SEPA Direct Debit Core

Introduction to SEPA Direct Debit Core

There are two types of direct debits available in the SEPA zone: SEPA Direct Debit Core (SDD Core) is aimed at consumers while SEPA Direct Debit B2B (SDD B2B) is intended for businesses. However, SDD Core is used widely for both consumer and business-to-business transactions.

SDD Core is mostly used by businesses to collect recurring payments from customers such as subscriptions, rent, bills, loan repayments, and insurance premiums. The scheme can also be used to collect one-off payments.

You can find in-depth information about the SEPA zone and its payment scheme in our guide to SEPA payments.

• Year introduced: 2009
• ‍Operated by: European Payments Council
• ‍Participation: 3,100 PSPs as of July 2022 (79%)
• ‍Availability: Business days
• ‍Settlement: Up to two business days
• Maximum amount: None
• ‍Fee per payment: €0.20 (approx.)

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How SEPA Direct Debit Core works

SDD Core enables pull payments, meaning that the creditor is given authorization to collect funds from the debtor’s account. This authorization takes the form of a mandate that outlines certain pre-agreed conditions.

To use the SDD Core scheme, businesses must establish a contractual relationship with a bank or PSP in the SEPA zone. This enables the bank or PSP to initiate direct debit transactions on their behalf. Businesses also require a unique reference number called a Creditor Identifier (CID) which can be obtained from the relevant national authority or central bank, such as Deutsche Bundesbank in Germany.

It’s not mandatory for banks or PSPs to participate in the SDD Core scheme but it’s widely adopted throughout the SEPA zone. Each bank sets its own fees for using SEPA Direct Debit Core. Typically each transaction costs €0.20.

Processing cycle

Debtors must be notified at least fourteen calendar days before a collection, unless a shorter notice period is mutually agreed upon. In the case of an initial or one-off collection, the SDD Core instruction must be sent to the bank one business day prior to the collection date.

For subsequent recurring collections, the instruction must be sent to the bank at least one business day before the payment due date.

How do SDD Core returns work?

It’s important to note that with SDD Core customers are entitled to a refund up to eight weeks after their account has been debited. When a refund is requested, the funds are returned to the debtor’s account automatically without an option to appeal.

As for unauthorized transactions, such as when an incorrect amount is collected or there’s no active mandate in place, the debtor can dispute the collection for up to thirteen months.

The debtor’s bank can return the collection up to five business days after the collection due date in the event of an error, such as the debtor’s account having closed or lacking sufficient funds. Banks and PSPs charge fees for returned transactions that are passed onto to the creditor, typically ranging from €2 to €5.

How do SDD Core mandates work?

A mandate must be signed by the debtor prior to the first SDD Core transaction. It can be embedded in the payment or onboarding flow itself and signed by the user digitally. As specified by the SDD Core rulebook, the following information is mandatory to include:

• Scheme type (SEPA Direct Debit Core)
• Unique mandate reference
• Name of the debtor
• IBAN of the debtor
• BIC of the debtor’s bank
• Creditor’s company name
• Creditor Identifier (CID)
• Creditor's full address
• Signatures and time of signing

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Benefits and drawbacks of SEPA Direct Debit Core

SEPA Direct Debit Core is a relatively low-cost way for businesses to collect direct debits throughout the SEPA zone. SDD Core is more widely available than SDD B2B since a greater number of banks and PSPs participate in the scheme, and its transaction volume is also higher.

For some businesses, the main drawback to using SDD Core is that the payer is entitled to a refund up to eight weeks after their account has been debited. The funds are returned to the debtor’s account automatically without an option to appeal.