The SEPA Direct Debit (SDD) remains the EPC’s problem child. Both banks and end-users (business and consumer bodies) expressed their reservations, or even worse, object to the existing SDD design.

Recently, a position paper written by the Payment System End-user community, describes the key flaws in the design of the SDD scheme, and the governance of SEPA. A key problem is that the current European SDD proposal is a compromise between various domestic schemes, hence lacking some functionality addressed by existing domestic schemes (such as the design of the mandate flow(e.g. debtor or creditor mandate flow).

Looking at the Direct Debit product, it features timely payments for the supplier, convenience for the buyer (assuming a streamlined electronic mandate process), and an acceptable amount of risk for both parties.

From this perspective, an electronic invoicing service coupled with a credit transfer could perfectly substitute a direct debit. If a bank offers online invoice reception services in it’s e-banking environment, one could register a ’standing order’ in his e-banking environment to automatically pay all invoices received from a creditor for which payment amount does not exceed x EUR. For example, the standing order could automatically pay the monthly invoices from one’s telecom operator as long as they are below EUR 50. This standing order would be similar in functionality to a debtor mandate flow. The invoice would act as a Direct Debit that is checked agains the standing order to automate payments.

In times where banks are looking to reduce excess cost (SDD implementation is estimated not to be low cost), this may be worth investigating. It could enable banks to step into e-invoicing with some real value added services, and e-invoicing needs to be solved anyway.

Tags: E-invoicing, SEPA

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