Life-cycle of a SEPA Direct Debit (SDD) Message

SEPA Direct Debit (SDD) is a Europe-wide Direct Debit system that allows merchants to collect euro payments from accounts. Regular payments, such as subscriptions and bills, use SDD (SEPA Direct Debits).

SDD works as follows: the merchant issues a mandate with all the details about the direct debit. Once the debtor agrees, the merchant pulls the payments on a regular basis, notifying them 14 days before the payment is due.

The merchant controls the entire payment process. They issue the SEPA Direct Debit mandates, they notify the customer and they are the ones to pull the payments whenever they are due.

SEPA Direct Debit Payment Scheme

The European Payments Council has created two SDD schemes, one designed primarily for consumers (SDD Core), one exclusively for businesses (SDD B2B).

  • SDD Core. Designed primarily for consumers. Mandatory for all banks offering Euro-denominated Direct Debits
  • SDD B2B. Optional scheme offered exclusively for business. Not all banks are able to offer it.

The following describes the flow of messages between debtor and creditor

SEPA Direct Debit Message Flow

  • Pain.002 – is a payment status report indicating acceptance or rejection of SEPA Direct Debit
  • Pacs.003 – a direct debit request posted by a client to a direct participant.
  • Pain.008 –  direct debit initiation request.
  • Pacs.002 – Status Report message – is sent by an instructed agent to the previous party in the payment chain. It is used to inform this party about the positive or negative outcome of a payment instruction. 

Pain.008 Message

The Pain.008 message initiates a direct debit and is part of the ISO-20022 message format. It is used to request single or bulk collection(s) of funds from one or various debtor’s account(s) for a creditor. It is sent by the initiating party to the forwarding agent or
creditor agent.

Pain.008 is the initiation message for the SDD message flow. You can download the Pain.008 Message Definition Report and XML Schema from here.

Pain.008 will contain one or more direct debit instructions.

Building blocks of Pain.008

GroupHeader

A Pain.008 will contain a GroupHeader which contains the common characteristics of all individual transactions included in the message.

Pain.008 GroupHeader

The GroupHeader contains the following elements:

  • Message Identification – unique identifier for the message
  • Creation Date and Time – message creation date and time
  • Number of Transactions – total number of individual payment transactions
  • Control Sum – sum of control amounts of all the transactions within the message
  • Initiating Party – initiating party that initiated the payment transaction
  • Batch Booking – indicates whether the payments in the message should be booked as a batch or individually.
  • Payment Category Purpose – category of the payment transactions

PaymentInformation

A Pain.008 will contain a PaymentInformation block which provides information on individual payment transactions within the message.

Pain.008 PaymentInformation
Payment Information

The PaymentInformation element will contain the following elements:

  • Payment Information Identification – unique identifier for the payment information
  • Payment Method – payment execution method i,e direct debit.
  • Payment Type Information – provides additional details about the type of payment
  • Requested Execution Date – provides requested date for the payment transaction execution.
  • Debtor – party initiating the payment
  • Creditor – party receiving the payment
  • Amount – currency and monetary value of the transaction
  • Remittance Information – provides additional information related to the payment

Pacs.003 Message

The creditor agent sends the Pacs.003 message to the debtor agent, either directly or through other agents and/or a payment clearing and settlement system.

The Pacs.003 is a financial institution to financial institution customer direct debit message. It can contain 1 or many customer direct debit instructions.

A creditor bank will initiate the Pacs.003 in response to a Pain.008 direct debit initiation request to collect funds from a debtor account for a creditor. You can find the XML Schema and Message Definition Report here.

Pacs.003 overview
Pacs.003 flow

The Pacs.003 will contain:

GroupHeader


All transactions in the message share a set of common elements within the GroupHeader. It will contain the following elements:

  • Message Identification – A unique identifier assigned to the entire group of payment cancellations within the message
  • Creation Date and Time – Date and time of the creation of the payment cancellation message
  • Number of Transactions – The total count of payment cancellation instructions included in the group
  • Original Group Identification – The identification of the original group of payment instructions to which the cancellation instructions belong. It links the cancellation instructions to the original payment instructions
  • Original Message Identification: The identification of the original payment instruction within the original group to be cancelled. It specifies the specific payment instruction targeted for cancellation

DirectDebitTransactionInformation

The DirectDebitTransactionInformation will contain information about each direct debit transaction.

