Payment methods
SEPA Direct Debit: Core vs B2B, mandates, return codes and refunds
SEPA Direct Debit is a euro payment that the merchant pulls from the payer's bank account after the payer signs a mandate once. It runs under two schemes: Core for consumers and B2B for business payers. A Core payer can ask their bank to refund an authorised debit within 8 weeks; a B2B payer cannot. It suits subscriptions, invoices and other recurring payments.
- SEPA Direct Debit
- A euro pull payment collected from a payer's bank account under a signed mandate, governed by European Payments Council SDD Core or SDD B2B rulebooks.
At a glance
| Schemes | SDD Core (consumers and businesses) and SDD B2B (business payers only), per European Payments Council rulebooks |
|---|---|
| Currency | EUR collections within the SEPA area; participating countries and banks are listed by the EPC |
| Pre-notification | 14 calendar days before the due date by default; a shorter period can be agreed in the mandate (EPC SDD Core rulebook) |
| Refund rights (Core) | 8 weeks for authorised debits without a reason; up to 13 months if there was no valid mandate |
| Refund rights (B2B) | No refund right for authorised debits; unauthorised claims up to 13 months when no valid mandate exists |
| Mandate validity | Expires 36 months after the last collection; a new mandate is required before collecting again |
| Creditor identifier | A unique creditor code issued nationally and sent with every collection; continuity matters when changing provider |
| Return codes | Failed collections return as R-transactions with ISO 20022 reason codes (for example AC04, AC06, AM04, MD01) |
What is SEPA Direct Debit (SEPA-Lastschrift)?
In Germany it is known as SEPA-Lastschrift, in the Netherlands as automatische incasso and in Italy as addebito diretto SEPA. The rules below come from the European Payments Council (EPC) rulebooks and Regulation (EU) 260/2012.
SEPA Direct Debit is the euro-area standard for collecting money from a bank account under a mandate. The payer authorises you once; after that your payment provider or bank submits collections, and the payer's bank debits the account on the due date without further action from the payer.
The EPC sets the rulebooks that all participating banks follow (source: europeanpaymentscouncil.eu). To collect, you need three things: a creditor identifier, a mandate for each payer, and a bank or payment provider that submits the collections for you.
It is widely used for subscriptions, utilities, telecom, insurance, memberships and instalment plans.
SEPA Core vs B2B: which scheme do you need?
Most merchants use SDD Core, which works for any payer. SDD B2B is only for business payers, gives them no refund right on authorised debits and requires the payer to register the mandate with their bank first.
Source: EPC SDD Core and SDD B2B rulebooks. Check the current rulebook version for exact return periods.
| Criterion | SDD Core | SDD B2B |
|---|---|---|
| Who can pay | Consumers and businesses | Businesses only |
| Refund of an authorised debit | Within 8 weeks, no reason needed | Not possible |
| Claim for an unauthorised debit | Up to 13 months | Up to 13 months if there is no valid mandate |
| Mandate checked by payer's bank | No | Yes, the payer registers it first |
| Typical use | Subscriptions, consumer bills | Larger invoices, leasing, wholesale |
What does a SEPA mandate have to contain?
A SEPA mandate is the payer's authorisation and your evidence in any dispute, so it must contain a fixed set of data. Store it securely for as long as you collect under it and afterwards for the period your provider or local law requires.
For online mandates, keep a record of how and when the payer agreed, such as a timestamp and the confirmation step. Whether a checkbox mandate is valid in a given country is a legal question; check with your provider or a legal adviser.
When you change provider, keep your creditor identifier and the mandate references so that existing mandates stay valid.
- Unique mandate reference (UMR)
- Creditor name, address and creditor identifier
- Payer name and IBAN
- Payment type: recurrent or one-off
- Date and signature, or an electronic equivalent for e-mandates
Is SEPA the same as IBAN?
No. SEPA (Single Euro Payments Area) is the set of schemes and rules for euro payments, while the IBAN is the account number format those payments use. SEPA Direct Debit needs the payer's IBAN, but having an IBAN alone does not authorise a debit; you also need a mandate.
