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SEPA use cases

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Last editedApr 20232 min read

This guide looks at the kind of businesses SEPA Direct Debit is great for, and considers how it benefits those businesses. It also summarizes the types of transactions that it isn’t great for, to help you to decide whether SEPA Direct Debit is suitable for you.

Similarly to ACH Debit in the US, the level of control SEPA Direct Debit gives merchants makes it ideal for the collection of recurring payments.

Unlike ACH Debit, SEPA Direct Debit allows you to collect payments in 21 Eurozone countries. This guide will look at the kind of businesses SEPA Direct Debit is great for and how it benefits them. It will also summarize the types of transactions it isn’t great for, to help you to decide whether it is suitable for you.

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SEPA Direct Debit is great for...

Collecting regular payments such as subscriptions

For companies collecting regular payments such as membership or subscription organizations, SEPA Direct Debit has three important advantages:

  1. Control – Using SEPA Direct Debit enables merchants to ensure that customers will pay their bills on time every month.

  2. Retention rates – Using SEPA Direct Debit eliminates failed payments due to card expiry or cancellation. It also increases customer loyalty by offering a convenient set and forget payment method.

  3. Reduced admin – Using SEPA Direct Debit reduces the admin time involved in chasing and inputting updates to card details.

Invoicing for services where instant payment is not required

An example would be marketing agencies or accountancy firms. SEPA Direct Debit is great for B2B invoicing for three important reasons:

  1. Improved cash flow – Using SEPA Direct Debit puts control back into the merchant’s hands. Merchants are able to collect payments when they want. This provides greater control over cash flow.

  2. Variable amounts can be easily collected – Using SEPA Direct Debit enables merchants to collect variable amounts using a single upfront authorization. As and when the payment amount changes, merchants are able to automatically claim the new amount. This differs from a standing order where customers need to give their bank new instructions each time a change is needed.

  3. Reduced admin and credit chasing – Using SEPA Direct Debit reduces the time and manual effort required by chasing late payments and reconciling payments. It also reduces average debtor days without requiring awkward conversations about money with customers.

Account customers with an ongoing relationship with the merchant

A good example would be wholesalers. Using SEPA Direct Debit to collect payments from account, or ongoing customers, works well for the same reasons as invoices (above). It also provides two additional key benefits to your customers:

  1. Simple payment method for customers – It automates the collection process and enables customers to simplify the way they pay.

  2. Allows a flexible payment option – SEPA Direct Debit allows ongoing customers the option of spreading costs and paying on account.

Markets with low card use

Such as Germany and the Netherlands, where credit card penetration is lower than 50%. Paying by bank account through SEPA Direct Debit is the preferred way to pay in these countries. Similarly, in industries or markets where usage of corporate cards is low, B2B customers tend to prefer to pay by bank account.

SEPA Direct Debit isn't so good for...

Transactions which need immediate clearing

SEPA Direct Debit payments are not instant, even under the faster B2B scheme - see our guide to timings for more information.

Transactions that are likely to be charged back

Including liquid assets and high value goods. The SEPA Core Direct Debit no-questions-asked refund policy makes chargebacks (equivalent to returns in the ACH scheme) easy in the initial eight weeks following the payment.

SEPA Direct Debit payments through GoCardless

Our simple online interface and API make it cheap and easy to access and use SEPA Direct Debit. Businesses use us for a range of things, including regular billing, instalments and subscription payments. Our customers include:

  • SaaS companies

  • Subscription companies

  • B2B or B2SME companies

  • Professional services organizations, such as accountancy firms and marketing agencies

  • Telecoms and web hosting companies

  • Energy and water companies

  • Marketing agencies

  • Financial services and insurance companies

  • Membership organizations, including professional bodies and fitness businesses

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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