SEPA Direct Debit Background
Launched in November 2009 the SEPA Direct Debit Regulation replaced national schemes with a European wide scheme that can be used for both domestic and cross-border direct debits. The scheme operates across 34 countries and currently processes approximately 500 million direct debits every month.
SEPA implementation guidelines are communicated in what’s referred to as SEPA Rulebooks and in November this year we will see the launch of the next Rulebook (V8.2) which introduces some very significant changes for both banks and their customers. The changes are mandatory for banks to implement but are optional for banks’ customers that use direct debit to collect payment (i.e. SEPA Direct Debit Creditors).
So, what are these changes and how will they impact Creditors?
Firstly the current requirement to use the sequence type ‘FRST’ when submitting a new direct debit mandate will no longer apply. Instead, if preferred Creditors can use the sequence type ‘RCUR’ for all transactions be it the first payment collection or any of the payments in a series of collections for the lifetime of the mandate (i.e. where the direct debit mandate is recurring). This change will remove the confusion regarding which sequence type to use and if implemented by Creditors will also eliminate R transactions (failed payments) relating to sequence types. Worth noting, the current sequence types remain valid if Creditors wish to continue using them.
Secondly, Creditors will be able to avail of shorter end to end payment processing times. Currently direct debit files need to be submitted (to the bank) in a D-5 and D -2 timeline for FRST and RCUR sequence types respectively. The result of moving to a RCUR sequence type only will mean Creditors will collect the first payment of a newly established direct debit mandate quicker i.e. D – 2. Your bank may have advised that D-1 submission times will be available, this will be dependent upon getting the file(s) to the bank before a defined cut-off time e.g. 11am on D-1.
To Realise the Benefits..
To avail of the benefits of shorter processing timelines and the ability to use a single sequence type, Creditors will need to make changes to their IT systems. The introduction of SEPA a short number of years ago still plays on the minds of many business owners and Finance professionals and from a number of conversations to date we’re seeing mixed opinions regarding making these necessary changes to IT systems.
..now, without the Pain
With our core system built to support SEPA Regulation and the scheme objectives, DebaPay is well positioned to assist with changes introduced each year. In relation to 2016 SEPA Rulebook changes we have considered a solution to enable businesses to take advantage of the benefits afforded by the upcoming Rulebook. Here, internal IT changes are avoided by employing the Debapay system to deliver the available benefits through data substitution coupled with agreed business rules, all carried out over secure host to host connectivity.
Should this be of interest to your business please feel free to contact us to discuss this further.