Payments Academy
SEPA Direct Debit PAYMENT OPERATIONS STARTED LIVE 01 SEPA Direct Debit - payment in which the creditor pulls funds ACTIVE 02 Mandate - flow, and without a valid mandate QUEUED 03 Core - any creditor that collects from consumers QUEUED 04 Debtor - Third, the debtor must inform its bank QUEUED 05 Jonas Weber signed a mandate online - authorising Stadtwerke Linden to QUEUED A SEPA Direct Debit is a payment in which the creditor pulls funds from the debtor account, under a mandate that the debtor has signed in advance. Step 1 of 5 SEPA Direct Debit STARTED SEPA Direct Debit payment in which the creditor pulls funds ACTIVE Mandate flow, and without a valid mandate QUEUED Core any creditor that collects from consumers QUEUED Debtor Third, the debtor must inform its bank QUEUED Jonas Weber signed a mandate online authorising Stadtwerke Linden to collect EUR QUEUED A SEPA Direct Debit is a payment in which the creditor pulls funds from the debtor account, under a mandate that the debtor has signed in advance.
Mandate: legal basis for whole PAYMENT OPERATIONS IN PROGRESS LIVE 01 SEPA Direct Debit - payment in which the creditor pulls funds DONE 02 Mandate - flow, and without a valid mandate ACTIVE 03 Core - any creditor that collects from consumers QUEUED 04 Debtor - Third, the debtor must inform its bank QUEUED 05 Jonas Weber signed a mandate online - authorising Stadtwerke Linden to QUEUED The mandate is the legal basis for the whole flow, and without a valid mandate the collection must not happen. Step 2 of 5 Mandate: legal basis for whole IN PROGRESS SEPA Direct Debit payment in which the creditor pulls funds DONE Mandate flow, and without a valid mandate ACTIVE Core any creditor that collects from consumers QUEUED Debtor Third, the debtor must inform its bank QUEUED Jonas Weber signed a mandate online authorising Stadtwerke Linden to collect EUR QUEUED The mandate is the legal basis for the whole flow, and without a valid mandate the collection must not happen.
Core: default scheme PAYMENT OPERATIONS IN PROGRESS LIVE 01 SEPA Direct Debit - payment in which the creditor pulls funds DONE 02 Mandate - flow, and without a valid mandate DONE 03 Core - any creditor that collects from consumers ACTIVE 04 Debtor - Third, the debtor must inform its bank QUEUED 05 Jonas Weber signed a mandate online - authorising Stadtwerke Linden to QUEUED Core is the default scheme, and any creditor that collects from consumers must use it. Step 3 of 5 Core: default scheme IN PROGRESS SEPA Direct Debit payment in which the creditor pulls funds DONE Mandate flow, and without a valid mandate DONE Core any creditor that collects from consumers ACTIVE Debtor Third, the debtor must inform its bank QUEUED Jonas Weber signed a mandate online authorising Stadtwerke Linden to collect EUR QUEUED Core is the default scheme, and any creditor that collects from consumers must use it.
Debtor must inform its bank that it PAYMENT OPERATIONS IN PROGRESS LIVE 01 SEPA Direct Debit - payment in which the creditor pulls funds DONE 02 Mandate - flow, and without a valid mandate DONE 03 Core - any creditor that collects from consumers DONE 04 Debtor - Third, the debtor must inform its bank ACTIVE 05 Jonas Weber signed a mandate online - authorising Stadtwerke Linden to QUEUED Third, the debtor must inform its bank that it accepts B2B collections, and the bank must record that agreement. Step 4 of 5 Debtor must inform its bank that it IN PROGRESS SEPA Direct Debit payment in which the creditor pulls funds DONE Mandate flow, and without a valid mandate DONE Core any creditor that collects from consumers DONE Debtor Third, the debtor must inform its bank ACTIVE Jonas Weber signed a mandate online authorising Stadtwerke Linden to collect EUR QUEUED Third, the debtor must inform its bank that it accepts B2B collections, and the bank must record that agreement.
Jonas Weber signed a mandate online PAYMENT OPERATIONS COMPLETE LIVE 01 SEPA Direct Debit - payment in which the creditor pulls funds DONE 02 Mandate - flow, and without a valid mandate DONE 03 Core - any creditor that collects from consumers DONE 04 Debtor - Third, the debtor must inform its bank DONE 05 Jonas Weber signed a mandate online - authorising Stadtwerke Linden to ACTIVE Jonas Weber signed a mandate online, authorising Stadtwerke Linden to collect EUR 89.99 each month from his account with Meridian Bank Munich. Step 5 of 5 Jonas Weber signed a mandate online COMPLETE SEPA Direct Debit payment in which the creditor pulls funds DONE Mandate flow, and without a valid mandate DONE Core any creditor that collects from consumers DONE Debtor Third, the debtor must inform its bank DONE Jonas Weber signed a mandate online authorising Stadtwerke Linden to collect EUR ACTIVE Jonas Weber signed a mandate online, authorising Stadtwerke Linden to collect EUR 89.99 each month from his account with Meridian Bank Munich.

Key points of this lesson, in order.

