SEPA Direct Debit is one of the leading payment methods in Europe. In countries such as Germany. Austria, or Switzerland, consumers consider it a must-have. It’s easy-to-use and truly cost efficient as from the payer’s perspective, making a payment looks more or less like a card transaction, except instead of a card number they need to provide their bank account number.

SEPA Direct Debit allows collecting euro-denominated payments from accounts in 34 SEPA countries and associated territories. The acronym SEPA stands for the Single Euro Payments Area – an initiative of the European Union aimed at making payments across the Eurozone as easy and cheap as domestic ones.

SEPA Direct Debit is a pull-based direct bank-to-bank payment method, which means that it is the merchant who initiates transactions, once given a mandate by their customer, and that the money is transferred between banks with no intermediaries such as card networks. Although all transactions are denominated in euro, the system operates also in numerous countries outside the Eurozone.

1. The customer selects SEPA Direct Debit as their preferred payment method and fills a payment order form, which includes information such as their BIC and IBAN, and results in issuing of a mandate. The mandate is issued for a particular recipient – the merchant.
2. Merchant’s bank receives the the mandate and sends it to the payer’s bank with a payment request.
3. Payer’s bank verifies the mandate and wires the money to merchant’s bank account.