Background
Within SEPA (the Single Euro Payments Area) a payment instrument has been created that can be used for both domestic and cross-border payment collections in EURO throughout the 33 SEPA countries. Two SEPA schemes are developed by the European Payments Council (EPC):
- The SEPA Direct Debit Core Scheme (SDD Core), which is intended for payments where debtors are consumer entities.
- The SEPA Direct Debit Business-to-Business Scheme (SDD B2B), which is intended for business payments where debtors are business rather than consumer entities.
For more information about other differences, see the European Payments Council website and select the document Shortcut to SEPA Direct Debit (SDD).
See the Schemes section below for further details.
The SEPA Direct Debit payment is based on the following concept: “I request money from someone else, with their prior approval, and credit it to myself”.
It is a payment instrument for collections in EURO from bank accounts designated to accept collections. Transactions for the collection of funds from a debtor’s account with a debtor bank are initiated by a creditor via their bank as agreed between debtor and creditor. This is based on an authorization, referred to as the “mandate”. Mandates must be handled directly between the creditor, the debtor and their banks. The system will only hold the necessary information about the mandates that needs to be included in the XML scheme for collection. The debtor and creditor must each hold an account with a bank participating in the SEPA Direct Debit Scheme. See About mandate handling for more information.
Schemes
All the information that the financial institution needs to execute a SEPA Direct Debit payment is contained in the two base schemes. The structure of the information is determined by the EPC standard or local guidelines outlined according to the UNIFI ISO 20022 Payments Message CustomerDirectDebitInitiationV02 (Msg ID pain.008.001.02), for the business area Payment Initiation, which is found in the ISO MDR 2009.
- The SEPA Direct Debit Core Business-to-Business scheme (SDD B2B) defines the format of the transferred SEPA payment collections (see further below). The information contained in the scheme is determined by the SEPA Direct Debit Business to Business Scheme Customer-to-Bank Implementation Guidelines.
- The SEPA Direct Debit Core scheme (SDD CORE) defines the format of the transferred SEPA payment collections (see further below). The information contained in the scheme is determined by the SEPA Direct Debit Core Scheme Customer-to-Bank Implementation Guidelines.
- The SEPA Direct Debit Core 1 scheme (SDD CORE 1) defines the format of the transferred SEPA payment collections (see further below). The information contained in the scheme is determined by the SEPA Direct Debit Core Scheme Customer-to-Bank Implementation Guidelines.
The SDD schemes process both recurring and one-off collections:
- Recurring Direct Debits are those where the authorization by the debtor is used for regular Direct Debits initiated by the creditor.
- One-off Direct Debits are those where the authorization is given to initiate only one single Direct Debit; an authorization which cannot be used for any subsequent transaction.
See About mandate handling for more information.
What is a SEPA payment?
The following constitutes a SEPA payment:
- The payment is made in the ISO currency code EUR.
- Paid amount >0.
- The only permissible bank account for SEPA transactions is the IBAN (International Bank Account Number) which is mandatory. The only permissible bank identifier is the BIC code (Bank Identifier Code) which is optional.
- The payment must not contain more than a maximum of 140 characters of remittance information. The information can be unstructured (free text) or structured.
Roles and actors
The UNIFI ISO 20022 Payments Message CustomerDirectDebitInitiationV02 (Msg ID pain.008.001.02) holds five roles. These roles can be played by one and the same actor, or by different actors. See Setting up the SEPA Direct Debit functionality for details.
| Role | Description | Actors/Additional information |
|---|---|---|
| Initiating party | The party sending the message. | This role is equal to the company. |
| Creditor | The party to which an amount of money is due.
The credit account owner, i.e. the sender. |
This role is equal to the company.
The creditor’s agent is equal to the company’s bank. |
| Debtor | The party that owes an amount of money to the (ultimate) creditor.
The debtor, i.e. the party where the payment will be deducted from; the debit account owner. |
This role is equal to the debtor in the Business partner file.
The debtor’s agent is equal to the debtor’s bank in the Business partner file. |
| Ultimate creditor | The ultimate party to which an amount of money is due. | This role does not exist in the system. |
| Ultimate debtor | The ultimate party that owes an amount of money to the (ultimate) creditor. | This role does not exist in the system. |
Actors
The execution of a SEPA Direct Debit involves four main actors:
| Actor | Description |
|---|---|
| Creditor | This actor receives and stores the mandate from the debtor to initiate payment collections. On the basis of this mandate, the creditor collects the Direct Debits. |
| Creditor bank | This actor is the bank where the creditor’s account is held and which has signed an agreement with the creditor about the rules and conditions of a product based on the scheme. On the basis of this agreement, the bank receives and executes instructions from the creditor to initiate the Direct Debit transaction by forwarding the collection instructions to the debtor bank in accordance with the Rulebook. |
| Debtor | This actor gives the mandate to the creditor to initiate collections. The debtor’s bank account is debited in accordance with the collections initiated by the creditor. By definition, the debtor is always the holder of the account to be debited. |
| Debtor bank | This actor is the bank where the account to be debited is held and which has signed an agreement with the debtor about the rules and conditions of a product based on the scheme. On the basis of this agreement, the bank executes each collection of the Direct Debit originated by the creditor by debiting the debtor’s account in accordance with the Rulebook. |
Websites
The following two documents are available for downloading from the following websites:
- The Message Definition Reports (MDR) are available on: UNIFI ISO 20022 Payments Messages.
- The documents SDD B2B Scheme Customer-to-Bank Implementation Guidelines and SDD CORE Scheme Customer-to-Bank Implementation Guidelines are available on: European Payments Council, EPC documents. A list of available documents is shown where you click the link to the applicable guidelines. Use the following link to find out more: Shortcut to SEPA Direct Debit (SDD)