0:00 / 2:29 Step 1 of 5

SDD Core and B2B: Two Schemes, Two Risk Profiles

SEPA Direct Debit Deep Dive, Lesson 1 of 7, Narration 2:29, D05 Domestic payment systems

SettlementCreditorReversal

What you will learn

Your objective. By the end of this lesson, you will be able to explain sdd core and b2b: two schemes, two risk profiles. A SEPA Direct Debit is a payment in which the creditor pulls funds from the debtor account, under a mandate that the debtor has signed in advance.

Why it matters. First, the debtor bank must check that a valid mandate exists before it allows a B2B collection, and it must refuse the collection if no mandate is on file.

Chapter objective: Mandates, collections, returns and refunds

Key learning points

  • SEPA Direct Debit
  • Mandate: legal basis for whole
  • Core: default scheme
  • Debtor must inform its bank that it
  • Jonas Weber signed a mandate online

Key terms

Settlement: The final movement of funds between banks to discharge obligations created by cleared payments. Settlement is usually made in central bank money or through correspondent accounts.

Creditor: The party that is owed money and receives a payment, such as a supplier, a seller or a service provider.

Reversal: A transaction that cancels a previous payment by posting an equal and opposite entry. Reversals are used to correct errors, such as a duplicate debit or a wrong amount.

Payment flow diagram showing SDD Core and B2B: Two Schemes, Two Risk Profiles.

Insights and practice scenarios

Worked insights and practice scenarios for this lesson. Each one is a reusable PaymentForge case, so the same case may appear in more than one lesson.

Practise this lesson

Exercise

Decide which settlement model fits the scenario in this lesson and explain why.

Use the settlement models, the liquidity trade-off and the finality rules in this lesson.

  1. What to do. Name the model, state when settlement becomes final, and explain what happens if the sending bank does not have enough liquidity.

Correct result. Real time gross settlement settles each payment individually in central bank money with immediate finality, but it needs liquidity for every payment. Deferred net settlement nets payments and settles the net position, which needs less liquidity but leaves settlement risk until the net settles.

Why. Settlement is where money actually moves. The model decides the risk, the liquidity need, and when the payment is truly final.

Check your understanding

Practice question

A utility company collects monthly bills by SEPA Direct Debit. A customer claims a debit was taken without authorisation. What is the key control the company must be able to show?

Takeaway and next step

What to remember

This reversal of the usual direction is what makes direct debits useful for recurring payments such as utilities, subscriptions and rent, because the creditor does not have to wait for the debtor to remember to pay.

Follow EUR 89.99 through every stage, from instruction to beneficiary credit, and note where it can stop.

Open the Payment Lifecycle Simulator →

Builds on "SCT Inst Becomes Mandatory, Schemes, Instruments and the SEPA Area Map".

Transcript and full text

Show transcript

A SEPA Direct Debit is a payment in which the creditor pulls funds from the debtor account, under a mandate that the debtor has signed in advance. The creditor initiates the collection, the debtor bank checks the mandate and the account, and the funds move from debtor to creditor on the due date. This reversal of the usual direction is what makes direct debits useful for recurring payments such as utilities, subscriptions and rent, because the creditor does not have to wait for the debtor to remember to pay. The mandate is the legal basis for the whole flow, and without a valid mandate the collection must not happen. The SDD Core scheme is the scheme for all debtors, including consumers, and it is the scheme used in our worked example. Under Core, a debtor can claim a refund within eight weeks of the debit, with no questions asked, and within thirteen months if the collection was unauthorised. That refund right protects consumers who may not notice a wrong collection immediately, and it means the creditor carries the risk that a collection can be reversed weeks after the money arrived. Core is the default scheme, and any creditor that collects from consumers must use it. The SDD B2B scheme is the scheme for business debtors only, and it works differently in three important ways. First, the debtor bank must check that a valid mandate exists before it allows a B2B collection, and it must refuse the collection if no mandate is on file. Second, the debtor has no eight week no questions asked refund right, so a business that wants its money back must agree the return with the creditor. Third, the debtor must inform its bank that it accepts B2B collections, and the bank must record that agreement. B2B suits businesses that want certainty that a collection will not be reversed, and it suits creditors that collect large amounts from other businesses. The worked example for this chapter is a monthly utility collection in Germany. Stadtwerke Linden, a municipal utility in Hanover, supplies electricity to a household customer named Jonas Weber. Jonas Weber signed a mandate online, authorising Stadtwerke Linden to collect EUR 89.99 each month from his account with Meridian Bank Munich. The mandate reference is SWL-JW-2026-0417, the creditor identifier is DE98ZZZ00001234567, and the collection is due on the first working day of each month. The next collection is due on Monday 2 November 2026, and this chapter follows it from mandate to settlement. Worked example with numbers: Stadtwerke Linden collects EUR 89.99 a month from Jonas Weber under the SDD Core scheme, and the collection is a pull payment, because the creditor initiates it and the debtor account is debited. Under Core, Jonas Weber can claim a refund within eight weeks of the debit with no questions asked, and within thirteen months if the collection was unauthorised. Under the B2B scheme, a business debtor cannot claim a refund at all, and the debtor bank must check that a valid mandate exists before it allows the collection. The difference matters because a utility that collects from consumers under Core must hold enough liquidity to fund refunds, while a supplier that collects from businesses under B2B can rely on the money staying put. Failure and recovery: the SDD scheme choice fails when a creditor uses the wrong scheme, and the failure is a collection that must be returned. If Stadtwerke Linden collects from a business customer under Core instead of B2B, the business can claim a refund within eight weeks, and the utility must return EUR 89.99 even though the collection was valid. If the utility collects under B2B from a consumer, the debtor bank must refuse the collection, because B2B is for business debtors only, and the collection never reaches the debtor account. The recovery is a new collection under the right scheme, but the utility has lost a month, and the customer must be told why the first collection failed. For a business analyst, product owner or subject matter expert, the scheme requirement must state the two schemes, Core for all debtors and B2B for business debtors only, and must state the refund rules for each, eight weeks and thirteen months for Core, no refund for B2B. The requirement must also state that the debtor bank must check the mandate before allowing a B2B collection, and must refuse it if no mandate is on file. The test pack must include a Core collection, a B2B collection, a Core collection claimed as a refund, and a B2B collection with no mandate, because each case exercises a different scheme rule. Source: EPC SDD Core Rulebook 2025; EPC SDD B2B Rulebook 2025; last reviewed 7 November 2026.

