SEPA TIP is a secure, one-time payment option to pay invoices remotely. Formerly known as TIP, this payment method was updated to SEPA TIP in 2016. This interbank payment method, similar to a check, offers several benefits to businesses that use it.

What’s in this article?

• What is SEPA TIP?
  
• How does SEPA TIP work?
  
• How does it differ from SEPA Direct Debit?
  
• Pros and cons of SEPA TIP
  
• When to use SEPA TIP
  
• Initiating a SEPA TIP payment
  

What is SEPA TIP?

SEPA TIP is an easy and secure payment method primarily used across Europe. The “titre interbancaire de paiement” (TIP) was introduced in France in 1988, but in 2016, it was replaced by SEPA TIP to align with the changes brought by the adoption of the euro in 1999. SEPA stands for Single Euro Payments Area.

The SEPA TIP is a document attached to an invoice that the customer must sign and return to the creditor to authorise their bank to process the payment. This document acts as a direct debit authorisation.

SEPA TIP lets the customer authorise a one-time payment to a service provider or business and lets them pay one-time bills remotely without having to write a check. This system replaces the former interbank payment order (“titre interbancaire de paiement”), which was widely used throughout France. It eliminates the need to set up direct debits or write and sign cheques, simplifying the payment process.

How does SEPA TIP work?

For customers, the process is straightforward: they sign the SEPA TIP and send it with their bank identity statement (RIB) to the business by post or online. The processing of SEPA TIPs creates additional work for businesses because they must forward them to the financial institutions to initiate the payment process.

The SEPA TIP must include details such as the payment amount, the creditor’s identity, and the debtor’s bank information (international bank account number (IBAN), bank identifier code (BIC). This form authorises a single direct debit from the customer’s account.

The first time the SEPA TIP is used or when changing banks, the customer must complete the SEPA TIP form in full, including the bank account details. For future transactions, the SEPA TIP will be pre-filled because the bank details are on file, speeding up the payment process.

The SEPA TIP is an “interbank” payment, meaning the transaction is made between banks.

How does it differ from SEPA Direct Debit?

SEPA TIP differs from SEPA Direct Debit primarily in that it does not provide immediate payment.

Unlike SEPA Direct Debit payments, SEPA TIPs require the debtor’s authorisation for each payment, making every transaction unique. Each SEPA TIP transaction requires explicit consent through a signature or e-signature.

After receiving the SEPA TIP, the business submits it to its bank for processing. Unlike the SEPA Direct Debit mandate, which allows for recurring debits, this payment method is limited to a one-time transaction. The SEPA TIP is ideal for one-time payments, while the SEPA Direct Debit is better suited for recurring payments with only one authorisation from the payer.

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Pros and cons of SEPA TIP

Pros

SEPA TIP gives customers more control and peace of mind. Customers can specify the amount to be debited and authorise only that payment.

It can be used to make payments within the SEPA.

Offering SEPA TIP is a smart choice for businesses because it provides traceability and gives customers an alternative to less secure digital payment methods. For businesses, offering SEPA TIP as a payment option is easy and free, apart from any postal charges.

Cons

SEPA TIP does have drawbacks. For example, if the customer has insufficient funds, the bank can decline the transaction and charge a fee, effectively cancelling the payment.

Businesses should also note that the payer has the right to dispute the amount shown on the TIP or on the creditor’s invoice. This provides peace of mind to the customer but can create complications for the business.

Payment by SEPA TIP is not immediate, which is a drawback compared with other payment methods such as credit transfers or cash payments. Manual processing of SEPA TIPs requires additional resources for businesses.

When to use SEPA TIP

Although SEPA TIP is evolving in a more digital environment, it remains a traditional payment method, particularly favoured for settling certain invoices. It is commonly used to pay bills from public administrations, public institutions, and large businesses. It is often used to pay bills for water, electricity, gas, telephone services, rent, taxes, and similar expenses.

Its adoption within the SEPA, which spans much of Europe, makes cross-border transactions easier for private individuals and professionals. The SEPA is a region where businesses, governments, and citizens can make and receive cashless euro payments on the same terms as domestic transactions.

Initiating a SEPA TIP payment

SEPA TIP by mail

For the non-digital version, the process typically follows these steps:

1. Issuing the TIP: The business includes the TIP with the invoice and sends it to the customer.
2. Signature and dispatch: The customer dates and signs the TIP, then returns it to the business, including a bank identity statement if needed.
3. Forwarding to the bank: The business sends the signed TIP to its bank.
4. Account debit: The creditor’s bank debits the customer’s account.

SEPA TIP online

The SEPA TIP is also available in digital form. To use the online TIP for the first time, customers must follow these steps:

1. Log in to your online account: Visit the website or mobile app of the business you want to pay.
2. Fill out your bank details: Enter your IBAN and BIC (or Society for Worldwide Interbank Financial Telecommunication (SWIFT) code) in the fields provided.
3. Electronic signature of the SEPA mandate: You must confirm the direct debit authorisation using an electronic signature. This typically requires entering a code sent via SMS.

For subsequent use of e-TIP, you can follow this process:

1. Log in to your online account: As with first-time use, the customer must log in to their account.
2. Payment validation: The customer selects the payment to be made and confirms their selection.
3. Payment completed: The amount is automatically debited from the customer’s bank account.