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SEPA Direct Debit: Corporate Change, Business Benefits
by Garry Young, Director of Corporate Services and SaaS, Logica
With the European Commission currently proposing 2013 as the date to move from legacy euro direct debit schemes to SEPA Direct Debit (SDD), corporates across Europe need to plan for the impact of switching off national schemes. While SDD holds much promise, it also brings with it a set of challenges which will call for new business processes and system upgrades. The scheme will also place responsibility for managing mandates with the corporate – a significant change in many countries. Garry Young, Director of Corporate Services and SaaS at Logica, examines the opportunities available to forward-thinking corporates, and how they can find business benefit in SEPA.
SDD is coming
When SEPA Direct Debits come into force in 2013, corporates are going to face some big challenges. Some organisations still believe that SEPA won’t have any effect on them at all, especially those operating only in domestic markets. As a result, SDD has barely registered on their radar – and many continue to see the regulation only in terms of the spend required to comply.SDD’s shift of responsibility for managing mandates to corporates represents a major shake-up in many countries and will call for new business processes and technology upgrades. It’s not all bad news though, and opportunities are out there for corporates which approach SDD strategically – such as gaining greater visibility and control of their cash.
Changes for corporates
To start with, SEPA as a whole can boost the efficiency of a firm’s payments processes. Right now, international firms operating collections across the Eurozone have to work with different direct debit schemes in each country. By moving to SDD for euro collections, they’ll just have one set of requirements to manage, allowing them to standardise process and rationalise infrastructure.
Take, for example, a pharmaceuticals company that supplies outlets and distributors throughout Europe. Pre-SEPA, the firm would have collected payments through various mechanisms and processes, to deal with the individual domestic direct debit schemes in each country. Under SDD, the corporate can rationalise its infrastructure and collect those euro funds via a single, standard process. This will make their collection processes more efficient and, ultimately, save time and money in back-office administration. If implemented within a strategic approach to payments, it will be a step further towards gaining greater visibility and control over cash.
Firms like this can also gain more flexibility and control over their banking relationships as part of a broader payments factory approach – centralising all payments and collections. A payments factory can help the entire supply chain work more efficiently – and improve the risk positions. SDD can help further reduce the number of banks with which corporates work, giving firms a stronger hand when negotiating – for example around fees.