A SEPA Direct Debit is a payment in which the creditor pulls funds from the debtor account, under a mandate that the debtor has signed in advance. The creditor initiates the collection, the debtor bank checks the mandate and the account, and the funds move from debtor to creditor on the due date. This reversal of the usual direction is what makes direct debits useful for recurring payments such as utilities, subscriptions and rent, because the creditor does not have to wait for the debtor to remember to pay. The mandate is the legal basis for the whole flow, and without a valid mandate the collection must not happen.

The SDD Core scheme is the scheme for all debtors, including consumers, and it is the scheme used in our worked example. Under Core, a debtor can claim a refund within eight weeks of the debit, with no questions asked, and within thirteen months if the collection was unauthorised. That refund right protects consumers who may not notice a wrong collection immediately, and it means the creditor carries the risk that a collection can be reversed weeks after the money arrived. Core is the default scheme, and any creditor that collects from consumers must use it.

The SDD B2B scheme is the scheme for business debtors only, and it works differently in three important ways. First, the debtor bank must check that a valid mandate exists before it allows a B2B collection, and it must refuse the collection if no mandate is on file. Second, the debtor has no eight week no questions asked refund right, so a business that wants its money back must agree the return with the creditor. Third, the debtor must inform its bank that it accepts B2B collections, and the bank must record that agreement. B2B suits businesses that want certainty that a collection will not be reversed, and it suits creditors that collect large amounts from other businesses.

The worked example for this chapter is a monthly utility collection in Germany. Stadtwerke Linden, a municipal utility in Hanover, supplies electricity to a household customer named Jonas Weber. Jonas Weber signed a mandate online, authorising Stadtwerke Linden to collect EUR 89.99 each month from his account with Meridian Bank Munich. The mandate reference is SWL-JW-2026-0417, the creditor identifier is DE98ZZZ00001234567, and the collection is due on the first working day of each month. The next collection is due on Monday 2 November 2026, and this chapter follows it from mandate to settlement.

Worked example with numbers: Stadtwerke Linden collects EUR 89.99 a month from Jonas Weber under the SDD Core scheme, and the collection is a pull payment, because the creditor initiates it and the debtor account is debited. Under Core, Jonas Weber can claim a refund within eight weeks of the debit with no questions asked, and within thirteen months if the collection was unauthorised. Under the B2B scheme, a business debtor cannot claim a refund at all, and the debtor bank must check that a valid mandate exists before it allows the collection. The difference matters because a utility that collects from consumers under Core must hold enough liquidity to fund refunds, while a supplier that collects from businesses under B2B can rely on the money staying put.

Failure and recovery: the SDD scheme choice fails when a creditor uses the wrong scheme, and the failure is a collection that must be returned. If Stadtwerke Linden collects from a business customer under Core instead of B2B, the business can claim a refund within eight weeks, and the utility must return EUR 89.99 even though the collection was valid. If the utility collects under B2B from a consumer, the debtor bank must refuse the collection, because B2B is for business debtors only, and the collection never reaches the debtor account. The recovery is a new collection under the right scheme, but the utility has lost a month, and the customer must be told why the first collection failed.

For a business analyst, product owner or subject matter expert, the scheme requirement must state the two schemes, Core for all debtors and B2B for business debtors only, and must state the refund rules for each, eight weeks and thirteen months for Core, no refund for B2B. The requirement must also state that the debtor bank must check the mandate before allowing a B2B collection, and must refuse it if no mandate is on file. The test pack must include a Core collection, a B2B collection, a Core collection claimed as a refund, and a B2B collection with no mandate, because each case exercises a different scheme rule. Source: EPC SDD Core Rulebook 2025; EPC SDD B2B Rulebook 2025; last reviewed 7 November 2026.

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