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10 best practices for SEPA Direct Debit

Reach your full potential in Germany, the Netherlands, and Austria with Europe’s leading direct debit payment method.

March 25, 2024
 ·  4 minutes
SEPA Direct Debit: 10 best practices

Preferred payment methods vary across regions. To gain a competitive advantage, businesses must offer customers the payment options they want.

One rising payment method is SEPA (Single Euro Payments Area) Direct Debit (SEPA DD). SEPA DD is a bank account-based payment method available across the Eurozone for ecommerce and recurring payments. In this article, you'll discover SEPA Direct Debit's advantages and 10 best practices for offering this payment method.

Benefits and considerations

SEPA Direct Debit (SEPA DD) is an alternative payment method to credit cards and an important addition to your payment portfolio. Here are some of its benefits:

  • It's especially valuable in Eurozone countries with low card penetration as it works with local e-banking services such as Pay by Bank in Germany, iDEAL in the Netherlands, and EPS in Austria.

  • Subscription businesses can use SEPA DD to attract young shoppers who don't have a credit card yet. 

  • Compared to card payments, SEPA DD has low fees for both domestic and cross-border payments.

All this makes SEPA DD an attractive option for businesses. However, before diving into the best practices, there are a few things to be aware of:  

  • Unlike cards, SEPA DD doesn't have an additional authentication layer, such as a CVC check or 3D Secure. Consequently, it's important to have good risk management tools to offset the fraud threat.   

  • It has a comparatively long clearing process and settlement time. You must wait up to three days before receiving confirmation that your shopper has paid. A shopper can perform a chargeback online eight weeks after the purchase, with no questions asked. In some cases, this can be as long as 13 months.

10 best practices for SEPA Direct Debit

SEPA DD benefits businesses that want to expand their payment method offering. Below are some best practices to ensure it's successful.

1. For retailers, we recommend holding shipment for seven days to avoid making a loss if the payment is unsuccessful.

2. We recommend SEPA DD payments for ticketing businesses and airlines if there is enough time to settle the payment before the flight or event. This way, you can cancel the transaction if it's unsuccessful.

3. Businesses should consider a maximum transaction value for SEPA DD. A good indicator is the average transaction value of your chargebacks.

4. For high transaction values, we recommend cross-checking your customers against local credit scoring agencies. If you fail to collect the funds from your shopper before shipping the product, you can work with a local debt-collecting agency.

5. We'll collect the funds if you process payments with Adyen. This means Adyen and Adyen's creditor ID will appear alongside your name on the customer's bank statement. Communicating this clearly to your customers is essential to avoid confusion and chargebacks. 

6. Communicate clearly on your confirmation page that the payment might take up to seven days to complete so the shopper knows they may be charged later.

7. Clearly state that refunds will take a few days in your return/refund policy. This reduces the risk of chargebacks. The shopper can charge SEPA DD back even if there has already been a refund. Refunding a SEPA DD transaction is risky if there is an ongoing dispute with the customer. 

8. Make sure you keep your IBAN blocklists up to date to identify and block payments from invalid bank accounts. 

9. Use tools that mitigate chargeback risks. You can set up and monitor velocity checks, limiting the number of orders a shopper can place within a specific timeframe.

10. If a transaction is refused due to lack of funds, you can retry the transaction later. We recommend adjusting your retry logic based on the reason for refusal provided by the customer's bank.

Enhance your payment method portfolio

Businesses need to enhance their payment method offerings to stay competitive. It's important to consider what payment methods are popular in your markets and offer customers the ones they want. By embracing SEPA DD, businesses can simplify transactions across regions and industries, providing customers with effortless payments and staying ahead in today's competitive landscape.

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