Businesses are struggling with the transition to SEPA Direct Debit (SDD), especially in the B2B market. For corporates, choosing the B2B scheme seems to be the best option. However, whilst suppliers are enthusiastic, the clients are reluctant. Or should they choose the Core scheme, which is easier to migrate to, easier to manage but comes with the uncertainties of a longer revocation term? And what about mandate management?
“The B2B scheme is an excellent product for businesses, because it offers certain risk mitigators,” says Paul Geerts, Associate Director of Financial Services at KPMG Advisory in Amsterdam. “However, local companies are reluctant to use it, because of the complex and lengthy implementation, and because debtors are uncomfortable with the idea of giving out blank cheques without the option of revoking them. European businesses are also reluctant to use it, as in spite of the international standard, there are simply too many differences between the various countries.”
Impending marginalisation of SDD B2B
Geerts: “In some countries, business direct debits were widely used, but this is decreasing rapidly. SDD B2B runs the risk of becoming a marginalised product, because businesses are switching to SDD Core en masse. But with the revocation term of 56 days, these businesses will be running new risks. Of course, they are free to use SDD Core; however, we would advise businesses to assess which clients are high-risk, and demand that they use SDD B2B in order to effectively manage the debtor risks.”
Mandate information as part of core data
Most debtors have arranged their SDD mandate management themselves, despite the fact that there are several service providers that offer high-quality solutions. Geerts: “The majority of businesses feel that mandate information is part of their core data.” This might change in the future with the introduction of e-mandates. Geerts does see considerable demand for an e-mandate solution that would facilitate easy online mandate checks and routing of the mandate forms: “In this digital era, it seems odd that we are still legally required to use ‘wet’ signatures. That feels like a step backwards, especially with SDD B2B, where most debtor banks require a paper version of the mandate.”
Widely supported solution
Regarding what it would take to realise a single e-mandate solution, Paul Geerts makes two specific suggestions: “Develop a service that is supported by the market, including debtors. I would call upon banks to be open to ideas, and not only consider their own circumstances. Secondly, it is important to develop a long-term European solution. Given the varying paces at which SEPA is implemented throughout Europe, local solutions would seem the most obvious way to go. But the ultimate goal, complete harmonisation, should not be forgotten.”
International businesses are justifiably concerned
The latter issue is a serious cause for concern at international corporations. Geerts: “They’re not convinced it’s going to work – and rightly so. The European legislation and rulebooks leave too much room for national ‘tastes’ and interpretation by individual banks. This is detrimental disastrous for international enterprises. For now, SEPA has the dubious reputation of not having set a real standard. It’s high time for us to jointly work towards a truly unified solution.”
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