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SEPA Direct Debit - an introduction

In a few months, GoCardless will become one of the first Direct Debit companies to offer collection from across Europe. We'll be doing this using the new SEPA Direct Debit scheme.

What is SEPA Direct Debit?

SEPA Direct Debit is a new payment scheme for collecting from any bank account in the Single Euro Payments Area (SEPA).

The SEPA scheme works similarly to Direct Debit in the UK:

  • Payers authorise merchants to take variable future payments from their account by issuing them a mandate
  • Once this authorisation is in place, the merchant just needs to notify the customer before taking the payment automatically

SEPA's key innovation is to create a single system for collecting from across the Euro area. This pan-European system supersedes the national Direct Debit schemes it currently operates alongside. In February 2014 it will formally replace them.

Differences to UK Direct Debit

There are a few key features of SEPA Direct Debit that differ from the UK system:

  1. Currency - All SEPA Direct Debit transactions happen in Euros (even if the relevant accounts aren't in Euros). Any currency exchange required is up to the payer's and collector's banks
  2. Chargebacks - Under SEPA, payer's can query payments and get a refund from their bank for up to 13 months. Under UK Direct Debit the chargeback period is unlimited
  3. Bank details - To collect using SEPA Direct Debit, you need a customer's BIC and IBAN. Generally these can be generated from details the customer is more familiar with

In addition there are a lot of differences 'under the hood'. The way mandates are stored, payment timings, and the submission process are all different. I'll write more about these implementation details in a subsequent post, but for now it's worth noting that using GoCardless abstracts them away.

Where can and can't you collect from?

SEPA Direct Debit allows collection from almost all Euro-denominated bank accounts in the Single Euro Payments Area (SEPA), including any account which is accessible by a national Direct Debit scheme. The accounts that are not accessible are generally savings accounts.

In addition, SEPA Direct Debit can be used to collect from some non-Euro accounts. Here, participation is at the discretion of the payer's bank, and GoCardless is in the process of determining each bank's policy.

How to get access

GoCardless will be beta testing SEPA Direct Debit in the coming weeks. Initially, we'll allow UK-based merchants to collect from select European countries. We'll then expand the countries we collect from to cover all of SEPA, and begin to serve non-UK merchants.

To be part of the GoCardless beta test register your interest here.

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