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Direct debit

Overview

Direct debit is initiated by a creditor to take funds from a debtor's account. Common creditors who use direct debit include utility companies and real estate rental agencies.

At Swan, direct debit works in two directions. Swan can receive instructions for an outgoing direct debit (discussed on this page). Additionally, Swan can initiate incoming direct debit, either for merchants to accept payments or to fund your own account.

Swan supports several types of outgoing direct debit. Note the acronyms; while the documentation doesn't use them, the acronyms are sometimes present in the API and used in written and verbal communication.

Direct debit typeDescriptionAcronym
SEPA Direct Debit CoreIssued by companies to individual or company accounts in euros between accounts in the Single Euro Payments Area (SEPA).SDD Core
SEPA Direct Debit B2BIssued by companies to company accounts in euros between accounts in SEPA.SDD B2B
Swan Internal Direct Debit StandardIssued by a Swan company account to individual or company accounts within the same Swan project.IDD Standard
Swan Internal Direct Debit B2BIssued by a Swan company account to company accounts within the same Swan project.IDD B2B
Swan Internal Direct Debit

Some use cases require that direct debit transactions occur between two Swan accounts in the same project. For example, perhaps you want to receive fees directly from your user's Swan account.

For Internal Direct Debit, Swan is the creditor bank, the Clearing and Settlement Mechanism (CSM), and the debtor bank. Internal Direct Debit doesn't pass through the SEPA network. Instead, these transactions must follow the rules defined by France's Code Monétaire et Financier.

Specifications

SpecificationsSEPA Core & Internal StandardB2B
Eligible account typesIndividual and company accounts (natural or legal persons)Company only (legal persons)
Refund requested by debtorUp to 8 calendar weeks after execution, no questions asked

Up to 13 months after execution if there wasn't a valid mandate or if the payment wasn't authorized
Not possible
Returned by debtor's bankIf Swan can't accept the outgoing direct debit, a rejected SDD-Out transation is created (example: invalid mandate, account closed).
Mandate provided to and registered by the debtor's PSPNot requiredMandatory
Validity of the mandate (consent) confirmed with the debtor by the debtor's PSP for each transactionNot requiredMandatory
Refusal and rejection timelineUp to the date and time of settlement execution
Creditor cancellationUp to the due date and time
Creditor reversalUp to 5 business days after due date and time
FrequencyOne-off and recurrent

PSP stands for payment services provider.

Received payment mandates

Prior to issuing SEPA Direct Debit instructions, the creditor must obtain a formal authorization from the debtor to take money from the debtor's account. This formal authorization is a received payment mandate. Received payment mandates can be one-off, valid for a single transaction, or recurrent, for multiple transactions.

Received payment mandates are created by creditors and authorized by debtors. Creating and authorizing mandates happens off of the SEPA network, and the mandates must be declared to the SEPA network with two unique identifiers:

  1. Unique Mandate Reference (UMR): Each received payment mandate has a unique reference number.
  2. SEPA Creditor Identifier (SCI): Each creditor is identified on the SEPA network with their unique identifier.

The combination of the SEPA Creditor Identifier and Unique Mandate Reference must be unique across the SEPA network, meaning one received payment mandate per creditor-debtor pair. Information about the received payment mandate is embedded in each SEPA Direct Debit instruction sent by the creditor bank to the debtor bank.

Received payment mandates are stored in the API's receivedDirectDebitMandate object.

Received mandate specifications

The specifications of the received payment mandate depend on whether the mandate authorizes Core or B2B SEPA Direct Debit instructions. All are signed by the debtor; otherwise, requirements are different.

Direct debit typeSpecifications
SEPA Direct Debit Core
  1. Core received payment mandates don't need to be provided to Swan (or the creditor's bank).
  2. Swan isn't required to verify a mandate's validity with the debtor.
  3. The debtor is entitled to a refund of an authorized debit, no questions asked, according to the timeline listed in the specifications table.
SEPA Direct Debit B2B
  1. B2B received payment mandates must be provided by the debtor to Swan.
  2. Swan must validity of the instruction against the mandate or mandate information received from the debtor.
  3. The debtor isn't entitled to a refund of an authorized debit.
Swan Internal Direct Debit Standard
  1. Internal received payment mandates are handled within Swan.
  2. Swan isn't required to verify a mandate's validity with the debtor.
  3. The debtor is entitled to a refund of an authorized debit, no questions asked, according to the timeline listed in the specifications table.
Swan Internal Direct Debit B2B
  1. Internal received payment mandates are handled within Swan.
  2. Swan must check the validity of the instruction against the mandate or mandate information received from the debtor.
  3. The debtor isn't entitled to a refund of an authorized debit.

