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SEPA Direct Debit: definition and implementation method!

SEPA Direct Debit: definition and implementation method!

By Nathalie Pouillard

Published: 22 October 2024

SEPA Direct Debit, a term that is part of everyone's daily life.
But do you know the ins and outs? How do you set it up and why?
Did you know that there is software dedicated to managing your recurring billing that supports different payment methods, including subscription management software and payment gateways?
I promise, we'll stop asking questions and start answering them:

The SEPA zone

Definition and background

The initials stand for Single Euro Payments Area.

The Unified Payments Area covers 34 countries and their overseas territories. It was set up by the member banks of the European Payments Council(EPC) in response to a request from the European Commission.

These countries, which do not necessarily have the euro as their currency, are :

  • the countries of the European Union (19 of which are in the Euro zone) + Monaco
  • Monaco,
  • Switzerland
  • Liechtenstein
  • Norway
  • Iceland
  • San Marino
  • the Isles of Man,
  • the Channel Islands.

Exceptions and subtleties

Some countries that use the euro in agreement with the EU are not part of the SEPA zone:

  • Montenegro,
  • Kosovo.

The French overseas departments and regions are part of the SEPA zone:

  • Guadeloupe
  • Martinique
  • French Guiana
  • Réunion,
  • Mayotte,
  • Saint-Pierre-et-Miquelon,
  • Saint-Barthélemy,
  • Saint-Martin.

A SEPA COM Pacific system has been set up for the overseas collectivities (formerly TOM), using the same standards for exchanges with :

  • French Polynesia,
  • New Caledonia
  • Wallis and Futuna.

Some countries adopted it earlier, in 2014 for France, but all European countries have been able to issue and receive SEPA credit transfers and direct debits since 1 February 2016.

What is the purpose of SEPA?

Within the framework of Economic and Monetary Union, the principle of SEPA is to enable consumers, whether private individuals or professionals, BtoC or BtoB :

  • make payments under the same conditions in all European countries,
  • harmonise euro payment methods between member countries,
  • take full advantage of the trade and commercial area.

SEPA has created an integrated, competitive and innovative retail payments market for all cashless payments in euros.

Banque de France

These are cashless payments (excluding cash and banknotes), such as :

  • SEPA Credit Transfer ( SCT),
  • SEPA Instant Credit Transfer (SCT Inst),
  • SEPA Direct De bit ( SDD),
  • SEPA Card Payment (SCP).

Compared with domestic payments, cross-border payments benefit from :

  • the same standards
  • the same speed
  • the same security
  • the same costs.

This is to ensure that the development of trade and investment within the zone is not hindered or even encouraged.

Harmonisation of bank details

On the RIB (bank identification statement), two international data elements are required for SEPA:

  • the IBAN (International Bank Account Number): a series of numbers and letters, in France beginning with FR, identifying the bank account,
  • the BIC (Bank Identifier Code) or SWIFT (Society for Worldwide Interbank Financial Telecommunication): a series of letters identifying the bank.

Focus on SEPA direct debits

As defined by the Banque de France, a SEPA direct debit is "an automated means of payment that can be used to pay recurring or one-off bills denominated in euros. This pan-European, bank-to-bank payment method is the opposite of the SEPA credit transfer, which is initiated by the debtor.

The difference between the SEPA direct debit and the old national direct debit :

SEPA Core Direct Debits and SEPA B2B Direct Debits

There are two types of SEPA direct debit.
The SEPA Core concerns all creditors and all debtors, while the SEPA B2B direct debit, as its name suggests, is only valid for business-to-business direct debits.
The latter does not offer the same guarantees:

  • the right to reimbursement of transactions is not systematic, unless the debtor can prove that he did not accept the B2B mandate (absent or invalid mandate),
  • on the other hand, direct debit times are shorter.

The SEPA mandate

The SEPA direct debit mandate is used to give the debtor's consent to be debited, although no amount is mentioned.

It can take 2 forms:

  • paper: completed by the debtor and returned to the creditor ;
  • electronic: completed online by the debtor on the creditor's website or via their online bank (e-mandate).

A SEPA mandate is valid for:

  • unlimited, i.e. until the debtor's agreement is revoked (for recurring direct debits),
  • revoked at any time at the debtor's request to the creditor,
  • obsolete if no SEPA direct debit order has been presented for a period of 36 months.

The SEPA direct debit deadline

Unlike direct debits by credit card, SEPA direct debits are not immediate and not in real time. The payment is collected from the creditor's account at least two interbank business days after the direct debit date.

Other conditions

  1. The creditor and debtor must both be in the SEPA zone.
  2. There is no limit on the amount.
  3. The debtor does not need to send a payment voucher for each payment or due date for recurring transactions (previously the TIP, interbank payment voucher).
  4. Since the introduction of SEPA, there is no longer a specific form to complete in addition to the direct debit mandate.
    Previously, the debtor's bank had to be notified by the debtor. The agreement is now made directly between the customer and the company.

"This will enable the dematerialised mandate to flourish.

GoCardless

SEPA Direct Debit obligations

SEPA Direct Debit requires :

  • an ICS (SEPA Creditor Identifier) to suppliers, replacing the NNE (National Issuer Number) since 1 August 2014,
  • In practice, it remains the same if the company name, trading name, bank account or address changes;
  • an RUM code (unique mandate reference), defined by the creditor and communicated to the debtor.

How do I obtain an ICS?

