What is SEPA Direct Debit? (2024)

SEPA - the Single Euro Payments Area - covers many European countries, and allows for frictionless payments in euros across country borders. Payments can be made in several ways under SEPA - including SEPA direct debit schemes, which allow businesses in SEPA countries to collect recurring payments in euros from customers.

This guide covers SEPA consumer and business to business direct debit payment services, and how SEPA direct debit payments are used.

With a Wise account, you can get EUR bank details and set up direct debits for rent, mortgages, bills and much more in the Eurozone. Plus, if you need to send money overseas from the US, send money online with Wise, and get the real mid-market exchange rate with no hidden fees or sneaky markups –but more on this later.

Open a free Wise account today

📝 Table of contents
  • What is SEPA?
  • What is SEPA Direct Debit?
  • SEPA Direct Debit vs ACH Debit
  • What are the popular use cases for SEPA Direct Debit?
  • When not to use SEPA Direct Debit?
  • How to cancel a SEPA Direct Debit?
  • Set up Euro Direct Debits with Wise - And save up to 6x
  • Frequently Asked Questions

What is SEPA?

SEPA stands for Single Euro Payments Area. SEPA is an ongoing initiative spearheaded by the EU (European Union) to harmonize payments within the Eurozone and some other countries within Europe. The aim is to make it as fast, easy and cheap to make euro payments to other countries within SEPA as it is to make a domestic payment¹.

SEPA covers all EU countries, but also a few other European countries like the UK and Switzerland, which are not members of the EU. In total, 36 countries use SEPA at present. SEPA covers 3 different payment schemes:

  • SEPA Direct Debit(SDD or SEPA DD)²
  • SEPA Credit Transfer (SCT)
  • SEPA Cards Framework (SCF)

The different SEPA payment schemes cover varied payment types - and work is ongoing within SEPA to harmonize other payment types, like mobile and online transfers. This guide will focus on SEPA direct debit - you can learn more about other payment types on the SEPA pages of the European Payments Council website.

What is SEPA Direct Debit? (1)

What is SEPA Direct Debit?

SEPA direct debit payments are similar to ACH debit payments in the US. Although there are a few important differences to the way ACH debits work at home, SEPA DD transfers are used to allow businesses to pull recurring payments from customer accounts. As with ACH debits, a customer will authorize a business using a SEPA direct debit mandate, and the company can then collect payments according to the agreed terms. Payment amounts can vary, making SEPA direct debits a useful payment instrument for bills that change month by month, like utility costs or a phone bill.

SEPA direct debit payments can be made by customers to companies - or for business to business transfers, under the 2 SEPA DD schemes:

  • SEPA Direct Debit Core (SEPA DD Core or SDD Core)
  • SEPA Direct Debit B2B (SDD B2B)

SEPA Direct Debit vs ACH Debit

Although SEPA DD payments roughly match ACH debit transfers in the US, they’re not exactly the same. Here are some key points to note:

Similarities

  • Both are electronic payment methods which can be used for one off or recurring billing

  • Both are pull payment types, where the organization being paid is authorized to collect payments from the customer account

  • Both can be used for fixed or varied payment amounts

  • Both are managed through strict protocols to keep customer money safe and ensure efficient, cheap payments

Differences

  • SEPA DD payments can only be made in euros, even if the accounts involved in a transfer are held in other currencies

  • You’ll need to provide an IBAN and SWIFT/BIC code for SEPA payments, rather than an account and routing number as in the US

  • Customers can request a refund for a SEPA DD for up to 13 months after a payment is processed

  • SEPA direct debits can be made under both the core and B2B scheme, and the processing rules and protections do vary according to the payment type

What is SEPA Direct Debit? (2)

What are the popular use cases for SEPA Direct Debit?

Not sure if SEPA direct debit is right for you? Here are some common examples of when SEPA DD payments can be helpful.

Case 1: Recurring bill payment - consumer to business

SEPA DD payments allow customers to set up repeat transfers which is easier for them, and ensures businesses are paid in full and on time. Good for consumer subscription services, mortgage and rent payments, or utility bills for example.

Case 2: Recurring bill payment - business to business

SEPA DD payments can also be used for B2B transfers - handy if you’re paying a regular retainer to a service provider, or if you have an ongoing payment arrangement to a supplier.

