SEPA direct debit

Overview

The Single Euro Payments Area (SEPA) is a payment-integration initiative of the European Union for simplification of bank transfers denominated in Euro between member countries. SEPA enables customers to make cashless euro payments to any account located anywhere in the area, using a single bank account. To debit from SEPA bank accounts, bank account holder must accept a mandate that gives the debtors an authorization to debit the account.

SEPA Direct Debit is a PayPal Direct Banking solution that enables you to offer SEPA banks as a payment option to your customers.

SEPA direct debit features

• Supported transaction types: One-off or Recurring Payments.
• Settlement: Instant or Delayed.
• Vaulting: Supported
• Transaction Currency: EUR only
• Refunds: Full, Partial and Multiple Partial refunds supported.
• Integration Type: PayPal Orders v2 API and Braintree SDKs.

SEPA Direct Debit allows you to access funds immediately if you opt for Instant Settlements. Delayed settlement option will make funds available in the standard SEPA settlement timeframe of 2-3 days.

How it works

SEPA Direct Debit can be offered as a payment choice in your checkout flow. Customers choosing to pay with SEPA Direct Debit will provide an IBAN. PayPal will validated the IBAN and provide a link to a mandate page. The customer authorizes you and PayPal to debit from their SEPA Account by agreeing to the mandate. PayPal stores and manages mandates on your behalf. Funds can be debited once your customer has agreed to the mandate. Mandates can be specified to be one time or recurrent.

Checkout flow

1. Customer is presented with checkout page.
2. Customer selects SEPA as payment method.
3. Customer provides IBAN information.
4. Customer gets redirected to the PayPal hosted experience to accept the mandate.
5. Customer accepts mandate.
6. Customer returns to complete checkout.

Mandates

• Mandates conform to SEPA guidelines and are hosted by PayPal.
• Mandates can be specified for a one-time payment or for recurrent payments.
• Customer acceptance of mandates is stored at PayPal. PayPal allows for viewing and revocation of approved mandates.
• Mandates with no transaction activities in the past 36 months or those that fail risk checks will be auto cancelled.

Mandate management

Mandate acceptance flow is used to display mandates, obtain customer authorization and store it. Mandate Management API allow you to manage (view, revoke) authorized mandates that have been collected in the acceptance flow. After a mandate is created, the Mandate Management API can be utilized in any customer servicing experiences you choose to provide.

Mandate Management API Key Features:

• Providing a link to a front end experience to view an accepted mandate.
• Fetching mandate Details, such as status and mandate approval time.
• Revoking Mandate for future payments.

If a mandate has no transaction activities in the past 36 months or fails routine risk checks, the mandate is auto cancelled by the system.

Settlement

Transactions usually takes 2-3 business days to settle. Time Frame and details of the settlement process varies between the product selection of Instant and Delayed Settlement.

If you opt for Instant Settlements, transactions that fail due to insufficient funds may be re-presented to the customers's bank account after a delay. Re-presented transactions provide a second opportunity to collect the funds, and are auto triggered at an optimal time.

Disputes and returns

Your customer can dispute any transaction with their bank. Disputes raised within 8 weeks of the transactions will be automatically honored in alignment with SEPA guidelines. Customers can dispute a transactions only as unauthorized after 8 weeks but up to 13 months.

SEPA return codes

SEPA Return Reason Code PDF

Eligibility

PayPal Direct Banking Platform's SEPA Direct Debit solution is supported for bank accounts in the following countries:

Integration methods

• Direct API integrations

  Fully customize the SEPA direct debit payment experience and cater to business needs.

  • Orders API - SEPA Direct Debit
    • An order represents a payment between two or more parties. Use Orders API to:
      • Create an Order
      • Confirm Payment Source
        • Collect customer's authorization for SEPA direct debit payment method.
      • Capture Order
  • Mandate Management API
    • A mandate is an authorization, given by your customer, allowing you to collect future payments. Use Mandate Management API to :
      • Check the status of a mandate.
      • Revoke a mandate.
  • Payments API - Refunds
    • Use Payments API to refund captured payments.
  • Webhooks Management API
    • A webhook is an event notification. Use the Webhook Management API to :
      • Configure a webhook listener for your application and subscribe to the transaction events.

• SDK integration

  Start processing SEPA direct debit payment with minimal steps.

SEPA Regulatory Guidelines

Reason Code PDF

• SEPA regulations require you to communicate a debit notification to your customer on successful debit for both one-off and recurring transactions. This is to be shown on the purchase confirmation pages, and associated emails. Informing your customers may reduce returns.
• Merchants must allow buyers to dispute a SEPA DD for up to 8 weeks from the date of transaction, on a 'no questions asked' basis, with disputes being 'automatically honored'.
• SEPA regulations require you to provide means for mandate cancellation. Mandate Management APIs allow for both viewing and revocation of mandates.
• You may opt to communicate mandate information to your customer at or after mandate authorization.

Integration Guidelines

• Mandate URLs are best handled in an iFrame in your checkout flow.
• Every transaction must have a unique transaction reference (order id/invoice id etc.) as the soft descriptor.
• External id is mandatory. It is best to choose a unique customer reference for this field.
• View Mandate API provides a link to the latest authorized mandates. Viewing of revoked or one-off mandates is not supported.
• Use the API experience context locale to set the locale for your customer.
• Provide validated addresses for your customers, as PayPal does only minimum validation. Transaction settlement may be impacted if bad addresses are used.
• First and last name is needed for your customers, and should be separated by a space. Incomplete names will throw INVALID PARAM SYNTAX error.
• Maintain consistency between mandate type in Confirm Payment Source and application context in Capture. If Confirm Payment Source uses attributes:mandate:type: RECURRENT, then Capture would need to use application context : stored payment source : payment type: RECURRING.

SEPA reports

SEPA transactions, fees and returns data will be reported in all relevant PayPal reports.

• SEPA transactions will be available in STL, TRR and Activity Download reports. SEPA transactions can be identified as 'Direct Debit' in the Payment Source column.
• For SEPA returns, Decline Code column will identify the SEPA return code. Please refer to the SEPA return code section.

SEPA risks

SEPA Direct Debit scheme does not guarantee funds as your customer or their bank can initiate disputes.

• Any disputes raised by your customer with their bank within 8 weeks of the transactions will be automatically honored in alignment with SEPA guidelines.
• All returns, including those for disputes and insufficient funds, may attract a return fee. The return fee is charged by your customer's bank and is passed on to you. Some banks may refuse to honour electronic mandates, and return MD01.
• If you have opted for instant settlement, settled fund may be debited from your account in case the customer is found not to have sufficient funds. In this case, settled funds will be debited after 1-2 days after the transaction.
• Instant settled transaction may eventually fail to settle and may have two associated return fees. The first return fee will be for the initial debit attempt. If this fails due to customer having insufficient funds, the re-presentment is triggered. If the re-presentment fails as well, a second returns fee may be charged.
• The SEPA Direct Debit scheme allows for returns to be initiated on any transaction, including those that you may have previously refunded. The scheme does not recognise refunds as being associated with original transaction, and does permits disputes on the original transaction.