SEPA Direct Debit

SEPA Direct Debit requires a mandate: the debtor (customer) authorises the creditor (merchant) to collect payments from their account and authorises their bank to honour those collections. The mandate includes the creditor's identifier, a unique mandate reference, the debtor's IBAN and BIC, and the mandate type (one-off or recurring). Mandates can be paper-based or electronic (e-mandate, via online banking authentication).

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Collection timelines depend on the mandate type. For Core Direct Debit, since the 2016 rulebook all collections (first, one-off, and recurring) must be submitted at least one business day (D-1) before the due date. For B2B Direct Debit, the timeline is 1 business day. These pre-notification requirements reflect the batch processing nature of the scheme.

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Settlement occurs through SEPA clearing infrastructure (EBA CLEARING's STEP2, or national ACH systems). Funds reach the creditor's account on the due date, subject to clearing cut-off times. The creditor bears the financial risk of debit returns: if a collection fails or is returned, the funds are reversed, and the creditor must manage the failed collection operationally.

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Customer refund rights under Core SDD are broad: customers can claim a refund for any authorised direct debit within 8 weeks without needing to provide a reason. For unauthorised direct debits (where no valid mandate exists), the refund window is 13 months. B2B SDD offers no unconditional refund right; the debtor's bank verifies mandates before honouring collections.

SEPA Direct Debit enables European merchants to collect recurring euro payments from customers across 36+ SEPA countries through a single standardised scheme, without maintaining separate direct debit setups in each country's domestic scheme. This is materially simpler than operating country-specific direct debit arrangements across German Lastschrift, French TIP Sepa, and other national equivalents that preceded SEPA harmonisation.

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For subscription businesses, insurance companies, and utilities operating across multiple European markets, SDD reduces operational complexity and collection cost. The absence of card network fees makes SDD significantly cheaper per transaction than card recurring billing, particularly for high-frequency, lower-value collections.

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The broad Core SDD refund rights create a meaningful operational risk for merchants: a customer can reclaim any collection within 8 weeks. For businesses collecting membership fees, subscription charges, or instalment payments, this creates potential chargeback-equivalent exposure on each collected direct debit. Merchants need to assess and provision for this risk in their payment operations.