestic and cross-border collections in euros. It covers the 36 countries and associated territories in the Single Euro Payments Area (this interactive map of SEPA member countries shows exactly who has signed up), and ensures streamlined direct debit services for both consumers and businesses.

SEPA Direct Debit operates on the basis of shared rules, processes, service levels and time frames. As a payment instrument, it can replace the many different national direct debit solutions within the eurozone.

There are two SEPA Direct Debit schemes: SEPA Core Direct Debit and SEPA B2B Direct Debit.

SEPA Core Direct Debit

This is a payment collection scheme for both personal and corporate customers, and must be offered by all banks participating in the SEPA scheme. Under the Core scheme, debtors can request a no-questions-asked refund within 8 weeks of the payment.

SEPA B2B Direct Debit

SEPA B2B Direct Debit is a payment collection scheme for corporate customers only. Banks participating in the SEPA scheme can choose to offer it to their customers, but it is not mandatory. Here, debtors cannot be reimbursed after a withdrawal from their account, except in the case of error. The two schemes use the same technical set up and file formats. They differ primarily with respect to debtors’ rights to refund.

How does SEPA Direct Debit work?

SEPA Direct Debit is pull-based

Before a merchant can collect payments through SEPA Direct Debit, the sender must complete a mandate authorising the merchant to pull funds. These can be set up by filling out a paper form or online. Once given a mandate, it is the merchant who initiates payments. Mandates allow merchants to collect future payments without having to ask for permission every time. Of course, money is debited only from the account specified in the mandate.

Before withdrawing funds, merchants need to send a notification to their customers 14 days before the payment date, e.g., by invoice, unless previously agreed otherwise.

When dealing with a recurring payment of a fixed amount, merchants only need to send one notification. It must include the frequency of the payments and the amount of money to be debited. For payments with varying frequencies and amounts, merchants must send their customers a notification before every payment.

SEPA Direct Debit payments are bank-to-bank

There are no card networks involved in the SEPA Direct Debit scheme. All communication happens directly between the banks. The advantage here is that there is no fixed transaction limit - rather, the limit depends on what was agreed upon between the merchant and the payer.

SEPA Direct Debit is only available in euro

All SEPA Direct Debit transactions happen in euro, even if the relevant accounts are not in euro. Any currency exchange required is up to the payer's and merchant's banks. Moreover, account numbers of the payer and the payee must be in the IBAN format.

Chargebacks depend on the SEPA Direct Debit scheme used

Using SEPA Direct Debit Core, a payer can request a refund of an authorised collection from their bank within 8 weeks of being debited. The payer is also entitled to request a refund of an unauthorised or fraudulent collection up to 13 months after being debited.

Under the SEPA Direct Debit B2B scheme, the payer is not entitled to obtain a refund of an authorised collection. However, if a payer believes that a collection is unauthorized, i.e. is executed without a valid mandate, the direct debit may be reversed within a period of 13 months.

How long do SEPA Direct Debit transactions take?

SEPA Direct Debit is not an instant payment method (unlike the SEPA Instant scheme). Payments take at least 3 business days to clear under the B2B scheme and 2 business days under the Core scheme.

When collecting the first payment under the SEPA Core Direct Debit scheme, the cut off to submitting a payment request to the payer’s bank is 5 business days before the due date. For subsequent payment collections, merchants must submit the requests 2 business days before the payment is due.

Under the SEPA B2B Direct Debit Scheme, the merchant needs to submit the payment request one business day before the payment's due date.

The main benefits of SEPA Direct Debit

The primary advantage of a SEPA transfer is that it offers the same ease and comfort when receiving payments from across Europe as when receiving them within your home country.

And the SEPA Direct Debit scheme is particularly useful for recurring transactions. For merchants collecting regular payments such as rent or subscription fees, SEPA Direct Debit offers several important advantages:


Using SEPA Direct Debit enables merchants to ensure that customers will pay their bills on time every month. Invoices are paid when they are due and can be directed to a single account.

Retention rates

When making international payments, people usually lean towards using credit cards. Using SEPA Direct Debit eliminates failed payments due to card expiry or cancellation. With funds transferred directly from bank accounts, the chances of payment failure are much lower. The scheme also increases customer loyalty by offering a convenient “set it and forget it” payment method.

Efficiency gains

SEPA Direct Debit allows payments to be automated. A business that handles recurring payments can use the scheme to collect them automatically at regular intervals instead of waiting for customers to pay their invoices. This reduces the admin time involved in chasing and inputting updates to card details. It also cuts down the time and manual effort required from chasing late payments.

For consumers, SEPA Direct Debit provides several key benefits:

Peace of mind

SEPA Direct Debit simplifies recurring payments by automating the transaction process, so consumers avoid the risk of missing a payment deadline and of being charged additional fees for late payments, or suffering from an interruption of service.


With SEPA Direct Debit, consumers have the option of spreading costs across bank accounts and credit cards. The scheme also allows for payment plans and, in turn, better budgeting.


SEPA Core Direct Debit allows consumers to enjoy a fast, simple no-questions-asked refund procedure up to 8 weeks after a direct debit was made on their account.

The disadvantages of SEPA Direct Debit

SEPA Direct Debit offers numerous advantages for both merchants and customers, but there are instances where the scheme is less beneficial:

Transactions which need immediate clearing: SEPA Direct Debit payments are not instant. Even under the faster Core scheme, it takes at least 2 business days for the payment to be settled. So, if a business requires instant payments, SEPA Direct Debit is not an ideal payment method.
Chargebacks: For sellers of high value goods, implementing SEPA Direct Debit might not be worthwhile. This is because the chargeback time frame is limited to 13 months. If there are many chargebacks, the business might end up doing a lot more administrative work.

SEPA Direct Debit: the takeaways

SEPA Direct Debit connects the 36 European countries in the Single Euro Payments Area to simplify direct debit transfers. The two SEPA Direct Debit schemes (SEPA Core Direct Debit and SEPA B2B Direct Debit) give consumers and businesses a convenient and secure means of paying bills and subscription fees, and making other recurring payments.

In addition to convenience, consumers enjoy a guarantee that the bills will be paid on time, taking the stress away from remembering recurring payments.

Merchants get even more benefits, including better cash flow -thanks to no missed payments - and reduced administrative burden. While SEPA Direct Debit is not an instant payment method, it is the easiest way to collect invoices across Europe on their due date.

Would your clients and their end users benefit from SEPA Direct Debit? Paysolut offers fast, simple access to SEPA schemes including Direct Debit through its SEPA gateway module.

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