The request is made directly by the creditor's bank to the Banque de France or via a payment gateway.
The following will be verified

  • the creditor's activity in France
  • The creditor's ability to comply with SEPA standards, avoid errors and maintain the system's reputation,
  • sufficient cash flow to cover rejected direct debits,
  • the ability to compensate the bank in the event of requests for repayment of a sepa direct debit.

How do you create an RUM code?

The creditor defines the RUM code, but certain rules must be observed:

  • it is made up of a maximum of 35 Latin characters, including :
    • letters from A to Z, with capitals recommended,
    • numbers from 0 to 9,
    • punctuation / - ? :() . and space (not recommended).
  • it is unique to each mandate
  • it does not include sensitive data such as IBAN, passport number, etc,
  • it can include contract or customer references, as long as they are unique.

SEPA direct debits and businesses

When does a business use SEPA direct debits?

As soon as a business sells products or services and invoices its customers on a recurring or repeated basis, it can use SEPA Direct Debit, because
it allows them to :

  • attract customers by making payment easier, faster and more secure ;
  • make customers pay regularly and automatically
  • ensure compliance with a payment schedule, without late payment or reminders;
  • build customer loyalty through subscriptions, pay-as-you-go(based on actual consumption) or payment in instalments;
  • easily identify payments received, with the references decided by the creditor itself (cf. RUM code);
  • limit the risk of non-payment.

It is also possible to offer SEPA direct debits for a single payment, known as "One off".

Company obligations

There are three aspects to these obligations:

  • the collection and physical or electronic storage of mandates,
  • ensuring that debtors are properly informed
  • updating, amending and cancelling mandates.

The supplier or service provider must therefore :

  • provide their customers with a contact point to enable them to amend or revoke the SEPA direct debit mandate;
  • inform the customer at least 14 calendar days before the due date of any direct debit, by means of an invoice, a sepa single or recurring direct debit notice, or a payment schedule, indicating :
    • the date
    • the amount
    • the ICS number,
    • if possible, the RUM code that will be assigned to the mandate;
  • draw up and send the direct debit mandate to the customer, which must contain :
    • the heading "SEPA Direct Debit Mandate",
    • the RUM code,
    • contact details (address and name or company name, and name or company name if different),
    • ICS identification,
    • compulsory information;
  • send their bank the first payment order 5 working days before the due date, and 2 working days for recurring orders;
  • modify the mandate at the debtor's request (new bank account, etc.) on receipt of a letter that will serve as proof (no new signature).

The unique mandate reference is visible on the debtor's bank statement (paper and/or online) so that they can identify and dispute a direct debit.

How do I set up a SEPA direct debit?

The creditor can collect the mandates and send them to his bank, but in the case of SEPA online payments, e-merchants need a payment management solution.
This enables them to protect their customers' sensitive data as it travels over the web, and to entrust responsibility for it, particularly for storing bank details, to a trusted third party.

Renowned payment gateways include :

  • adyen,
  • Braintree (PayPal),
  • Checkout.com,
  • GoCardless,
  • Nuapay,
  • Stripe,
  • Worldline.

Slimpay is a payment gateway approved by the Autorité du contrôle prudentiel et de résolution (ACPR).
With its streamlined interface, the solution not only collects customers' bank details, but also activates them via an electronic signature module, which can be used both online and in-store, for SEPA direct debit contracts and mandates.
The electronic signature includes archiving with probative value and time stamping.

Slimpay can also :

  • accept SEPA direct debit payments, after IBAN filtering for optimum security,
  • restart failed direct debits using Automatic Retry,
  • monitor the status of recurring payments via the dashboard,
  • access and modify customer information as required,
  • set up SEPA direct debit schedules,
  • reimburse customers,
  • transfer funds collected to the company's account, etc.

It can be integrated into your website or mobile application with just a few lines of code, thanks to an advanced API.

How do I manage SEPA subscriptions and recurring payments?

As we mentioned earlier, a payment gateway is essential for managing payments relating to your online business. If you want to go even further, there are subscription management solutions that include payment gateways.

The advantage? As well as managing payments, these tools allow you to create subscription formulas, automatically calculate their price, and manage subscriptions to the various offers.

ProAbono is one such solution. Dedicated to cloud software publishers, it automates the management of the subscriptions they offer. ProAbono works with well-known payment gateways such as Slimpay.
The platform is nonetheless impartial when it comes to payment methods, offering a full range of options: payment by direct debit, credit card, bank transfer, cheque or even cash!

Among the advantages of ProAbono :

  • its pricing engine, which calculates the cost of your subscriptions in real time,
  • the creation of tailor-made or à la carte offers, segmented by customer type,
  • automated online subscription steps with dynamic offer grids, personalised subscriptions, online SEPA direct debit mandates, etc,
  • a customer portal giving customers the freedom to change offers and modify their bank details,
  • integration with your software ecosystem (CRM, accounting, etc.) via simple, secure application programming interfaces.

Recurrence and security for your offer

SEPA direct debits provide a secure framework and harmonise payments within Europe and beyond. This makes it easier for companies to develop their business and manage subscription payments, which are increasingly popular with individuals and businesses.

For e-tailers and online service providers, tools adapted to subscription-based consumption manage recurring invoicing as well as the collection of payments and banking data from their customers. These are called SaaS, Software as a Service, and they live up to their name, don't they?

And how do you manage SEPA direct debits?