Case 3: Business invoice payments

Using a SEPA DD for business invoicing puts the recipient business in control of the payment date and amount. The payer only needs to complete a single authorization through a direct debit mandate, and the recipient can then trigger invoice payments when required.

Case 4: Payments in countries where credit card use is lower

SEPA direct debit payments are especially useful in countries where card payments are not as popular. No card provider is involved in a SEPA DD, instead the money simply passes from one bank account to another.

When not to use SEPA Direct Debit?

SEPA DD payments are not always the best option.

If you need a transfer to happen instantly, SEPA direct debits aren’t the right payment instrument to use. Similarly, as customers have very high levels of protection and can request a chargeback at any point in the 13 months after a payment is processed, SEPA DD transfers aren’t a good choice when customer returns are likely.

How to cancel a SEPA Direct Debit?

When you set up a SEPA direct debit, you’ll complete a mandate authorizing the company to collect payments. To end the arrangement you’ll need to cancel the mandate with your own bank. This can usually be done by logging into your online banking service.

What is SEPA Direct Debit? (3)

Set up Euro Direct Debits with Wise - And save up to 6x

It's never been easier to set up Euro direct debits. With a Wise account, you can get EUR bank details and use direct debit to pay rent, bills, mortgages, or get your European pension.

Plus, with Wise, you can cut the costs of sending money overseas and save up to 6x compared to old-school banks. Hold 50+ currencies, get your own local account details for 10 currencies and convert to the currencies you need, with low and transparent fees.

Learn more about Wise

Frequently Asked Questions

What is the difference between SEPA Direct Debit and Standing Orders?

Both direct debit and standing order payments are processed electronically and can be used for recurring bills. However, they are different in the way they are set up, and in who is in control.

A SEPA direct debit is a pull payment type, in which the company being paid triggers the transfer. On the other hand, a standing order is controlled by the customer. Direct debit payments can be used for varied amounts and payment dates - standing orders can only be used for repeat transfers of the same value.

What is the difference between SEPA Direct Debit and SEPA Credit Transfer?

SEPA Direct Debits are set up to allow a company or organization to pull money from a customer account automatically and in accordance to an advance agreement.

SEPA Credit Transfers, on the other hand, are push payments. SEPA Credit Transfers are more commonly used for one off payments - although they can also include standing orders which may be recurring - and are set up by the customer pushing funds to another account.

Sources:

1]European Payments Council - about SEPA
2]European Payments Council - SEPA direct debit

All sources checked on 21 October 2021

*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

What is SEPA Direct Debit? (2024)

FAQs

What is SEPA Direct Debit? ›

Used primarily in Europe, SEPA Direct Debit allows businesses to collect payments from customers' bank accounts when authorized. SEPA, or the Single Euro Payments Area, includes countries within the EU as well as Iceland, Liechtenstein, Norway, Switzerland, and Monaco.

What is a SEPA direct debit? ›

SEPA stands for “Single Euro Payments Area.” SEPA Direct Debits are a secure and reliable payment method that has been specifically developed to process payments within the European Union. It is used to process cashless payment transactions by almost all EU member states.

What does SEPA mean on bank account? ›

The Single Euro Payments Area (SEPA) is a mechanism that facilitates the standardisation of electronic payments denominated in euro across Europe. Under SEPA, all bank accounts must be identified by an International Bank Account Number (IBAN) and a Bank Identifier Code (BIC).

Is a SEPA direct debit the same as an ACH? ›

SEPA Direct Debit differs from ACH Debit in five key ways

Under the ACH scheme in the US, the payer has 60 days to request a return (the official name of a "chargeback" in this scheme). To collect SEPA payments, you need a customer's BIC and IBAN rather than their account number and routing number.

What is SEPA direct debit mandate Paypal? ›

SEPA enables customers to make cashless payments to any EUR bank account located in the area using a single bank account. To debit from SEPA bank accounts, the bank account holder must accept a mandate that gives debtors the authorization to debit the account.

Is it safe to use SEPA direct debit? ›

SEPA Direct Debit security measures

Mandate system: Every SEPA Direct Debit transaction is based on a mandate—a formal authorization from the customer to the business—allowing the business to debit their account. This mandate must be verified and stored securely by the business.