What do SEPA return codes mean?
A failed collection comes back as an R-transaction (reject, return, refund or reversal) with an ISO 20022 reason code. The code tells you whether to retry, ask for new details or stop collecting (source: EPC guidance on reason codes for SDD R-transactions, EPC173-14).
| Code | Meaning | What the merchant should do |
|---|---|---|
| AC01 | Incorrect account number (invalid IBAN) | Ask the payer for the correct IBAN |
| AC04 | Account closed | Request a new account and a new mandate |
| AC06 | Account blocked for any financial transaction (the whole account, not only direct debits) | Ask for another account or another payment method |
| AM04 | Insufficient funds | Notify the payer and retry later |
| MD01 | No valid mandate | Check the mandate status; do not retry without a valid mandate |
| MD06 | Refund requested by the payer (Core) | Contact the payer; collect again only with their consent |
| MD07 | Payer deceased | Stop all collections and close the agreement |
| MS02 | Refused by the payer, no reason given | Contact the payer before any retry |
| MS03 | Reason not specified by the bank | Contact the payer; retry once at most |
| SL01 | Specific service of the payer's bank, such as a block list | Ask the payer to allow your creditor identifier |
What does return code AC06 mean?
AC06 means the payer's whole account is blocked for any financial transaction, not only for direct debits, for example because of a court order or suspected misuse (EPC guidance on SDD reason codes, v8.1). Retrying does not help. Ask the payer for another account or another way to pay.
What is a Rücklastschrift and why does it happen?
A Rücklastschrift is the German term for a returned direct debit: the payer's bank sends the collection back to the creditor instead of paying it. Common causes are insufficient funds (AM04), a closed account (AC04), a blocked account (AC06), a missing mandate (MD01) or a refund request by the payer (MD06).
Your bank or provider usually charges a fee for each Rücklastschrift, and the payer's bank may charge the payer too. Check the fees in your contract; they can matter more than the per-collection fee if your return rate is high.
When should a merchant use SEPA Direct Debit?
Use SEPA Direct Debit when the same customer pays you repeatedly in euro. Bank accounts do not expire the way cards do, so collections are not interrupted by card renewals.
It fits less well for one-off purchases that must ship immediately, because the merchant learns about a return only after the collection date. For those, cards, Pay by Bank or iDEAL are usually a better fit.
SEPA Direct Debit vs SEPA Instant and SEPA credit transfer
The difference is who starts the payment. A SEPA credit transfer, including SEPA Instant (often searched as SEPA Überweisung), is a push payment: the payer sends money from their banking app. SEPA Direct Debit is a pull payment: the merchant collects under a mandate.
Pay by Bank and Wero use instant transfers confirmed in real time.
| Criterion | SEPA Direct Debit | SEPA credit transfer | SEPA Instant |
|---|---|---|---|
| Who starts it | Merchant (creditor) | Payer | Payer |
| Needs a mandate | Yes | No | No |
| Speed | Debited on the due date | Usually next business day | Seconds |
| Good for | Recurring payments | Invoices | Instant payments, Pay by Bank, Wero |
What does SEPA Direct Debit cost compared with cards?
SEPA Direct Debit is usually priced as a fixed fee per collection, while card fees are usually a percentage of the amount. Rates depend on your bank or provider, so compare your own offers rather than published averages. Remember to include fees for returns, which are charged separately.
How do you run SEPA Direct Debit through OrsunPay?
OrsunPay is payment orchestration software that connects you with payment providers that offer SEPA Direct Debit and manages collections alongside your other methods. OrsunPay is a payment orchestration platform that connects you to licensed PSPs; it does not process or hold funds itself.
- Mandates can be captured in hosted checkout or via the API.
- Recurring collection schedules (amounts and due dates) are set up in your own billing system or with your provider; check with your provider which scheduling options it offers.
- Returns come back with a reason code; how you respond to each code (for example re-presenting after AM04, stopping after AC04, MD07 or MS02) is set up with your provider.
- Fees, availability and payouts are set by your provider.
How does a SEPA Direct Debit collection work, step by step?
