How to get started with SEPA Direct Debit
Automating your receivables collection through direct debit is a smart move. No more chasing customers for outstanding invoices, but seeing the trees through the wood can sometimes be challenging. Let's walk you through it.
The very first thing you will need is a party (usually your bank) that collects those payments from your customer on your behalf. They'll ask you some questions (which we hope to cover here) and in the end they will provide you with a creditor agreement. This allows you to act as a creditor and collect the money from your customer's account, but only after you have approval from your customer.
Why do you need an approval?
In order to protect you and your customer a mandate is required. Basically it's an agreement between you and your customer. And since you probably have more than 1 customer, Twikey helps you with the management of those agreements.
There are 2 types of mandates. B2B used exclusively between businesses, while CORE can be used for both consumers and businesses. The creditor agreement we mentioned previously specifies which type(s) are allowed.
- B2B mandates don't have a refund right, but have to be registered at the bank of your end-customer (more on that later).
- A CORE mandate on the other hand doesn't need this registration but allows the customer to request a refund within 8 weeks.
Important here is that the mandate should adhere to the EPC regulations to avoid chargebacks up to 13 months. So a simple checkbox may look like a good idea, but might get you in trouble afterwards.
How to tackle chargebacks?
Even though your customer might ask his bank for a chargeback in the first 8 weeks of your collection, it doesn't mean that he doesn't have to pay. There are alternative methods to pay you. Twikey can help you provide those using the right balance between cost and convenience.
If your mandate on the other hand is not according to regulations, then all transactions up to 13 months linked to the mandate can be charged back. Which could be quite problematic as the amount is a lot higher.
Twikey provides verified proof. It may seem like overhead but this actually provides extra trust in your company, enhancing customer satisfaction.
Are you already using Direct Debit?
Step 1 Risk assessment
Your bank will request specific details in order to assess their risk, such as :
- The bank will likely recommend CORE is the best type for if your customers are mainly individuals or companies with low risk.
- If you're only doing business with companies, they will probably suggest B2B.
- What are the estimated transaction volumes.
We've prepared a comprehensive document outlining all the necessary details, helping you with your application. Make sure to complete the document before contacting your bank.
Request a Creditor agreement
Step 2 Contact your bank
Contact the business or corporate banking department at your bank. These teams specialize in payment services and can offer detailed guidance on setting up a creditor agreement.
Step 3 Creditor agreement
Once your application is approved and the creditor contract is signed, you will receive a unique creditor ID. This reference is required for future agreements with your customers and for initiating the actual collection of payments.
You can now start doing and managing direct debits with Twikey. Share your creditor contract here
Great! Let's get started!
Sharing your creditor contract early helps us ensure a smooth and quick onboarding experience, preventing any delays.
Share your creditor contract here