Most associations collect fees from their members regularly – whether it’s monthly, quarterly, semi-annually, or yearly. These are often collected using SEPA Direct Debit. Stripe makes integrating and processing SEPA Direct Debit easy. Here, we’ll explain what SEPA Direct Debit is, how to process it using Stripe, the advantages it offers, and the requirements an association must meet to collect money from its members’ accounts using SEPA Direct Debit. You will also find templates for a SEPA mandate and a SEPA Direct Debit notification.

What’s in this article?

• What is SEPA Direct Debit?
  
• What are the advantages of SEPA Direct Debit for associations?
  
• What requirements must an association meet to collect membership fees with SEPA?
  
• How should an association format its SEPA mandate?
  
• How should an association format its SEPA Direct Debit notification?
  

What is SEPA Direct Debit?

Single Euro Payments Area (SEPA) Direct Debit is a standardised electronic payment method. It was introduced in 2014 and is now used throughout the European Union, as well as in Iceland, Liechtenstein and Norway, which are not part of the EU but are part of the European Economic Area.

The goal of SEPA was to simplify international payment transactions, including credit transfers and direct debits. To this end, national payment systems were updated. In Germany, for example, the direct debit system was replaced by the SEPA Direct Debit mandate. Since then, the international Bank Identifier Code (BIC) has been used instead of the bank routing number, and the International Bank Account Number (IBAN) has been used instead of the account number.

SEPA Direct Debit is the standard procedure in many jurisdictions in terms of recurring payments. There is a difference between the SEPA B2B Direct Debit and the core SEPA Direct Debit. The former is designed for business-to-business (B2B) transactions between businesses, while the latter is for general customer transactions. If associations want to collect membership fees, they use a core SEPA Direct Debit. This allows associations to transfer money from their members or donors to the association’s account without requiring the members or donors to actively make a transfer. All the association needs is a direct debit mandate. The direct debit mandate is the authorisation that allows the association to transfer money from its members’ accounts, either on a one-time or recurring basis. Learn more in our article on SEPA Direct Debits.

With Stripe Payments, you can easily collect and manage dues from your association members. Payments can also offer your members other payment options – such as bank transfers, card payments, or payment links – and streamline your accounting and reconciliation processes with our out-of-the-box financial and accounting reports.

There’s no need to integrate SEPA Direct Debit and other payment methods individually. When you use our frontend products, Stripe automatically determines the most relevant payment methods to display to the customer. Learn more about SEPA Direct Debits with Stripe.

What are the advantages of SEPA Direct Debit for associations?

Compared to cash payments or individual transfers, SEPA Direct Debit offers several advantages for associations when collecting membership fees:

• Automation: If the direct debit is active, the membership fee is automatically deducted from the member’s account. It’s easier for members because they don’t have to take any action and therefore can’t forget to pay. It also guarantees that associations receive funds on time. While there are special cases where a member’s bank can block the direct debit if there are insufficient funds in the account, and members can object to a payment within eight weeks – associations are generally guaranteed reliable payments. This also means that associations save time they would otherwise spend sending reminders to individual members for outstanding payments.
  
• Predictability: Associations can choose the specific dates on which their members’ accounts are debited. This means that they know exactly when membership fees are available to them.
  
• Simple management: SEPA Direct Debit automation reduces the administrative burden for associations. When an association has only a few members, the administrative work is usually minimal. However, as the number of members increases, so do the required accounting processes. Several direct debits can be grouped into one collective direct debit. This allows the association to send a consolidated dataset to its bank instead of sending each direct debit individually.
  
• Flexibility: If membership fees change, the association can easily update these changes in the SEPA Direct Debit mandate without requiring any action from members. New members can be quickly and easily integrated into the SEPA Direct Debit system.
  
• Trust: The SEPA Direct Debit system’s eight-week right to object increases trust in this payment method and can bolster trust in the association itself. Furthermore, all transactions can be traced and easily verified in the members’ account statements.
  
• Low costs: While the cost of SEPA Direct Debit varies from bank to bank, it is generally lower than other payment methods. In addition, there are no reminders – and therefore no associated costs – if membership dues are received on time with automatic direct debit.
  

What requirements must an association meet to collect membership fees with SEPA?

To use SEPA Direct Debits, associations must meet certain requirements. These concern organisational, technical, and legal aspects.

• SEPA-compliant bank account: The basic requirement for SEPA Direct Debits is a bank account that can receive them. The association must have such an account set up by its bank.
  
• Software: The association must have access to SEPA-compliant software or an online banking system that can create and manage SEPA Direct Debits.
  
• Creditor Identifier: Every association wishing to collect membership fees via direct debit requires a Creditor Identifier, which uniquely identifies it as a payee throughout the SEPA area. In Germany, this can be requested from the German Bundesbank. The relevant data of the association must be entered, and a contact person must be named. The contact person will then receive an email request to activate the application data. This must be done within 10 days or the data will be deleted. Once the data is activated by the contact person, a Creditor Identifier is assigned and sent via email. This must then be forwarded to the association’s bank.
  
• Collection agreement: Before banks implement SEPA Direct Debit for an association, they assess the risk of returned direct debits. They can only refuse to provide the service to the association if the estimated risk is high. However, this rarely happens specifically with associations. If the assessment is positive, the association and the bank enter into a direct debit agreement. This agreement is the basis for the submission of SEPA Direct Debits.
  
• SEPA mandate: By following these steps, the association creates the necessary conditions for SEPA Direct Debits. The next step is to get permission from the other party – the members. They need to give a SEPA mandate to allow the association to debit money from their accounts. There is no specific form required for the SEPA mandate, but certain requirements must be met. The mandate must be in writing and include the member’s name, address, account details, and signature. It’s also important to specify whether the mandate is for a one-time or recurring payment. In addition, the mandate must include the name, address, and creditor identification number of the association. Finally, the association must provide a mandate reference. This is a unique number that can be used to identify the person issuing the mandate. This is often the membership number. The membership application can also be combined with the SEPA mandate. However, in this case, a separate signature is required.
  
• Mandate management: Associations that issue direct debit mandates must manage and document them carefully. SEPA mandates expire if they are not used within 36 months of signing. However, each direct debit will extend the validity of the mandate for an additional 36 months. SEPA mandates must be kept on file even after a member has left the association. If a membership ends, the association must keep the corresponding SEPA mandate for at least 14 months.
  
• Notifications: Associations have a duty to inform their members and must inform them about SEPA Direct Debit. This could be done, for example, at the general meeting. However, advance notice should also be given by circular letter or by other means, such as the association’s website, association magazine, or notice board. Notice should be given 14 days prior to the due date, unless otherwise agreed.
  
• Submission of direct debits: The association must submit SEPA Direct Debits to its bank in a timely manner. They must be submitted at least one bank business day before the due date. However, to be on the safe side, it’s advisable to contact the bank in advance. Direct debits must be created in SEPA XML format, which is the standardised format for SEPA transactions.
  
• Data protection: It is important that associations comply with the General Data Protection Regulation (GDPR) guidelines, especially when handling members’ sensitive personal data for SEPA Direct Debits. Additionally, members must consent to the storage and processing of their data.
  

How should an association format its SEPA mandate?

No specific form is needed for the SEPA mandate, but there are certain requirements. Below is a [template for a SEPA mandate], which authorises an association to make regular direct debits.

With a SEPA mandate for a one-time payment, you can replace the first sentence with the following:

I authorise [Association] to collect a one-time payment from my account by direct debit.

How should an association format its SEPA Direct Debit notification?

Below is an [example direct debit notification] for a recurring direct debit collection.