The European credit transfer (SEPA Credit Transfer) and the European direct debit (SEPA Direct Debit) were introduced in 2008 and 2009 respectively. The European Commission (EC) and the European Parliament believed this implementation was happening to slowly and prepared legislation in 2010 to legally regulate migration.
In 2012, the final version of the EU regulation was adopted by the European Parliament and thus came into force and is binding for 36 countries. It lays down requirements for the entire payment chain, i.e. from customer to customer.
Following on from our previous article on the introduction of the new SEPA XML version 2019, which will be available from 17 March 2024, this article provides additional information on the technical background of the European SEPA legislation.
The following payment products are within the scope of the EC legislation:
The following payment products do not fall within the scope of EC legislation:
Companies must take into account the foreign account numbers of their customers and suppliers:
A debtor is given the option by his bank to:
The European credit transfer process involves 4 parties: the debtor (buying party), his bank (debtor bank), the creditor (beneficiary) and his bank (creditor bank). This is also known as the 4-corner model.
*The original version of this table can be found here.
The European credit transfer process consists of the following steps:
Four parties are involved in the European direct debit procedure: the creditor (collector), his bank (creditor bank), the debtor and his bank (debtor bank). This is also called the 4-corner model. The collection process consists of two parts, namely the mandate process and the collection process.
*The original version of this table can be found here.
The collection process consists of the following steps (the handling of exceptional situations is not taken into account):
The European direct debit also offers the option to initiate and have an authorization signed digitally. This is called an e-mandate.
The mandate process has the following steps:
Creditors are obliged to physically archive the authorizations for the European direct debit and keep them for the legally required period. A collector must be able to provide the debtor with a copy of the authorization on request. In addition, part of the data of each authorization must be stored electronically. The reason for this is that this authorization information must be sent with every direct debit order.
Exceptional situations are handled using the so-called R-Transaction. The ‘R’ stands for the type of exception, such as ‘Reject’ and ‘Refund’.
R-Transactions | European Transfer | Direct Debit |
Request for cancellation | ||
Cancelling before a scheduled transfer | Complete payment batch; Item(s) from a payment batch; Individual transfer |
Complete collection batch; Item(s) from a payment batch |
Timeline; | 1 day before transfer |
Normal; 5 days before first transfer; Normal; 2 days before subsequent transfer B2B; 1 day before transfer or same day |
Communication; | Procedural depending on bank; Bank's Internet Portal; Submitting an electronic cancellation order (Camt.055) |
Bank's clients service department; Bank's Internet Portal; File (Camt.055) |
Recall (revocation of transfer) | ||
Mostly attempted by clients bank | Double sending of transfer by bank; Technical problems and incorrect transfer; Fraudulently transfer |
Double sending of transfer by bank; Technical problems and incorrect transfer; |
Timeline; | Up to 10 working days after transfer; Followed by 10 working days beneficiary's bank |
Up to 2 days after transfer |
Communications; | Bank's client service department |
Bank's client service department; Bank's Internet portal; Submitting an electronic repair order (Pain.007) |
Rejection | ||
By own bank before execution | Complete payment batch; Individual transfer |
Complete collection batch; Individual transfer |
Timeline; | From submission to day of transfer | From submission to day of transfer |
Communication; | Procedural depending on bank; Refund the day after on daily statement; Returning an electronic payment status report (Pain.002) |
Bank's client service department; Refund the day on daily statement; Payment status report (Pain.002) |
Return (return payment) | ||
After transfer is executed | Beneficiary account number unknown; Transfer not allowed for specific account nr |
Debtor's account number unknown; Insufficient debtor balance |
Timeline; | Max 3 working days after transfer; If approved max 20 days for return |
Normal: 5 working days after collection; B2B: 2 working days after collection |
After transfer is executed | ||
At request debtor | Authorization direct debit; | Not applicable |
Timeline; | Up to 8 weeks after date of debit | |
At request debtor | Unauthorized direct debit; | |
Timeline; | Max 13 months after date of debit |
*The table is based on information on R-Transactions relating to European Transfer and Direct Debit.