SEPA mandate explained

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  1. Introduction
  2. What is a SEPA mandate?
  3. What are the benefits of a SEPA mandate?
  4. What is SEPA?
  5. How does a SEPA mandate work?
  6. How long is a SEPA mandate valid for?
  7. Who is allowed to sign a SEPA mandate?
  8. What does a SEPA mandate cost?

In a digitised world where payment processes are becoming increasingly simplified, SEPA mandates offer new opportunities for businesses. Businesses should know about the benefits of SEPA mandates and how they work. Read this article to learn how a SEPA mandate works, what SEPA is and how businesses can benefit from SEPA mandates.

What's in this article?

  • What is a SEPA mandate?
  • What are the benefits of a SEPA mandate?
  • What is SEPA?
  • How does a SEPA mandate work?
  • Who is allowed to sign a SEPA mandate?
  • How long is a SEPA mandate valid for?
  • What does a SEPA mandate cost?

What is a SEPA mandate?

A SEPA mandate, also called a SEPA Direct Debit mandate, is a legally binding document that allows a company to debit money from a customer's bank account. A mandate contains all the customer's necessary information, such as their name, address, IBAN and BIC, as well as the amount and date of the debit. It can be used for one-off or recurring payments. Permission must be given in writing and then signed by the person providing payment – this can also be done digitally.

What are the benefits of a SEPA mandate?

A SEPA mandate offers many benefits for businesses. It simplifies the entire process of collecting and processing payments, reducing costs as a result. You can use a mandate to send out automated payment requests and process customer payments immediately, for example. This allows businesses to check the current status of their incoming and outgoing payments at any time.

It's also convenient for customers to pay via SEPA mandate because they don't need to create a manual payment. This is a real time-saver, especially for recurring payments. Money can be transferred more securely and efficiently using a SEPA mandate – without any delays or problems processing payment transactions.

It's a standardised process which is valid throughout the European Economic Area (EEA) and available in most European countries. Businesses can offer this payment method to their customers if both parties are located in a SEPA payment area.

What is SEPA?

SEPA, which stands for "Single Euro Payments Area", is a payment area within the European Union (EU) that allows banks and payment providers to simplify international payments. 36 countries currently participate in SEPA. SEPA allows businesses to transfer money quickly and efficiently between European accounts.

SEPA Direct Debits have been valid throughout Europe since February 2014, replacing the former national direct-debit process in Germany. Businesses can use SEPA to make payments more quickly and securely. This is because the customer doesn't need to do anything besides signing the SEPA mandate and sharing it with the company.

How does a SEPA mandate work?

To make sure that the payment process flows seamlessly and without any legal issues, the company first needs to obtain written consent from the customer via a SEPA mandate. The customer must accept the conditions of the mandate and confirm that all the information is correct. After signing and submitting, the customer can pay invoices and direct debits automatically using a credit card or their bank account. Alternatively, the business can submit direct debits to their bank using the mandate reference and creditor identifier number. It must be sent to both the recipient and the person sending the money.

Some businesses use pre-set mandates for regular payment transaction processes or provide options to improve the payment process for customers. They also need to be transparent when informing customers about collections and give them the opportunity to cancel the mandate at any time. You can find more information on how to issue a SEPA mandate here.

How long is a SEPA mandate valid for?

Once a SEPA mandate has been issued, it generally remains valid indefinitely unless it is cancelled. However, it will expire if it has not been used for 36 months. If the mandate has expired, the business will need to ask their customer to provide consent again in order to continue collecting funds via SEPA Direct Debits.

Mandates can only be extended or renewed in writing and via a secure data transfer (e.g. letter or email). If the mandate is cancelled or expires, the company does not have any legal means to continue collecting. As a result, it is the company's responsibility to ensure that the mandate is valid and to renew it in good time when needed.

Who is allowed to sign a SEPA mandate?

A valid SEPA mandate has to be signed by all parties involved in the transaction. Generally, it needs to be signed by the person acting in the name of the company, which is typically the managing director or another authorised person. If it's unclear who should sign, businesses should consult their legal advisor about how to proceed, and also check whether special authorisation is required. If businesses have more than one shareholder, each one will need to receive authorisation and provide their signature, which can also be done electronically. This ensures that all parties involved in the transaction are fully informed and have given their consent.

What does a SEPA mandate cost?

There are usually no fees for customers or businesses, unless currency conversion is involved. However, it's a good idea to ask your principal bank whether they charge fees in advance.

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