On 1 August 2014, the new European SEPA regulation put an end to the use of RIB to be replaced by BIC and IBAN. Above all, this step marked the end of national direct debit authorisations in favour of SEPA direct debits that require the signature of a titled mandate to withdraw from a bank account. This migration is an amazing opportunity to dematerialise direct debit authorisation with an electronic signature on the SEPA mandate.
SEPA is an acronym for « Single Euro Payments Area ». Created at the same time as the Euro, this project is an initiative from the European banking sector to try and standardise payment methods within the SEPA zone. This put an end to the use of RIB (bank account details in France) to be replaced by IBAN, or, in other words, the unique European number that allows a bank account to be recognised in one of the 32 SEPA zone countries.
Two new payment instruments
The SEPA project led to the creation of two new payment instruments that allow transactions to be completed in a standardised manner to all SEPA zone countries
- in 2008, the SEPA Credit Transfer (SCT),
- in 2009, the SEPA Direct Debit (SDD),
These new payment methods were created to replace their national counterparts. The 1 February 2014 was the initial cut-off date set by the European bodies by which all transfers and direct debits had to explicitly comply with SEPA standards. However, a supplementary adaptation period has been fixed to the 1 August 2014. The successful transition to SEPA means being able to issue or receive a SEPA transfer request or SEPA direct debit by that date.
A paradigm shift to fit the factual situation
Telephone contracts, television, electricity, tax payments, rent… regular payments are often made by direct debits. Therefore, from 1 February 2014, the SEPA direct debit (SDD) will be the new instrument of choice to allow creditors to get paid by their clients every month.
This will introduce a paradigm shift in the manner of conducting direct debit authorisations. Until now, with traditional direct debit authorisations, a debit client would sign a direct debit authorisation that they then had to send to their bank to give the creditor the permission to allow them to withdraw from their account. In the majority of cases, individuals were happy… to send nothing! Large corporations such as EDF, France Telecom or Veolia could withdraw money without a mandate, thanks to the presumption of good faith.
The SEPA direct debit changes this situation by introducing the notion of a direct debit mandate. For this new direct debit, a credit organisation now needs to get their debtor to sign a SEPA direct debit mandate. This document replaces the direct debit authorisation. It formalises the debtor agreement and authorises withdrawal from their account. The debtor no longer needs to send anything to their bank. Setting up a regular payment is therefore simplified as it does not require a third party – the bank – to be involved and stays between the creditor-supplier and the debtor-client: a fundamental change in the trade relationship that is made more fluid.
Dematerialising the SEPA mandate for a better conversion
More than ever before, this new kinematic actually allows companies to visualise the complete dematerialisation of the subscription process via the direct collection of the electronic signature of the SEPA mandates. The electronic SEPA mandate is actually a trivialised document in PDF format consisting of a set of standardised information (Surname, forename, IBAN, etc.). A simple Google search suffices to double-check.
Yet, such a document can easily be signed with an online signature service such as Universign. By implementing this kind of solution, it is now very easy to ask site users, clients, suppliers or partners to electronically sign documents to demonstrate their commitment.
This step is also proof of the successful implementation of SEPA. For, if an online signature solution is not available, internet users visiting commercial websites are often asked to print their contract, to sign it and to send it by post to a specified address. Yet, this step is undeniably a source of conversion losses. In many cases, the internet user will face numerous predispositions, making them want to… do nothing! To name but a few; no printer, no paper, or even no ink cartridges… In many cases, the document will be far from signed, even further from being sent and will remain in a pile on the desk before being forgotten about forever.
By sticking to the paper format for the direct debit mandate, the simplification made possible by SEPA remains limited. Moving to an electronic format enables both an increase in the number and rate at which memberships are attained and improves the reliability of the signature process of mandates.
That being said, not all documents can be signed online using the same signature process and with the same level of legal security on the electronic evidence produced. One of the fundamental aspects of the SEPA direct debit to never be forgotten about is that the mandate must be in the possession of the creditor (or under their responsibility). They must be able to provide it on request by the bank in case of dispute from the debtor. This aspect, which differs from the traditional national direct debits, makes the creditor solely responsible for the management of mandates. As they withdraw money, they are responsible for proving to the bank that their client definitely mandated them to do so.
The debtor can actually ask for a refund :
- for any reason within 8 weeks from the debit date;
- for the absence of a mandate (non-authorised operation) within 13 months from the debit date.
In the second case, the current legislation allows the possibility of recourse towards the creditor who must provide the evidence of the validity of the mandate. Should the mandate prove to be invalid or non-existent, the bank will reimburse the amount of the non-authorised operation. Therefore, a signature with legal value is absolutely indispensable and the large contractors whose economic model is based on subscriptions cannot do without it!
As always with the electronic signature, it was, therefore, important to ask the right questions before beginning a dematerialisation project of the SEPA mandate, in particular: « Are the challenges significant? Are the litigation chances high? What kind of litigation do we need to prepare for? What guarantees need to be assured? etc. »
If the client denies being the signatory of the mandate, it needs to be proven that the entire implemented process allowed the client to be identified to a satisfactory level. Essentially, there has to be compromises made between ergonomics, security, operational constraints and cost.
In conclusion, the SEPA migration is obligatory for all companies, it will most likely lead to process modifications. Thanks to dematerialisation, these changes are an opportunity to accelerate and increase the reliability of commercial exchanges and improve the client conversion rate.