Introducing SEPA Direct Debit to further build up your payment collection offering

Learn why you should add SEPA Direct Debit to your payments arsenal!

Max Cutler
October 12, 2023

As a consumer, you are probably familiar with Direct Debit when you pay your electricity or mobile phone bill. And by pay, we mean you pretty much don’t —-the money is just taken out of your account. You don’t need to do anything yourself after authorizing a mandate with your bank! It’s smooth and efficient. 

For companies, SEPA Direct Debit ensures payments are made on time, so it’s not necessary to worry about late or missed payments. Cash flow is improved while administrative work is reduced. Win-win. 

But of course, it is more complicated than this behind the scenes. Let’s have a look.


What is SEPA Direct Debit (SDD)? 

SDD is a standardized payment method for bank-to-bank transactions in the European Union, namely within the Single Euro Payments Area (SEPA). Direct Debit allows the holder of one bank account to request and ultimately collect funds from another account. It can be either one-off or recurring. 

Direct Debit simplifies payments. Payers get to do nothing and continue to enjoy the services they need while companies enjoy improved cash flow.

The value of SDD for end users of your product

Collecting payments with Direct Debit brings many advantages. It’s convenient, often delivers a superior user experience, and can improve cash flow management for merchants.

Direct Debit ensures that payments are received on time and in a predictable fashion. This means that companies can anticipate and forecast their financial situations with a lot more accuracy and certainty. 

Checkout page with Direct Debit and card payments

Attrition due to late or failed payments happens far less often when customers are enrolled in Direct Debit. Users won’t make a late payment or need to replace an expired card. They’re locked in and don’t need to think about paying you.      

Payment is simplified. Your customers don’t need to remember to make a bank transfer every month at a specific date to pay a bill; the money is just collected automatically. And, unlike Standing Orders, Direct Debits allow for variable amounts to be collected without a new authorization.

The difference between SDD B2B and SDD Core

There are two different Direct Debit schemes: SDD Core and SDD B2B. At Swan, we offer both. 

B2B only works when one business account pays another. Makes sense, right? Core, on the other hand, works for both company-to-company payments as well as those between individuals and firms.

Another key difference between the two schemes lies with the need to obtain a mandate. With B2B, the bank of the payer (the company sending money) must receive a declaration authorizing Direct Debit payments. In effect, this communication means that the payer is not allowed to request a refund. On the other hand, the Core scheme supports no questions asked refunds up to 8 calendar weeks. Many banking institutions only offer SDD Core, which can be risky for companies. 

Consequently, the value of the SDD B2B Direct Debit scheme falls to the merchants who use your product. They can enjoy the piece of mind that comes from knowing that they won’t be the victim of an unjustified refund.  

The value of SDD for financial software companies

Software companies already enabling their customers to pay supplier bills and invoices, like Agicap and Pennylane, are well placed to benefit from collecting payments with Direct Debit as well. Why? Because end users have already been onboarded, have opened a bank account integrated into the software and are using it primarily to store money to pay bills and invoices. That's what we call an accounts payable use case. 

By expanding payment capabilities, companies add depth to their product and more value to their customers. With this set of features, accounts receivable products are a logical next step. SDD allows account holders to collect payment from vendors, freelancers, or really anyone with a bank account that interacts with the business. 

Direct Debit is crucial for financial software companies that want customers to do all of their banking in their software. Rounding out an embedded banking offering with payment collection (not just SDD but card acquiring and checks, too!), financial software companies can increase app touch points while further monetizing hard-won customers. 

The value of SDD for rental management software companies  

Companies building software tools for property managers and landlords ought to be excited about the prospect of adding enhanced payment collection capabilities to their products. Many companies in the space have started off with core workflow software solutions that enable users to better organize their property inventory. 

From that entry point, firms like GetMomo embedded bank accounts to give users the opportunity to collect rent and track inventory in the same place. Property managers have one master account and use Virtual IBANs to improve the rent payment collection and reconciliation process. But, while useful, Virtual IBANs are only a small part of a complete payment collection offering. 

Bringing SDD into the picture is a game changer. Managers and landlords can collect rental payments and the tenant does not need to take any action whatsoever. They must simply authorize the recurring payment. Reconciliation for the property manager is a breeze; payment and organizational data live together in the same app. And, of course, they can minimize time spent chasing late payments.  

Swan is delivering a full suite of payment collection features

With Swan, platforms can now embed a complete solution to easily collect payments, for themselves or their customers via: 

  • (Instant) SEPA Credit Transfer
  • SEPA Direct Debit
  • Checks
  • Card payments - coming in early 2024

Learn more and talk to one of our banking experts here.

Max Cutler
October 12, 2023
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