SEPA Direct Debit and why you should care

If you are not fundraising in any of the Single European Payment Area countries, feel free to skip this blog -- unless you want to discover how the amazing CiviCRM community is building support for what is becoming Europe's most important recurring payment instrument.

Do you know what direct debit means ? Don't feel bad admitting it. A direct debit transaction is a payment that is initiated by the receiver, not the sender. In practice, a donor gives you permission to ask his/her bank to transfer money into your bank.

Fundraising using direct debit is interesting because once your donors gives you the permission, they don't need to do anything : your job is to create the next debit instruction for every agreement you have, send them to the service provider who processes them (which could be your own bank or another company) and manage the exceptions that will occur (like your donors having insufficient balance in their account). Donors will feel it's not worth taking the effort to cancel the agreement (and feeling bad about it), so direct debit-based recurring donations tend to have a looooong life.

SEPA was created to help facilitate funds transfer between member states. Its first accomplishment was SEPA Credit Transfer. For example, my bank account was called 778-5915387-91, which makes absolutely no sense to my Irish and Ukranian fans who want to send me money. Thanks to SEPA, my bank account is now called BE23 7785 9153 8791, its IBAN number, and anyone in a SEPA country can transfer funds to me. It took banks quite a bit of effort to put this in place, but I'm told you can currently yell 'IBAN !' in any bank's IT department without people jumping behind the nearest desk.

Recurring payments across Europe were still a pain though. Most countries had some sort of local instrument, like the Dutch machtiging or the Belgian domiciliëring, which were pretty useless if you wanted to support a Portuguese dog kennel or a Lithuanian orphanage, since they tended to be off-limits to non-national bank accounts. SEPA Direct Debit was designed to provide a single system across Europe, based on IBAN bank account numbers, which would replace all national systems in time. Note the last two words of the previous sentence : while some countries (like Belgium) have been operating SDD for over two years, other member states are frantically trying to get ready before the April 2014 deadline.

SEPA Direct Debit isn't easy for most non-profits, because of its administrative and technical requirements. You need to sign an agreement with the bank which will process your payment requests (yes, only one single bank for all of Europe will do), manage the agreements (called mandates in SEPAese) and submit the payment requests for all of the mandates in a rather complex XML format. Banks have small teams of knowledgeable folk, which typically aren't the ones non-profits talk to. Technical staffing and IT capability generally aren't abundant in non-profits. But the advantages are many : SDD provides a reliable, flexible and versatile payment instrument for single and recurring donations. So many organisation were stuck in the middle …

The CiviCRM community took notice of the issue. A number of CiviCRM integrators, being queried by their customers for a solution, decided to build a CiviCRM extension to support SEPA Direct Debit. The end result will be an open source extension, free for everyone to download, install and use. So if you're a CiviCRM user, you would be able to setup recurring SDD payments easily, generate the XML with a click of a button, and run  a recurring donation stream without going through the technical hassle. The Project 60 team working on this is targeting late June of 2013 for a first release, with current customers acting as pilot users as well as funders for the initiative. There's also a Make It Happen initiative for this extension.

Soon, you'll be able to install this extension and

* offer SEPA Direct Debit as a payment option on a contribution page
* import SDD mandates generated by face-to-face and other fundraising channels
* automatically generate the required payment requests
* generate the XML needed to sublit the payments to the bank
* follow up on mandate and payment status, integrated in the contributions tab of your contact view

You can help make this happen by supporting the MIH for this extension. For more information, contact the MIH coordinator or any of the Project 60 members.