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Direct debit vs e-invoice

For some countries, direct debit is the main payment system, whereas some countries like to push e-invoice to be main payment system.

Both are really good ways for merchant but also for consumers to receive/ pay money. When talking with merchant, their only worry or request is to get money as easy as possible without scarifying too much energy or resources. Same thing goes for consumer, as long as payment is valid and predictable, it goes without any energy, it is always good.

I would like to make a list about negative/ positive things about both payment systems, but also where and when you would prefer one payment system over another.

To start, here are benefits of direct debit when consumer:

- easy to understand, makes sense when paying recurring small payments or loans or other same value transactions, paying for trusted party

Same list for merchant:

- no need to send invoice when recurring payment, automates process, it is possible all over Europe (in theory)

To understand benefits for e-invoice when consumer is using:

- saves nature, it can be semi or totally automated, when value of transaction is changing and needs to be verified, payment date can be changed if account doesn't have sufficient amount

For merchant e-invoice is good when:

- consumers are in one country, faster sending, cheaper than paper invoices, can be automated

Things I would like to use DD are:

- third sector recurring payments

- paying gym, online access or online movie (flat rate) rental fees

 

Things where e-invoice is good are:

- when paying every month mobile connection fees

- other payments where value of transaction is changing

 

Give your voice and tell me where DD beats e-invoice and vice versa.

 

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Comments: (3)

A Finextra member
A Finextra member 22 March, 2011, 02:32Be the first to give this comment the thumbs up 0 likes

These are complimentary services as one is about a payment, the other is about information.

The benefit of Direct Debit is that it is a "Collection" rather than a "Receivable" for the biller/supplier/payee, so it is easy to reconcile, the timing is known and it is usually cleared funds.

E-Invoice is about moving away from paper, speeding the information exchange with the buyer/payer to either justify a collection or initiate a payer in making the payment.  However, the timing relationship between the e-invoice and the payment is not rigid and so there can be issues as to timing, reconciliation and cleared funds.

A Finextra member
A Finextra member 22 March, 2011, 07:29Be the first to give this comment the thumbs up 0 likes

Geoff is absolutely correct! In my former country it has been trend about four- five years to change everything to e-invoice. Which is good but recently some of the banks finally has noticed that e-invoice itself is not a solution for some of the customers. 

I just spoke with third sector organization, where monthly recurring income comes in small streams of 5 € to 10 € contributions from individuals. They use to pay 0,01 or 0,05 € per transaction for banks. Now with SEPA DD they are asked to pay up to 0,90 € per transaction and same payment is also required from consumers. Making a business case. No way in H...  E-invoice itself is much more complicated and usually requires consumer to accept all payments. There is a plan where consumer is not required to accept small e-invoices, but it is still a plan, not solution. 

 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 22 March, 2011, 15:42Be the first to give this comment the thumbs up 0 likes

As far as I remember PSD directives around Mandate Management of SEPA Direct Debit, every SDD transaction MUST be accompanied by an invoice - whether paper-based or electronic. So, I really don't see Direct Debit and eInvoice as mutually exclusive. 

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