SEPA Direct Debits: collections management, efficiency and control

The sweeping changes to the European payments landscape under the SEPA Direct Debit (SDD) scheme are set to present corporations with a complex set of challenges. But ultimately the move to standardise payments in the Eurozone – as part of the Single European Payments Area (SEPA) initiative – represents a huge opportunity for corporates to overhaul their cash management and collection processes and leverage their banking relationships.

SDD will for the first time give corporates the ability to use a common direct debit scheme for euro collections across 32 countries. The scheme will allow them to increasingly standardise and centralise the payment collections process and drive down operational cost. In addition, SDD presents an opportunity for corporates to re-visit the number of bank relationships they’ve had to maintain in order to operate direct debit collections. It also holds the promise of faster settlement for euro payments.

For many corporates, SDD represents a potential catalyst for addressing long-standing issues around payments that their bank suppliers have been slow in addressing. For years, corporates have complained of a lack of visibility into cash flows, the complexity of dealing with multiple and disparate payments systems, high bank connection costs and a myriad of standards and complex routing processes. On top of this, they’ve faced high transaction costs and the lack of a uniform payments process across Europe.

While SDD does present corporates with an additional regulatory challenge, corporates can choose to embrace the opportunity. This change could be an important step towards a future vision of the payments and collections factory — a shared service centre centralising all payments and collections. A payments factory can provide an answer to the cost, control and compliance challenges facing corporates, whilst delivering significant and sustainable cost savings.

Benefits to corporates

• Improved collection management: the main business benefit from taking a strategic approach to direct debit mandate management. SDD enables corporates to centralise and standardise their cash collection processes for euro collections throughout the SEPA zone.
• Faster settlement: SDD settlement is immediate, which means companies can receive cleared funds up to three days earlier than with many legacy schemes. Faster payments and more efficient cash management will make a direct contribution to the bottom line.
• Greater control: the introduction of the B2B direct debit provides corporates with greater control to collect payments from corporate clients.
• Flexibility over bank relationships: an important consideration for large corporates. SDD presents an opportunity to leverage and potentially reduce the number of bank relationships.

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