Digital Payment: management of SEPA/SEDA Payments in a real case

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digital payment

Digital transformation is revolutionizing the banking sector, because it involves a process of corporate restructuring, both with reference to the internal organisation, the skills of the staff and the tools used, as well as the methods of interaction with customers.

In particular, in recent years we have been witnessing a real “explosion” of digital payment, which represent more flexible and effective money transfer tools.

In this article we will delve deeper into how SEPA/SEDA Payments work, illustrating a software platform created for one of Revelis’ customers.

What are Digital Payments

Digital payments are transactions made via digital or online methods, without any exchange of cash involved. Such payment, also sometimes called electronic payment (e-payment), is the transfer of value from one payment account to another in which both the payer and the payee use a digital device such as a mobile phone, computer, credit card , debit or prepaid. The payer and payee can be a company or an individual.

This means that for digital payments to take place, both the payer and the payee must have a bank account, an online banking method, a device from which they can make the payment and a means of transmission, which means both should be registered to a payment service provider or to an intermediary such as a bank or service provider.

SEPA (Single Euro Payments Area) is the single area in which citizens, businesses and institutions can make and receive payments in Euro, within national borders and between the different countries that make up the SEPA area with conditions basic, uniform rights and obligations between the countries themselves.

Payment hub in real case: SEDA and SDD

With reference to digital payment, Revelis has created, for a service center operating at a European level, a software platform to facilitate the exchange of information in the context of SEDA and SDD payments.

But what do we mean when we talk about SEDA? Let’s look at it specifically.

The SEDA (Sepa Electronic Database Alignment) service is an additional optional service of the Sepa direct debit schemes defined by the Italian banking community which consists in the exchange between the creditor company and the debtor’s bank, through the Alignment Bank, of electronic flows relating to the information contained in the Sepa mandates .

The subjects involved are the following:

• Beneficiary

• Alignment PSP (Payment Service Provider)

• Payer PSP

• Payer

The exchange of SEDA messages takes place through authorized parties in File transfer transmission mode based on the ISO 20022 “Payments Mandate” standard (XML language).

All PSPs participating in the SDD Core Scheme can join the SEDA service. A specific procedural registry of participating PSPs, called SED000, is used to manage and address messages.

Beneficiaries who make use of the SEPA Direct Debit schemes (Core and/or B2B) can join the SEDA service, in “Basic” or “Advanced” mode, on an optional basis. For the purposes of joining the service, the Beneficiaries sign a specific contract with an Alignment PSP and provide the following information:

the Creditor Identifier code(s) that they will use to be uniquely identified as part of their operations in the SEDA service;

the operating mode for joining the service, “Basic” or “Advanced”, for each of the Creditor Identifier codes indicated.

This information will allow the Beneficiary to be registered with a specific procedural registry (CRI000).

Seda Service delivery methods

The types of actions by the beneficiary and the payer, according to the membership methods, are:


Initiative of the beneficiary
Request for domiciliation of new mandateRequest for domiciliation of new mandate
Request to change the mandateRequest to change the mandate
Communication cancellation of the mandateCommunication cancellation of the mandate
Payer initiativeRequest for domiciliation of a new mandate:
– verification at the counter of the subscriber’s personal details and signing powers; dematerialization of paper mandate; – registration of the mandate in a database;
– electronic sending of dematerialized mandate data; archiving and conservation of the form (up to 13 months following revocation);
– management of disputes with the paying customer in the event of disputes over unauthorized charges.
Reports of changes to the mandateReports of changes to the mandate
Cancellation notification mandateCancellation notification mandate
Additional controls on charges SEPA direct contracts based on mandates SEDAAdditional controls on charges SEPA direct contracts based on mandates SEDA

Digital payment: SDD (Sepa Direct Debit)

SDD is the European collection tool for digital payment that replaced the RID product (ordinary or fast). Sepa Direct Debit (SDD) allows, under the same conditions, the accessibility of all bank accounts in the Sepa area that allow direct debit.

Sepa Direct Debit is activated exclusively by the Creditor pursuant to a mandate received from the Debtor. The mandate is the document, paper or electronic, signed by the debtor and which authorizes the creditor to send collection instructions to the debtor’s current account.

The product includes two distinct schemes:

“Core” SDD, which can be used by the creditor both towards customers classified by their bank as consumers and towards debtors classified by their bank as non-consumers (category to which Micro Enterprises and Businesses and Commercial Companies belong).