Received mandate statuses

Payment mandate statusExplanation
ConsentPendingB2B received payment mandate was added while setting up a direct debit.

Next steps:
  • If the debtor consents to the mandate, the status moves to Enabled
  • If requested by the debtor, the status moves to Suspended
  • If the debtor doesn't consent to the mandate, the status moves to Canceled.
Core received mandates never have the status ConsentPending.
EnabledReceived payment mandate is valid and direct debit instructions can be fulfilled.
SuspendedDebtor requested the received payment mandate be suspended.

For example, you want to stop a creditor from taking money from the account temporarily, and you'll inform Swan when to change the status back to Enabled.
CanceledReceived payment mandate is canceled and no longer available for use. Note that Swan cancels OneOff mandates automatically after they're used.

Received direct debit instructions

To start a SEPA Direct Debit transaction, the creditor's bank must send instructions to the debtor's payment services provider—in this case, Swan—before the scheduled transaction date. The date should be indicated in the instruction sent to Swan.

After receiving instructions to debit an account, Swan checks the embedded mandate information to see if it's a new instruction, or if Swan already knows about the instruction.

New instruction

If the instruction is new to Swan, the following events occur:

  1. Swan adds the SEPA Direct Debit received payment mandate:
    • Core: Adds the mandate with the status Enabled.
    • B2B: Adds the mandate with the status ConsentInitiationPending. After the debtor consents to the mandate, the status changes to Enabled.
  2. Swan creates a SepaDirectDebitOut transaction with the status Upcoming.
  3. Swan executes the transaction on the requested date, indicated in the instruction, if all checks pass (refer to execution date and time).

Known instruction

If the instruction is known to Swan, Swan checks the received payment mandate's status.

  1. If the mandate's status is Enabled, Swan creates a SepaDirectDebitOut transaction with the status Upcoming.
  2. If the mandate's status is Canceled or Suspended, Swan creates a SepaDirectDebitOut transaction with the status Rejected.

Execution date and time

At 6 AM Central European [Summer] Time (CET/CEST) on the date indicated in the SEPA Direct Debit instruction, Swan verifies a few details before executing the debit.

If either of the following is true, the instructions are rejected. The SepaDirectDebitOut transaction status changes to Rejected, and the reason is available in the rejectedReasonCode field with the API.

  • The status for the received payment mandate, the account, or the debtor's IBAN is anything other than Enabled.
  • The debtor account's Available balance won't cover the instructed amount.

If the received payment mandate's status is Enabled and the Available balance is sufficient to cover the instructed amount, the transaction continues and the following events occur:

  1. The amount is debited from the account.
  2. The account's Available balance is updated accordingly.
  3. The SepaDirectDebitOut transaction status changes to Booked.

Direct debit statuses

Account balances

There's a close link between transaction statuses and account balances. Refer to explanations of types of account balances in the accounts section.

Direct debit transaction statusExplanation
UpcomingTransaction is created after passing Swan's preliminary checks (for example, if the mandate already exists, it's valid; the account isn't closed). Upcoming debits don't impact the account balance.
BookedCompleted debits that are displayed on the official account statement. These debits have been debited from the account, and they impact the account's Booked balance.
CanceledAn Upcoming transaction is canceled by someone with the right to do so, such as the account holder or an account member. Only debits with the status Upcoming can be Canceled, and Canceled debits don't impact the account balance.
RejectedDeclined or refused debits. For example, the beneficiary account might be closed, or the account's Available balance isn't sufficient to complete the debit without resulting in a negative balance.

A transaction can also be Rejected without being assigned any other status if the transaction didn't pass the initial checks (examples in Upcoming).

R-transactions

After direct debits are instructed, other transactions, such as R-transactions, can be linked to the direct debit transaction.

Rejected

If you need to request that an Upcoming SEPA Direct Debit (Core or B2B) instruction be Rejected, a qualified account member can contact Swan directly. Qualified account members are those with the CanInitiatePayments membership permission.

If your request to reject the transaction is accepted, the status changes from Upcoming to Rejected. Rejected transactions don't impact the account balance.

Refunded

If you need to request a refund for a Booked SEPA Direct Debit Core transaction, a qualified account member can contact Swan directly. Qualified account members are those with the CanInitiatePayments membership permission. Confirm you're within the time window allowed.

If the refund is approved, a new SepaDirectDebitOutReturn transaction is created with the status Booked.

Reversed

Creditors can reverse Booked SEPA Direct Debit transactions within a specific time window. In the case of a reversal, a new SepaDirectDebitOutReversal transaction is created with the status Booked.

Canceled

Creditors can cancel Upcoming SEPA Direct Debit transactions.

If a creditor cancels an Upcoming transaction, the status automatically changes to Canceled. Canceled transactions don't impact the account balance.

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