Concept Definition
What is direct debit?
Direct debit is a payment method in which the supplier initiates the collection of funds from the buyer's bank account, with the buyer's prior authorization (mandate). SEPA Direct Debit is the standardized scheme in Europe. Direct debit is common for recurring service subscriptions and utility payments.
What is SEPA Direct Debit?
SEPA Direct Debit (SDD) covers two schemes:
- SEPA Core Direct Debit: For consumer and business payments. Creditor initiates. Debtor can request refund within 8 weeks.
- SEPA B2B Direct Debit: For business-to-business payments only. No unconditional refund right. Requires buyer bank confirmation of mandate.
- Mandate: Both schemes require a signed mandate from the debtor authorizing the creditor to collect.
Frequently Asked Questions
- What is a SEPA Direct Debit mandate?
- A SEPA Direct Debit mandate is a written authorization from the debtor (buyer) to the creditor (supplier) permitting the creditor to initiate direct debit collections from the debtor's account. The mandate includes a unique reference number (MRN) that is cited on each collection transaction.
- Is direct debit referenced on the invoice?
- Yes. When direct debit is the payment method, the invoice should include PaymentMeansCode 49 (or 59 for SEPA DD), the mandate reference, and the creditor identifier. This allows the buyer's accounting system to match the collection against the invoice.