SDD Core or B2B: everything you need to know about SEPA Direct Debit

SEPA Direct Debit and the well-known SEPA mandate? Everyone knows about it! Are you so sure? Principles, procedures, costs, execution or refund times – whether standard for SDD Core or inter-company for SDD B2B, you’ll know everything about SEPA Direct Debit in less than 3 minutes.

When a customer, whether an individual or a business, owes money to a company or professional providing them with goods or services, they can either:

• Initiate the payment themselves using a credit card, cheque, standard transfer, or instant transfer;
• Allow the creditor to debit the amount owed directly from their account.

In the latter case, in more technical terms, this is called the collection of debts by the creditor from the debtor. Simply put, direct debit is the payment method that allows a supplier to be paid by directly debiting the amount owed from their customer’s account, potentially according to scheduled dates. For this reason, it is the most commonly used method for recurring payments, such as subscription services or payments spread over instalments. This type of transaction ensures peace of mind for both suppliers and customers!

When direct debits are denominated in euros and the accounts involved are located within the SEPA payment area, they are referred to as SEPA Direct Debit or SDD for SEPA Direct Debit.

The SEPA payment area (Single Euro Payments Area) covers all European Union countries and European Economic Area member countries, as well as the United Kingdom, Switzerland, Andorra, Monaco, San Marino, and Vatican City.

A key point to remember is that SEPA Direct Debits are processed bank-to-bank. Therefore, they are free from the costs associated with card networks and their transaction fees.

In terms of simplicity, the introduction of SEPA Direct Debit on 1 August 2014 significantly streamlined procedures. For SDD Core, whereas previously the customer had to provide a direct debit mandate to his supplier AND his bank, they now only need to provide a bank account number (IBAN) and a SEPA direct debit mandate to the supplier.

Every direct debit must be authorised by signing a direct debit mandate, whether one-off or recurring. By signing and handing over a direct debit mandate to their creditor, the debtor:

• Authorises their creditor to make SEPA Direct Debits from their account;
• Authorises their bank to debit their account for the amounts of the debit orders presented by their creditor.

Each contract requires a unique mandate managed by the creditor or a third-party mandate manager.

A SEPA Direct Debit mandate must include the following eight pieces of information:

• Creditor’s identity
• SEPA Creditor Identifier (SCI)
• Unique Mandate Reference (UMR)
• Debtor’s identity
• Debtor’s account number with their IBAN (International Bank Account Number) and BIC (Bank Identifier Code)
• Type of debit: recurring or one-off
• Nature of the mandate: SDD Core (standard direct debit) or SDD B2B (business-to-business direct debit)
• Date of signature of the mandate

Good to know: for added security, you can protect your main IBAN by providing the number of a virtual IBAN in the SEPA direct debit mandate.

For a one-off or a first direct debit, the SEPA direct debit mandate must be submitted at least 5 working days before the due date.
For a second direct debit, the deadline is 2 working days.

The payment is collected within 3 working days.

The debtor can dispute and request a refund for a standard direct debit already made:

• Within 8 weeks, for any reason,
• Within 13 months if the transaction was unauthorised (invalid or absent mandate).

Beyond 36 months without any order being presented, a standard SEPA Direct Debit becomes void.

So far, you have mainly been introduced to standard SEPA Direct Debit, also known as SDD Core. This is because it applies to all payers – individuals, professionals and businesses – and is mandatory for all banks within the SEPA area, making it the most common.

However, another direct debit type is interesting to businesses: SEPA Business-to-Business Direct Debit, also known as SDD B2B.

As its name suggests, it is only used for collecting payments between businesses and is mainly used by public institutions to collect payments from businesses.

Three major differences distinguish SDD B2B from SDD Core:

• SDD B2B execution and collection times are faster than those of SDD Core.
• Unlike SDD Core, disputing a direct debit and requesting a refund is impossible, except in the case of fraudulent or erroneous debits.
• SDD B2B procedures are more complex than those of SDD Core:
This payment system is optional within the SEPA area, so both companies must ensure that their respective banks can process SDD B2B transactions.
The debtor must provide their bank with a copy of the mandate to avoid any direct debit rejection.

Although often used for its simplicity, payment by card can have limitations, especially for business-to-business transactions: the card’s limit, which prevents operations beyond a certain amount, its expiration date, which ends recurring subscription payments, and strong authentication, which makes payment impossible without the cardholder’s presence.

As for bank transfers, they remain at the customer’s initiative…

For these reasons, SEPA Direct Debit is an excellent way to secure your incoming payments while enhancing your customer satisfaction rate. It can even take you further in controlling your payments with real-time tracking and the automation of information processes, reminders, or reconciliation.