What is the purpose of SEPA payment? ›

The SEPA payment method makes cross-border transfers fast and cost-effective. The SEPA payment method includes payment processing rules from the European Payments Council, known as schemes, that Payment Service Providers (PSP) use to make SEPA payments.

How to stop SEPA direct debit? ›

To revoke SEPA Direct Debit authorization, customers simply need to inform their bank in writing indicating a reason for canceling the authorization. The bank will then inform the business of such cancellation and not collect any further payments, or return the amount in question.

Which banks accept SEPA payments? ›

SEPA IBAN-Only participants
  • Bank of America Merrill Lynch.
  • Bank of Ireland (UK) plc.
  • Bank of Scotland plc.
  • Bank of Tokyo-Mitsubishi UFJ Ltd.
  • Barclays Bank (UK) plc.
  • Barclays Bank plc.
  • Blackthorn Finance Limited.
  • BrazaUK Ltd.

How do I find out who a direct debit is going to? ›

Your bank or building society

That means the bank or building society knows who you have agreed to pay. You can find a full list of all your Direct Debits on your bank account, either online or directly from your bank or building society.

What countries are part of the SEPA? ›

Which countries are part of SEPA? The SEPA zone consists of the 28 EU member states together with the four members of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland). Monaco Andorra, San Marino, and the Vatican City State are also part of SEPA.

What are the risks of direct debit? ›

While overall, this payment method is safe, secure, and convenient, there are potential disadvantages of Direct Debit to be aware of. You can be charged overdraft or late fees: If there are insufficient funds in the buyer's account, the Direct Debit might still go through with overdraft protection.

What is a direct debit called in the USA? ›

An ACH payment is a type of electronic bank-to-bank payment in the US. It's made via the ACH network, rather than going through the card networks such as Visa or Mastercard. An ACH payment is also commonly referred to as an ACH transfer or ACH transaction.

Why is there a SEPA DD on my account? ›

The SEPA Direct Debit (SDD) scheme allows both domestic and cross-border collections to be made in Euro throughout the current 33 SEPA countries. Consumers are able to pay for goods or services throughout Europe via direct debit as easily, securely and efficiently as they do at home.

What is SEPA direct debit for dummies? ›

The SEPA Direct Debit scheme enables companies and customers to make cross-border payments within the SEPA area (Single European Payment Area). For this purpose, the debtor gives the creditor permission to automatically debit the amount due from their bank account by means of a mandate (so-called pull payment).

What is the maximum amount for SEPA direct debit? ›

SEPA Direct Debit transactions have a limit of 10,000 EUR each. For new users, there's an additional weekly limit of 10,000 EUR, which quickly increases as you process more SEPA direct debit payments.

What does SEPA DD mean on bank statement? ›

Learn about Single Euro Payments Area (SEPA) Direct Debit, a common payment method in the European Union. The Single Euro Payments Area (SEPA) is an initiative of the European Union to simplify payments within and across member countries.

Is SEPA same as bank transfer? ›

What is a SEPA bank transfer? The SEPA (Single Euro Payments Area) is a pan-European network that allows you to send and receive payments in euros (€) between two cross-border bank accounts in the eurozone. With SEPA, sending money within the eurozone is as easy as making your usual domestic bank transfers.

What countries are SEPA direct debit? ›

Which countries are part of SEPA? The SEPA zone consists of the 28 EU member states together with the four members of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland). Monaco Andorra, San Marino, and the Vatican City State are also part of SEPA.

How do I cancel a SEPA direct debit? ›

To revoke SEPA Direct Debit authorization, customers simply need to inform their bank in writing indicating a reason for canceling the authorization. The bank will then inform the business of such cancellation and not collect any further payments, or return the amount in question.

References

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Kareem Mueller DO

Last Updated:

Views: 6016

Rating: 4.6 / 5 (66 voted)

Reviews: 81% of readers found this page helpful

Author information

Name: Kareem Mueller DO

Birthday: 1997-01-04

Address: Apt. 156 12935 Runolfsdottir Mission, Greenfort, MN 74384-6749

Phone: +16704982844747

Job: Corporate Administration Planner

Hobby: Mountain biking, Jewelry making, Stone skipping, Lacemaking, Knife making, Scrapbooking, Letterboxing

Introduction: My name is Kareem Mueller DO, I am a vivacious, super, thoughtful, excited, handsome, beautiful, combative person who loves writing and wants to share my knowledge and understanding with you.