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SEPA Direct Debit: definition and implementation method!

SEPA Direct Debit: definition and implementation method!

By Nathalie Pouillard

Published: October 22, 2024

SEPA Direct Debit: a term that's part of everyone's everyday life.
But do you know the ins and outs? How do you set it up, and why?
Did you know that there are software packages dedicated to managing your recurring billing that support 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 :

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

Exceptions and subtleties

Some countries using 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 French 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 February 1, 2016.

What is the purpose of SEPA?

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

  • make payments under the same conditions in all European countries,
  • harmonize euro payment methods between member countries,
  • take full advantage of the trade zone.

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

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, and is even encouraged.

Harmonization of bank details

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

  • IBAN (International Bank Account Number): a series of numbers and letters, beginning with FR in France, 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 invoices 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 Debit and SEPA B2B Direct Debit

There are two types of SEPA direct debit.
The SEPA Core Direct Debit concerns all creditors and 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/she did not accept the B2B mandate (absent or invalid mandate),
  • on the other hand, direct debit lead times are shorter.

The SEPA mandate

The SEPA mandate is used to express the debtor's consent to be debited, without specifying any amount.

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).

The validity of a SEPA mandate is :

  • unlimited, i.e. until revocation of the debtor's agreement (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 or real-time. The payment is cashed on the creditor's account at least two interbank business days after the direct debit date.

Other conditions

  1. Both creditor and debtor must be located within the SEPA zone.
  2. There is no amount limit.
  3. No need for the debtor to send a payment voucher with each payment or due date for recurring transactions (previously known as TIP, titre interbancaire de paiement).
  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 enables the growth of the dematerialized mandate."

GoCardless

SEPA Direct Debit obligations

SEPA Direct Debit requires :

  • an ICS (SEPA Creditor Identifier) to suppliers, replacing the NNE (National Issuer Number) since August 1, 2014,
  • In practice, it remains the same in the event of a change of company name, corporate name, bank account or address;
  • an RUM code (Référence unique de mandat), 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

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

How do I create an RUM code?

The creditor defines the RUM code himself/herself, while respecting certain rules:

  • it consists of a maximum of 35 Latin characters, including :
    • letters from A to Z, with capital letters 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 companies

When does a company use SEPA direct debits?

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

  • attract customers with easy, fast and secure payment ;
  • make customers pay regularly and automatically;
  • ensure compliance with payment schedules, without late payments or reminders;
  • build customer loyalty, through subscriptions, pay-as-you-go or instalments;
  • easily identify payments received, as the creditor himself decides on the references (cf. RUM code);
  • limit the risk of non-payment.

On the other hand, it is also possible to offer SEPA direct debits for a single payment, known as "one-off".

Company obligations

Obligations are threefold:

  • the collection and physical or electronic storage of mandates,
  • providing information to debtors,
  • updating, modifying and cancelling mandates.

Thus, the supplier or service provider must :

  • provide their customers with a contact point to enable them to modify 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, specifying :
    • the date
    • amount
    • 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 include :
    • the "SEPA Direct Debit Mandate" header,
    • the RUM code,
    • contact details (address and name or company name, and name or company name if different),
    • ICS identification,
    • mandatory information;
  • transmit the first payment order to your bank 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 an authentic letter (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?

Creditors can collect mandates and send them to their bank, but in the case of SEPA online payments, e-tailers need a payment management solution.
This enables them to protect their customers' sensitive data circulating on the web, and to entrust responsibility, particularly for storing banking data, 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 French banking regulator, the Autorité du contrôle prudentiel et de résolution (ACPR).
With its streamlined interface, the solution not only collects customer banking data, but also activates customers 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 probative value archiving and time stamping.

Slimpay also :

  • accept SEPA direct debit payments, after IBAN filtering for optimum security,
  • relaunch failed direct debits using Automatic Retry,
  • monitor the status of recurring payments via the dashboard,
  • access and modify customer information,
  • set up SEPA direct debit schedules,
  • reimburse customers,
  • transfer collected funds to the company 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 mentioned above, a payment gateway is essential for managing the payments associated with your online business. To take this a step further, there are subscription management solutions that integrate payment gateways.

The advantage? In addition to managing payments, these tools enable 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 all possibilities: payment by direct debit, or credit card, by bank transfer, by check, or even in cash!

ProAbono's advantages include :

  • a pricing engine that estimates your subscription costs in real time,
  • the creation of customized or à la carte offers, segmented by customer type,
  • automation of online subscription steps, with dynamic offer grid, subscription personalization, online SEPA direct debit mandates, etc,
  • a customer portal giving customers the freedom to change offers and 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 for harmonizing 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 alike.

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. SaaS - software as a service- lives up to its name, doesn't it?

How do you manage SEPA direct debits?

Article translated from French