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SEPA Direct Debit gives corporates cash management boost

The pan-European SEPA Direct Debit (or ‘SDD’) scheme has arrived – and is taking off, with the EPC noting in their latest newsletter that nearly 4,000 European banks have now signed up to SDD core. This new instrument will significantly impact the way in which corporates collect payments and manage their cash across Europe. But many firms are still unsure of the affect that the legislation will actually have on them and so are not looking at the business benefits that the change could bring.

The key change in all SEPA countries is that corporates will need to take over the responsibility for managing mandates – something currently taken care of by the banks. But there are advantages to this change too. Many multi-national firms are still managing 20 or more cash management relationships and multiple systems and processes for direct debit collections. SDD will allow them to standardise the euro collections process, bringing efficiency benefits, and revisit the number of banking relationships they maintain in order to support euro collections.

SDDs will also help to deliver faster settlement for euro collections. Corporates can receive cleared funds up to three days earlier than with many legacy schemes. SDD also offers enhanced consumer protection, making it more likely to increase direct debit uptake – meaning more customers paying using this time-assured mechanism, reducing costly exceptions and increasing cashflow efficacy. SDD also brings with it a B2B instrument. Trading partners will be able to confirm a mandate at the point of signing contracts – guaranteeing payment dates and amounts right from the start.

In a nutshell, SDD will help corporates gain greater visibility and control over their cash and boost efficiency – making a real contribution to the bottom line. The largest corporates are also now taking a strategic approach to payments transformation, and actively looking at the potential for payment and collection factories to help address their cost, control and compliance challenges. Organisations who opt for this will improve their cash and risk positions, including their supply chain.

Of course, firms do need to invest in technology infrastructure to realise these opportunities – but those who are forward thinking and lay out their SDD roadmap now will not just comply when SDD comes into force, but will also find benefits in the change. I would urge corporates not to wait until the last minute to switch their collections to SDD as changes in the infrastructure can take from 3 to 9 months, and the end date is soon approaching.


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