The migration to the SEPA payment instruments in February 2014 poses new challenges to payment service providers and users.
From that date on, a creditor needs to be in possession of a mandate signed by the debtor in order to collect direct debit payments. Fraunhofer IAO has conducted a comparative study of solutions for SEPAcompliant electronic mandates with regard to the advantages and disadvantages for debtors, creditors, and banks.
Until now, direct debit has been the payment method of choice for many payers and payees, especially in Germany. This method is appreciated by all parties for its convenience, and especially the simplicity of setting up direct debit arrangements. As of February 2014, banks and payees (creditors) must adapt their direct debit processes to the requirements of the SEPA Direct Debit (SDD) Schemes. Among other things, the payer (debtor) needs to sign a SEPA-compliant mandate to give his or her consent to a one-off or recurrent direct debit. Given the increasingly widespread use of electronic payment orders, there is a need for suitable electronic mandatesolutions that provide the required security while being easy to implement.
This is the subject of Fraunhofer IAO’s white paper entitled “Electronic Mandates for SEPA Direct Debit Transactions”. The white paper was produced with the financial support of EBA CLEARING, the provider of the electronic authorisation solution MyBank. The study looks at various alternative forms of electronic mandates and evaluates their advantages and limitations. The white paper compares the following alternatives:
- E-mandate solutions based on the 2-corner model, which include processing by the debtor and the creditor only;
- E-mandate solutions based on the 3-corner model, which additionally include processing by the debtor’s bank;
- E-mandate solutions based on the 4-corner model, which additionally include processing by both the debtor’s and the creditor’s bank.
The white paper provides service providers, payees and technical providers with an overview of the system security, user-friendliness, and practicability of the different solutions.