SEPA Direct Debit
SEPA Direct Debit (SDD) is the euro direct debit scheme for the Single Euro Payments Area. It lets a creditor, such as a supplier, a software company or a tax authority, collect payments directly from a debtor's account in any SEPA country, once the debtor has signed a mandate. The schemes are run by the European Payments Council (EPC) under its SDD rulebooks.
How SEPA Direct Debit works
- The debtor signs a direct debit mandate that authorises the creditor to collect payments, and the debtor's bank to debit the account.
- Before each collection, the creditor sends the debtor a pre-notification with the amount and the debit date. The default is at least 14 calendar days before, unless both sides agree a shorter period.
- The creditor sends the collection to its own bank or payment service provider, which passes it to the debtor's bank, the customer's bank, through the clearing system.
- On the due date, the debtor's account is debited and the creditor's account is credited.
Core vs B2B
There are two schemes:| SDD Core | SDD B2B | |
|---|---|---|
| Who can be debited | Consumers and businesses | Businesses only |
| Mandate check by the debtor's bank | No | Yes: the debtor must confirm the mandate to its bank before the first collection |
| Refund for an authorised collection | Yes, unconditionally, within 8 weeks of the debit date | No |
| Refund for an unauthorised collection | Within 13 months | Within 13 months |
| Latest submission | One interbank business day before the due date | One interbank business day before the due date |
| Typical use | Subscriptions, utilities, consumer and SME billing | Large business to business invoices where the creditor needs certainty |
The SEPA Direct Debit mandate
A valid mandate includes:- the creditor's name, address and creditor identifier, a reference that identifies the creditor across SEPA
- a unique mandate reference chosen by the creditor
- the debtor's name and IBAN (a BIC is no longer needed)
- whether the mandate covers recurring or one off payments, and which scheme it uses
- the date and the debtor's signature, on paper or as an electronic mandate
Rejects, returns and refunds
Not every collection goes through. The SDD rulebooks call these exceptions R-transactions:- rejects: the collection is refused before settlement, for example because the IBAN is invalid
- returns: the debtor's bank sends the funds back after settlement, for example for insufficient funds or a closed account
- refusals: the debtor refuses the collection before the debit date
- refunds: the debtor claims money back after the debit, within the 8-week or 13-month windows
- reversals and revocations: the creditor cancels or reverses its own collection
Debtor rights under the SEPA Regulation
The SEPA Regulation gives debtors control over their own account. A debtor can ask their bank to:- limit collections to a set amount, a set frequency, or both
- block all direct debits on the account, or all collections from named creditors
- allow collections only from creditors on an approved list
SEPA Direct Debit vs SEPA credit transfer
In a SEPA credit transfer, the payer pushes money to the payee. In SEPA Direct Debit, the payee pulls money from the payer's account, under the mandate. Credit transfers suit one off payments to suppliers, while direct debits suit regular payments the creditor controls, such as invoices on fixed payment terms. A business usually uses both: it pays suppliers by credit transfer and collects from customers by direct debit.What businesses should check
- Whether your account can be debited by SEPA Direct Debit, and whether your provider can collect direct debits on your behalf. These are different services.
- Who issues your creditor identifier. In most countries it comes from the national central bank or a designated body.
- The cut-off times for submitting collections, and how returns and refunds are reported in your bank statements or accounting software.
- Whether Core or B2B fits your customers. B2B gives more certainty but needs every debtor's bank to support it.
Benefits for businesses that collect payments
- Improved cash flow: the creditor decides when to collect, so payments arrive on the payment date instead of whenever customers remember to pay.
- Fewer late payments and less time chasing invoices, which matters for recurring billing and fixed payment terms.
- Lower costs than card payments for regular amounts, and no cards that expire.
- One payment method for customers in all SEPA countries, across the European Economic Area and beyond, without opening an account in each country.
- Customer service teams spend less time on manual payments, because collections and returns are reported in a standard format.
How to start collecting SEPA direct debits
- Choose a bank or payment service provider that offers SEPA Direct Debit origination, and check whether it supports Core, B2B or both.
- Get a creditor identifier, usually from your national central bank or the body your country designates.
- Set up a mandate form, on paper or online, and store signed mandates and the mandate data where you can find them.
- Send pre-notifications with each invoice or schedule, so customers know the amount and debit date.
- Submit collections before the cut-off, then reconcile settled payments, returns and refunds in your accounting software.
Paying by SEPA direct debit as a business
Your suppliers, software vendors, landlord or local tax authorities may collect from your account by direct debit. Check your bank statements or online banking for collections you don't recognise, and remember that a direct debit can only be taken from a euro account. If you want to stop a creditor regularly collecting from you, cancel the mandate with the creditor and, if needed, ask your account provider to block that creditor.Common SEPA direct debit use cases
SEPA direct debit payments cover most regular bills a business pays or collects:- software subscriptions and other recurring billing
- utilities, telecoms and rent
- insurance premiums and loan repayments
- tax and social security instalments, where a supplier or tax authority collects on agreed dates
- membership fees, including for clubs and charities
Collecting from customers with non-euro accounts
SEPA direct debit transactions are always in euro. A customer can be debited only from a euro account held in one of the SEPA countries. If your customers keep their money in other currencies, for example in a sterling or Swiss franc account, they need a euro account or a multi-currency business account to pay this way, or you need another payment instrument. Any foreign exchange conversion happens outside the scheme, at the customer's own provider. For cross border payments outside SEPA, businesses use SWIFT transfers or local payment networks instead.FAQ
The collection settles on the due date. The creditor must submit it at least one interbank business day before, and send the debtor a pre-notification, normally 14 calendar days before unless agreed otherwise.
Under the Core scheme, the debtor can get a refund for an authorised collection within 8 weeks, and for an unauthorised one within 13 months. Under B2B, there's no refund for an authorised collection.
No. One mandate can cover a series of recurring payments from the same creditor until it's cancelled or lapses after 36 months without use.
Yes. It works in all the SEPA countries, including non-euro EU members and countries such as Norway, Switzerland and the UK, as long as the collection is in euro and debits a euro bank account.
Yes. SDD Core works for consumer and business accounts. B2B is an extra option for business accounts only.
Any creditor with a creditor identifier and a provider that offers SDD collection, which is a separate service from simply holding a euro account.
Related terms and sources
SEPA return codes explained · What is SEPA Instant · pacs.008 · ISO 20022 · Payment service provider · Verification of Payee · Browse the full glossary
Last reviewed November 2, 2026Disclaimer
This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Narvi Payments Oy Ab or its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Narvi Payments Oy Ab or its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
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