SDD “Business to Business” (B2B), which can be used by the creditor exclusively towards debtors who qualify as non-consumers.

The process that follows an SDD flow involves an exchange of XML files according to a precise standard.

The online service bank sends an XML collection instruction file pacs.003.001.02 to the receiving bank, which is routed to the payments hub. The payment is accepted and posted, then a transaction is scheduled for the settlement date indicated in the pacs.003.001.02 message. At this point the transaction will be visible in the list of pending transactions, but not yet registered as such on the customer’s account.

On the day of collection, a transaction is created from the payer’s bank to the creditor’s bank using the IBAN reported in the pacs.003 message. If the transaction fails, the payment status will remain in a pending state and further attempts will be made later. If the account has sufficient funds, the payment status will change and the settlement date will be recorded.

A direct debit may be rejected or reversed. SEPA distinguishes here whether this occurs before or after the execution and who is the initiator. Four different cases can be distinguished:

Rejection: the debtor’s bank immediately rejects the transaction; if the recipient’s bank rejects the transaction, e.g. since the account does not have a sufficient limit, this is sent as a pacs.002 message. This type of rejection occurs before the expiration date.

Cancellation: the creditor recalls the direct debit before it is executed, in fact, it or its bank can cancel a direct debit before the settlement date. The cancellation then takes place via camt.056 message.

• Reversal: the creditor refunds a direct debit made, in fact, if an SDD has already been made it can be refunded by the creditor via pacs.007. The process refers to a previous pacs.003. It is important to specify that a cancellation cannot be canceled and can overlap with a refund

Refund: the debtor refuses an executed SDD, in fact, the customer can object to a direct debit, for example because he believes that this is unjustified. The format associated with this type of transaction is pacs.004.

Payment hub: the advantages of digital payment

The advantages of using a solution of this type are many:

• Payment Processing: The payment hub is responsible for processing a wide range of payments, including credit card transactions, bank transfers, funds transfers and mobile payments. This system facilitates the movement of money between those who pay and those who receive the payment.

Centralization: The payment hub centralizes payment-related functions, including payment initiation, routing, authorization, conciliation and settlement. Through this centralization, organizations can reduce complexity and improve the efficiency of payment processes.

Integration: Payment hubs often integrate with various payment channels and systems, such as POS, e-commerce platforms, mobile apps and financial institutions. This allows businesses to accept payments from multiple sources and offer flexibility to their customers.

• Security: Security is a crucial aspect of payment processing. Payment hubs implement robust security measures, including encryption, tokenization, multi-factor authentication and fraud detection, to protect sensitive financial data and prevent unauthorized access.

Regulatory compliance: Payment hubs must comply with regulatory requirements and industry standards, such as the Payment Card Industry Data Security Standard (PCI DSS), anti-money laundering (AML) rules, and identity validation procedures of the customer (KYC). Compliance features are built into payment hubs to ensure transactions meet legal and regulatory standards.

• Reporting and analytics: Payment hubs often provide reporting and analytics tools that offer insights into payment trends, transaction volume and financial performance. This information can help organizations make data-driven decisions and optimize their payment strategies.

• Cost Reduction: By automating and streamlining payment processes, payment hubs can help organizations save time and reduce operational costs related to payment processing, manual data entry and error correction.

• Scalability: Payment hubs are designed to handle a high volume of transactions and can be scaled as your business grows.

In summary, a payment hub is a critical component in the modern financial ecosystem, allowing businesses to efficiently manage payments and financial transactions.


The digitalisation of processes is, nowadays, a pervasive phenomenon that affects all production sectors of our society.

The evolution towards computerized procedures acquires a strategic value in operational contexts characterized by greater dynamism, and in particular in the context of financial institutions and banks, which over the years have made significant investments to adapt the provision of their services on the basis of application infrastructure based on Information Technology.

This transformation has made it possible to make innovative payment tools available to end users which, by exploiting the potential of the web, enable the transfer of money from one part of the planet to another with just a few clicks and without the need to physically go to the branches banking.

Within these payment instruments, a leading role is played by SEDA mandates and SDD debits.

For Revelis, working in a context of this type is very stimulating and challenging and has allowed it to expand its know-how relating to the processes of creating services in the banking sector.

Author: Emanuela Tarantino, Carmelo Pitrelli, Franco Luigi Garofalo, Domenico Rodilosso

Do you want more information on Revelis solutions? Contact us at info@revelis.eu