- Obtain a mandate The payer signs a Core or B2B mandate with name, IBAN, mandate reference and your creditor identifier.
- Pre-notify the payer Send the amount and due date in advance. The default is 14 calendar days unless a shorter period is agreed (source: EPC SDD Core rulebook).
- Submit the collection Your provider or bank submits it before the due date, within the deadlines set in the rulebook.
- Debit and settlement The payer's bank debits the account on the due date and the funds settle to the creditor side.
- Handle returns and refunds The payer's bank can return the collection for a short period after settlement, and a Core payer can claim a refund for 8 weeks.
Frequently asked questions
What is SEPA Direct Debit (Was ist SEPA-Lastschrift)?
SEPA Direct Debit, or SEPA-Lastschrift in German, is a euro payment that the merchant collects from the payer's bank account under a mandate. The payer authorises it once, and later collections happen on the agreed due dates.
Is SEPA the same as IBAN?
No. SEPA is the payment area and its rules; the IBAN is the account number format. You need the payer's IBAN and a signed mandate to collect.
Which countries and banks use SEPA?
SEPA covers the EU member states and several other European countries and territories. The EPC publishes the current list of countries and of banks that participate in each scheme on europeanpaymentscouncil.eu (EPC list of SEPA scheme countries).
Can I collect SEPA Direct Debit from UK customers?
Yes. The UK is on the EPC list of SEPA scheme countries. The collection is always in euro, but the payer's account does not have to be: under the SDD rulebooks an account in sterling or another currency can be debited if the payer's bank has designated it for SDD collections (EPC clarification paper, section 2.2). Whether a given UK account accepts SEPA debits depends on the payer's bank, so check with your provider.
Can a customer reverse a SEPA Direct Debit?
Under SDD Core, yes. The payer can request a refund of an authorised debit within 8 weeks without giving a reason, and within 13 months if there was no valid mandate. Under SDD B2B there is no refund right for authorised debits.
What is the difference between 8 weeks and 13 months?
The 8-week period applies to authorised debits under the Core scheme: the payer can get a refund for any reason. The 13-month period applies to unauthorised debits, meaning collections without a valid mandate.
What is a Rücklastschrift?
A Rücklastschrift is a returned direct debit in German usage. The payer's bank sends the collection back, for example because of insufficient funds or a closed account, and the creditor usually pays a return fee.
What does AC06 mean?
AC06 means the payer's whole account is blocked for any financial transaction (EPC guidance). Do not retry; ask the payer for another account or another payment method.
How long does it take to receive the money?
The payer is debited on the due date and funds settle shortly after, according to the EPC timeline. Many providers treat a Core collection as final only after the bank return period has passed; the 8-week refund right still applies.
Can I use SEPA Direct Debit outside the eurozone?
Yes, within the SEPA area. Countries outside the eurozone, such as Switzerland or Norway, are on the EPC list of SEPA scheme countries. The collection is in euro, but the payer's account can be in another currency if the payer's bank has designated it for SDD collections (EPC clarification paper, section 2.2); the bank may charge for currency conversion.
What happens if a mandate is unused for 36 months?
The mandate expires 36 months after the last collection, and a new mandate is needed before you can collect again. A collection under an expired mandate is returned, typically with MD01.
If a direct debit is returned, will the bank retry it?
No, the bank does not retry on its own. The creditor or its provider decides whether to submit again: it can make sense after AM04, but not after AC04, AC06 or MD07.
Explore OrsunPay
Talk to our teamSources
- EPC list of SEPA scheme countries (EPC409-09)
- European Payments Council: SEPA Direct Debit Core and B2B schemes
- European Payments Council: SDD Core rulebook
- European Payments Council: guidance on reason codes for SDD R-transactions (EPC173-14 v8.1)
- European Payments Council: clarification paper on SDD Core and SDD B2B rulebooks (EPC132-17 v5.1, section 2.2)
- EUR-Lex: Regulation (EU) No 260/2012 (SEPA end-date regulation)
- European Central Bank: Single Euro Payments Area (SEPA)