  • Mandate Identification: A unique identifier assigned to the direct debit mandate authorizing the payment that is being canceled.
  • Creditor Scheme Identification: Specifies the scheme or system used for the direct debit payment
  • Original Debtor Account: Debtor account which the original direct debit payment debited
  • Original Creditor Account: Creditor account which the original direct debit payment credited.
  • Original Payment Information: The cancellation of the original direct debit payment includes the payment amount, payment date, and any additional payment details.
  • Cancellation Status: Indicates the status of the cancellation instruction, such as accepted, rejected, or pending
  • Cancellation Reason Information: Provides additional details or reasons for the cancellation status

SEPA Credit Transfer Overview

A SEPA Credit Transfer (SCT) is a payment instrument which facilitates the transfer of funds from the sending or originating bank to the receiving or beneficiary bank.

They generally used for once off payments and clear within a day. To send/receive a SEPA Credit Transfer, the originating and beneficiary banks must be SEPA participants.

Debtors and creditors use SCT Transfers conducted in Euro currency, which include IBANs and BICs for identification.

A SEPA Credit Transfer(SCT) involves the exchange of a number of messages between a debtor, their bank, the clearing and settlement (CSM) exchange and the beneficiary bank.

The SCT relies on 4 actors:

  • Originator, i.e the person making the payment
  • Originating bank, i.e the bank which contains the account of the originator
  • Beneficiary, i.e. the person receiving the payment
  • Beneficiary bank, i.e the bank which contains the account of the beneficiary
SEPA Credit Transfer

The originator and beneficiary use different ISO 20022 messages to initiate and complete the credit transfer. These messages are categorised as follows:

  • Payment Initiation (Pain). Sent/received between the customer and their respective banks.
  • Payment Clearing and Settlement (Pacs). Sent/received between the originating/beneficiary banks and the CSM.
  • Cash Management (Camt). Sent to the originator/beneficiary to inform them of their account balances as a result of payment transaction.

Pacs.008 Message

The Pacs.008 message belongs to the Payment Clearing and Settlement family of messages. The Pacs messages are used within the bank to bank interface.

Pacs.008 is sent by the debtor agent to the creditor agent, directly or through other agents and/or a payment clearing and settlement system. It is used to move funds from a debtor account to a creditor account.

The actual movement of funds will only happen after the clearing and settlement process. Each pacs.008 will have a settlement date which is the date when the transfer will take place.

Pacs.008 message flow
Pacs.008

The XML Schema and Message Definition Report can be found here.

Building blocks of Pacs.008 Message

The Pacs.008 message comprises of 3 blocks:

  • GroupHeader – contain all the common characteristics of all transactions contained within the Pacs.008.
  • CreditTransferTransactionInformation – set of elements providing information specific to the individual credit transfer(s).
  • SupplementaryData – contains additional information that cannot be captured in CreditTransferTransactionInformation or GroupHeader blocks.

Pacs.004 Message

Overview

The beneficiary bank uses the pacs.004 message to trigger the return of a settled payment. One possible reason for the return of a settled payment is that the beneficiary bank account no longer exists.

The pacs.004 message must identify the returned payment. The UETR (Unique End-to-end Transaction Reference) and the end-to-end-id identify the payment a pacs.004 refers to.

Building Blocks of the Pacs.004

Like other payment messages in ISO20022, the pacs.004 contains 2 main parts. You can find the definition of the pacs.004 schema and its message definition report here.

GroupHeader

The GroupHeader will contain the set of characteristics that are common to all transactions contained in the pacs.004.

The most important of these is the MsgId which used to uniquely identify the message. It is mandatory and must be unique

GroupHeader Pacs.004

Transaction Information

The transaction information sections of the pacs.004 will contain all of the information used to identify the transactions that are being returned. There are a number of mandatory elements which must be present.

