If you have to wait every month for your customers to remember to pay an invoice, instalment or subscription, there is a more convenient alternative: automating collection.
With SEPA Direct Debit, the customer authorises the payment once and your business can carry out subsequent collections directly from their bank account, in accordance with the agreed terms. This means fewer payments waiting for customer action, fewer manual processes and a simpler experience for both parties.
In this article, find out how SEPA Direct Debit works, when it makes sense to use it and how to start accepting this payment method in your business.
What is SEPA Direct Debit?
SEPA Direct Debit is a payment method that allows a company, as the creditor, to initiate a collection from a customer’s bank account, provided there is prior authorisation to do so.
The difference from a bank transfer is simple:
- With a transfer, the customer has to initiate the payment;
- With Direct Debit, once authorised, it is the business that initiates the collection.
This feature is what makes Direct Debit particularly interesting for businesses with instalments, subscriptions, retainers, donations, recurring invoices or other frequent charges.
Instead of depending on a new action from the customer on every due date, collection can become part of the business’s own payment flow.
How does Direct Debit authorisation work?
To collect via SEPA Direct Debit, authorisation from the customer is required, usually known as a SEPA Direct Debit mandate. This mandate gives the creditor permission to initiate collections from the account specified by the customer.
With easypay, the customer can provide the necessary details through a dedicated form, making it possible to create and manage the authorisation needed to carry out collections. Once the authorisation is active, the customer doesn’t need to enter their bank details again for each payment.
Is Direct Debit only for fixed monthly payments?
No, and this is one of the advantages of Direct Debit that can be particularly interesting for some businesses.
This payment method can be used for Subscriptions, when the amount and frequency are defined in advance, as well as for Frequent Payments, when new charges need to be made but the amounts or timing may vary.
To understand the difference, imagine two different businesses:
- A software platform charges €35 per month for access to the service. This is a subscription model, with a fixed amount and periodic collection;
- A digital services platform charges a variable amount each month, calculated based on usage, the number of users or the services consumed by the customer. In this case, it is a frequent payment model.
The advantage of Direct Debit is that it can be used in both scenarios.
Which businesses can benefit from Direct Debit?
Direct Debit is particularly interesting when there is an ongoing relationship between the business and the customer, for example:
- SaaS and software, for monthly or annual subscriptions, with a fixed amount or one adjusted to the chosen plan;
- Digital content platforms, such as streaming, e-learning or online communities, for recurring access;
- Marketplaces and digital platforms, for usage fees, professional plans or additional services charged periodically;
- Digital service companies, such as agencies, consultancies, marketing platforms or technology solutions, for retainers and recurring invoicing;
- Platforms with usage-based billing, where the amount varies depending on the number of users, consumption, transaction volume or features used;
- Organisations and digital projects, for donations or regular contributions made online.
The common thread is simple: if you charge the same customer repeatedly, it may make sense to spare them from having to initiate each payment manually.
What are the advantages for the business?
1. Automatic collections
Once authorisation has been obtained, the payment can be initiated by the business without requiring the customer to go through the whole payment process again.
2. Fewer manual tasks
Your team no longer has to depend on processes such as sending payment details and waiting for the customer to make each transfer manually.
3. Greater predictability
When collections are tied to set dates, it becomes easier to organise and track expected receipts.
3. Fixed or variable amounts
Direct Debit is not limited to fixed monthly payments. It can also be used in models where the amount varies between collections.
5. Collections across the SEPA area
The same model makes it possible to collect from eligible bank accounts within the SEPA area, making it relevant for businesses with customers in other European markets too.
And what are the advantages for the customer?
Automation doesn’t only benefit the business. For the customer, it means above all convenience.
Once authorisation has been given, they don’t have to remember every month to make a transfer, enter a reference or fill in their payment details again.
In addition, the SEPA scheme includes specific mechanisms to protect the payer.
SEPA Core vs. B2B: what’s the difference?
There are two SEPA Direct Debit schemes that it’s important to tell apart.
SEPA Core
It can be used for collections from consumers and businesses.
Under the Core scheme, the debtor can request a refund of an authorised collection up to eight weeks after the debit, without having to give a reason. In the case of an unauthorised collection, the deadline for requesting a refund can be as long as 13 months.
SEPA B2B
The B2B scheme is intended exclusively for business debtors. In this model, the debtor’s bank checks that the mandate exists and is valid before executing the collection, in accordance with the scheme’s rules.
In return, an authorised collection does not benefit from the same eight-week refund right that exists under Core. For this reason, B2B can be particularly relevant for companies with recurring commercial relationships with other businesses.
Core or B2B: which should you choose?
The first question is: who are your customers?
- If you charge consumers, the applicable scheme is SEPA Core;
- If your business charges only other businesses, SEPA B2B may be an option to consider.
Your choice should take into account your customer profile and the specific characteristics of your business’s collections.
Direct Debit or card: which should you choose for recurring payments?
There is not necessarily a winner, as the two methods can meet different needs and can coexist in a business’s payment strategy.
Cards offer a familiar, immediate experience for many consumers. Direct Debit, on the other hand, is especially well suited to ongoing collection relationships through a bank account and allows you to work with both fixed and variable amounts.
For many businesses, the question may not be “card or Direct Debit?” but rather “why not give customers both options?”
The better your payment methods fit your business model and your customers’ preferences, the simpler the payment experience will be.
How do you accept Direct Debit with easypay?
With easypay, you don’t need to build from scratch all the technical infrastructure required to manage SEPA Direct Debit collections. The solution lets you manage the authorisation needed for Direct Debit and use this payment method in different collection scenarios.
You can use it for Subscriptions, when you want to automate collections of a fixed amount at a defined frequency, or for Frequent Payments, when you want to charge the same customer again but the amount or timing of the collection may vary.
All integrated into the easypay payments infrastructure.
Give your customers a simpler way to pay regularly
If your business charges instalments, subscriptions, retainers, donations or recurring invoices, you don’t need to depend on a new action from the customer for every payment.
With easypay SEPA Direct Debit, the customer authorises once and subsequent collections can be built into your business’s payment flow. Fewer manual processes for your team, more convenience for your customers.
Start accepting Direct Debit with easypay. Talk to our sales team.
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