SEPA is the abbreviation for Single Euro Payments Area. It is a project aimed at harmonising cashless payments. 28 EU Member States, the three remaining states of the European Economic Area (Iceland, Norway and Liechtenstein) and Switzerland, Monaco and San Marino are all part of the SEPA scheme.

In the SEPA area, EU-wide rules apply to direct debits, and the national laws of the SEPA member countries for direct debits have been harmonised across Europe.

Direct debits involve cashless payments where the payee (creditor) instructs their bank to debit an amount from the account of the payer (debtor). The particularity here is that the payment process is not triggered by the payer but by the payee. The debtor must then authorise the creditor to collect the direct debit payment.

There are two types of SEPA direct debits: SEPA core direct debits and SEPA business-to-business direct debits. While SEPA core direct debits are used by consumers, SEPA business-to-business direct debits are used by businesses (non-consumers) only.

Anyone who wishes to collect funds from an account via SEPA direct debit needs the payer’s approval in the form of a SEPA direct debit mandate. In this context, the consumer pre-authorises the direct debit in writing, thereby authorising their bank to execute the direct debit. In the case of SEPA direct debit mandates, the payee must refer to a creditor identifier. A creditor identifier is a unique reference that is not linked to an account. It is valid across the EU and additionally identifies the payee as the direct debit payment recipient.