SEPA: Direct Debit for Business vs Core Direct Debit

Tom
Tom January 2022 Content Creator 5 min

Table of contents

While you’ve likely heard of SEPA direct debit, you might not know about SEPA direct debit for business. Standing for ‘Single Euro Payments Area’, SEPA is used by almost all of the European Union’s member states for cashless payment transactions within the EU. Read on to find out about the crucial differences between SEPA B2B and SEPA core direct debit. 

SEPA payments at a glance

  • SEPA basic direct debit is for individual use (B2C)
  • SEPA B2B is for businesses making transactions between themselves and other businesses in EU countries
  • A SEPA direct debit mandate or a SEPA direct debit mandate for business is required to collect payments
  • For SEPA B2B payments, no direct debit return is possible

What is the SEPA direct debit system?

The SEPA direct debit system was implemented in 2014 and has since then been used for electronic transactions within the EU. In addition to the 28 EU states, Norway, Switzerland, Iceland, Liechtenstein, Monaco and San Marino also support the SEPA Direct Debit Scheme.

Before SEPA, each EU member state had its own payment and transfer system. Under this scheme, anyone who wished to make a cross-border payment was not able to do so as seamlessly as they can now. 

The IBAN is the most important aspect of SEPA direct debit. This is your International Bank Account Number and is the account number belonging to account holders in nearly every SEPA member state. You also have a BIC (Bank Identifier Code), which is designed to make bank identification easier. When collecting a SEPA payment, you will also need a direct debit mandate or company direct debit mandate.

Direct debit turnover in 2020

In 2020, direct debits generated a turnover of around 3,201 billion euros in cashless payment transactions (source: Statista). Below are the important distinctions between the SEPA core direct debit and SEPA B2B direct debit.

What is the SEPA core direct debit?

SEPA core direct debit allows individuals to make transfers in Europe more seamlessly than before. When making payments in the B2C sector, core direct debit is ideal for recurring payments for things like rent, phone, electricity bills, or insurance premiums. The payments will come straight from your account without you needing to confirm or sign anything. You’ll see this kind of payment procedure all across the online commerce sector. 

The SEPA mandate authorises the collection of the amounts due. Without it, you as the payee cannot collect the money you’re owed. You have the right to object to unauthorised direct debit payments within eight weeks. 

Any valid SEPA core direct debit mandate will have the following information submitted in writing to the payee:

  • Payee’s name
  • Payee’s creditor identification number
  • Customer’s name
  • Customer’s IBAN
  • Customer’s BIC

The original mandate can be kept if the amount changes, and the mandate may be revoked at any point during the transaction.

Still on the hunt for a digital business account? Just pick the right pricing plan and apply for your Penta Account in just 15 minutes.

What is SEPA direct debit for businesses?

SEPA business to business direct debit is a mandate for transactions between companies and is exclusive to corporate customers. The same as core direct debit, the mandate must be valid for the transaction to be successful. 

The idea is that no incorrect bookings may occur between businesses. The debtor always authorises the creditor to collect. In the unlikely event of an incorrect booking, merchants will have 13 months after the payment is debited in which the transaction can be reversed.

How does a SEPA business-to-business direct debit work?

Each SEPA B2B payment is checked by the debtor’s bank before execution. As a company, you can avoid delay by sending a copy of the mandate to your own bank. 

The SEPA business-to-business direct debit mandate 

The information required for the mandate between businesses is similar to the core direct debit mandate requirements. As long as the mandate has been correctly authorised and remains valid, the receiver will not be entitled to a chargeback until the debit is made.

What are the differences between the direct debit for business and the basic direct debit?

While the procedures are similar, there are crucial differences: 

SEPA basic direct debitSEPA B2B direct debit
Business with private customers (B2C)Business with Business Customers (B2B)
It is only checked whether a mandate exists. However, the data itself is not checked for accuracy.Companies deposit copies of their business direct debits with their own bank: verification of the SEPA business direct debit mandate data before execution by the debtor’s bank.
Return of an unauthorised direct debit possible without giving reasons within a period of 8 days.As a rule, direct debit returns are not possible.
No special formal requirements.In addition to content requirements, the SEPA business-to-business direct debit mandate must also meet certain formal requirements.

How can you set up a SEPA business-to-business direct debit?

To make a direct debit payment supported by the SEPA B2B mandate, you must do so in writing and with the correct forms. Make sure the mandate is written in the debtor’s native language, however in some cases English is widely acceptable. Templates for the mandates are available on the internet. 

As an entrepreneur, if you want to collect direct debits under SEPA, you’re required to obtain a Creditor Identifier. In Germany, these are available from Deutsche Bank. 

The same, yet different

On the surface, the SEPA Business to Business and Core Direct Debit payments appear similar. It’s important however that, as an entrepreneur or business owner, you fully understand the small but crucial differences between them. Most important among these is that once a B2B direct debit has been collected, the debtor cannot reverse it if the mandate is still valid. Also note that the mandate for B2B transactions must meet certain formal requirements. 

See a general overview of all direct debit types here.

Penta Card, Mobile App on phone, and check
Penta Card, Mobile App on phone, and check

Your fully digital business account

Like your favourite cup of morning coffee, Penta’s business account can be packed “to go”.

Back to top