  • RtrId – Unique identification, as assigned by an instructing party for an instructed party, to unambiguously identify the returned transaction.
  • OrgnlEndToEndId – Unique identification, as assigned by the original initiating party, to unambiguously identify the original transaction
  • OrgnlUETR – Universally unique identifier to provide the original end-to-end reference of a payment transaction
  • OrgnlInstrId – Unique identification, as assigned by the original instructing party for the original instructed party, to unambiguously identify the original instruction.
Transaction Pacs.004

Pain.001 Message

Overview

The Pain.001 message is initiates a SEPA Credit Transfer. It is sent by an initiating party to the debtor/forwarding agent to request the transfer of money from debtor to creditor. It is the initiation message for the SCT flow.

Like all, ISO-20022 messages, Pain.001 is specified in XML.

The XML Schema and Message Definition Report can be downloaded here.

The Message Definition Report will additionally specify business rules governing the relationships between elements in the pain.001.

Pain.001 will contain one or more credit transfer instructions.

Building blocks of Pain.001 message

GroupHeader

The GroupHeader block will contain all the common characteristics of all transactions contained within the Pain.001.

GroupHeader pain.001

The most elements within the GroupHeader are:

  • MsgId – This is a unique identifier identifying all payments within the message.
  • CreDtTm – this indicates the creation date and time of the message.
  • NbOfTxs – this indicates the number of transactions contained within the message.

PaymentInformation

The PaymentInformation block will contain all the common characteristics that apply to the debit side of the payment transactions included in the credit transfer

PaymentInformation pain.001

The PaymentInformation block will contain information such as:

  • Debtor Agent – contains information about the financial agent acting on behalf of the debtor
  • Creditor Agent – contains information about the financial agent acting on behalf of the creditor.
  • Amount – specifies the value of this payment.
  • Payment Identification – unique identifier used to identify the payment transaction.
  • Remittance Information – contains additional information regarding the purpose of the payment
  • Payment Method – indicates the payment type such as Credit transfer or direct debit.
  • Payment Type Information – provides details about the purpose of the payment

SupplementaryData

The supplementary data element contains additional information not captured in PaymentInformation or GroupHeader blocks. It can include non-standardised information related to the payment.

SEPA Credit Transfer in Detail

When a SEPA Credit Transfer the originator exchanges a series of messages with the beneficiary through the originating and beneficiary bank and CSM.

The following diagram indicates this flow of messages.

SEPA Credit Transfer in detail

Customer to Bank Messages (PAIN)

A customer will send Payment initiation (Pain) message(s) to their bank to initiate a payment. Pain messages are customer to bank messages.

MessageDescription
pain.001This is the payment initiation message. Used to initiate the credit transfer. For more information see here
pain.002This message is used to inform a customer whether their transaction was successful or not. For more information see here

Cash Management Messages (CAMT)

Customers receive their cash management reports from banks using the Cash Management (CAMT) family of messages.

MessageDescription
Camt.052This message is the account report. It used to inform the customer of their account balances after a transaction.
Camt.053This message serves as the account statement. Additionally, it will include an opening and closing balance, along with the details of processed transactions. For more information see here
Camt.054This message is used to inform a customer about a debit or credit on their account. For more information see here
Camt.056This message is used by the originator bank to recall an SCT. For more information see here
Camt.029This message is used by the beneficiary bank to inform the originator bank that their request to recall the SCT has been denied. For more information see here

Interbank Messages (PACS)

Banks use Payment and Clearing messages (PACS) to settle and clear funds.

MessageDescription
Pacs.008This message facilitates the movement of funds from the originating bank to the beneficiary bank. For more information please see here
Pacs.002This message represents a payment status report message. For more information please see here
Pacs.004This message is used to undo a payment that has already been settled. It is issued by the beneficiary bank. In general, there are a number of reasons for this to occur, such as the account being previously closed at the beneficiary bank. Moreover, this message is also utilized to indicate that a recalled SCT has been successful.

Pain.002 Message

The Pain.002 message is a status message and is part of the Payment Initiation family of messages within ISO 20022.

It is sent by an instructed agent to the previous party in the payment chain. It is used to inform the party about the success/failure of payment request.

The definition of the pain.002 schema and its message definition report can be found here

pain.002 overview

Building blocks of Pain.002

GroupHeader – contains all the common characteristics of all transactions contained within the Pain.002. The GroupHeader will contain the following elements:

  • Message Id: A unique identifier assigned to the message group or batch.
  • Creation Date and Time: The date and time when the message was created.
  • Number of Transactions: The total count of individual transactions included in the message.
  • Initiating Party: Information about the party initiating the message such as their name, address, and account details.
  • Message Id of the original Pain.001 Message: If the pain.002 message is a response to a pain.001 message, it may contain the message identification of the original pain.001 message to which it refers.

OriginalGroupInformationAndStatus – Original group information concerning the group of transactions, to which the status report message refers to. The OriginalGroupInformationAndStatus will contain the following elements:

  • Original Message Identification: The unique identifier assigned to the original message.
  • Original Creation Date and Time: The date and time when the original message.
  • Number of Transactions: The total count of individual transactions included in the original message.
  • Initiating Party: Information about the party who initiated the original message, such as their name, address, and account details.
  • Original Message Name Identification: The identification of the original message, such as pain.001, camt.056, or other relevant message types.

OriginalPaymentInformationAndStatus – Information concerning the original payment information, to which the status report message refers.

  • Original Payment Information: Includes details about the original payment, such as the payment amount, currency, payment date, payment method, and other relevant payment-related information.
  • Payment Status: Indicates the status of the original payment, providing information on whether the payment was successfully processed, partially processed, or rejected.
  • Transaction Information: Provides additional details about the specific transaction within the original payment, such as a unique identifier for the transaction, the debtor and creditor involved, and any related payment references.

Pacs.002 Message

The Pacs.002 message is a payment status report message used in ISO 20022. It is sent by an instructed agent to the previous party in the payment chain indicating the status of the payment instruction. It will indicate whether a payment was successful or not.

The Pacs.002 can provide status information on:

  • Credit Transfer instruction
  • Direct Debit instruction
  • Cancellation requests.

The XML Schema and Message Definition Report for Pacs.002 can be downloaded from here.

Pacs.002 message
pacs.002

Building blocks of Pacs.002 Message

GroupHeader

Set of characteristics shared by all transactions in the status report. The GroupHeader contains the following elements:

  • Message Identification: A unique identifier assigned to the message group or batch for tracking and referencing purposes.
  • Creation Date and Time: The date and time when the message group or batch was created.
  • Number of Transactions: The total count of individual transactions included in the message group or batch
  • Initiating Party: Information about the party initiating the message group or batch, such as their name, address, and account details.
  • Message Identification of the original pacs.008 message

OriginalGroupInformationAndStatus

Original group information concerning the group of transactions, to which the status report message refers to. It contains the following elements:

  • Original Message Identification: The unique identifier assigned to the original message.
  • Original Creation Date and Time: The date and time when the original message was created.
  • Number of Transactions: The total count of individual transactions included in the original message.
  • Original Initiating Party: Information about the party who initiated the original message group or batch, such as their name, address, and account details.
  • Original Message Name Identification: The identification of the original message, such as pacs.008 or other relevant message types.
  • Status: The status of the original message indicating whether it was successfully processed, partially processed, or encountered any errors or rejections.

TransactionInformationAndStatus

Information concerning the original transactions, to which the status report message refers. It contains the following elements:

  • Transaction Identification: A unique identifier assigned to the transaction.
  • Payment Information: Details about the payment, such as the payment amount, currency, payment date, and other relevant payment-related information.
  • Status: The status of the transaction, indicating whether it was successfully processed, partially processed, or encountered any errors or rejections.
  • Status Reason Information: Additional information regarding the status of the transaction, providing more context or explanation for the status code or status description.