What is Core Direct Debit?
Core Direct Debit (or SDD) is a payment method that allows funds to be automatically withdrawn from a debtor’s bank account. This requires the drafting and signing of a contract between the merchant and the payer, called a SEPA mandate, which specifies the authorized direct debit conditions and includes mandatory information (Unique Mandate Reference (“UMR”), creditor contact details, SEPA Creditor Identifier (SCI), a signature date, etc.).
Used to collect funds from both individuals and professionals, Core direct debits have several advantages:
- Seller-initiated: Once the mandate has been created, it requires only authorization from the customer to execute direct debits.
- Low cost: It is much cheaper than direct debit cards, particularly business cards.
- No limit: It is not subject to the same limits and expiry dates as other cards.
- Optimized processes: It improves and accelerates customer relationship management and debt collection.
Core Direct Debit VS B2B Direct Debit
Within the SEPA zone, there are two types of direct debit: B2B and Core. Primarily used by public creditors (tax authorities, tax services), B2B direct debits differ from Core by their strict dispute policy. Indeed, following a B2B direct debit, the debtor will not be able to dispute the transaction or request a refund under any circumstances. This type of SDD therefore offers additional security to the creditor against the risk of non-payment and ensures timely payment. In return, the debtor’s banks are required to verify the existence and compliance of the B2B mandate before executing the direct debit, greatly limiting the risk of fraudulent or erroneous transactions.
Why implement Core Direct Debit?
Here are 5 reasons to integrate Core Direct Debit into your payment process:
Reason #1 – Ensure regular and stable income
Integrating a direct debit method helps limit the risk of late payments and/or non-payment. This automated payment method debits a set amount from the debtor’s bank account on a set due date. It’s then easy to receive recurring payments for all types of goods or services: subscriptions (magazines, streaming services, water, gas, electricity), insurance or mutual fund contributions, or school fees.
By digitizing the entire Core Direct Debit payment process, from signing the mandate to updating payment statuses, merchants improve their customer payment experience while optimizing their cash flow.
Reason #2 – Increase online sales
Online, the time a customer spends filling out their banking information is perceived as wasted time and can therefore lead to shopping cart abandonment. In long-term business relationships where trust and convenience are paramount, Core Direct Debit offers a frictionless alternative, particularly suited to established and loyal customers.
Reason #3 – Offer customers more payment flexibility
Implementing a direct debit payment plan is a real asset when it comes to multi-payment installments. It’s particularly useful when a merchant wants to split and automate payments for relatively expensive goods or services, without having to rely on an external BNPL provider. Ultimately, fee-free split payments improve customer satisfaction and tend to build customer loyalty.
Reason #4 – Conquer new markets in Europe
For businesses offering their services in several SEPA countries, Core Direct Debit facilitates cross-border transactions in euros. Payments are as simple and secure as domestic transactions in the eyes of European consumers.
Reason #5 – Reduce payment management costs
Automating the collection of recurring payments replaces all manual operations related to payment management. Core Direct Debit thus greatly minimizes the administrative effort and costs associated with invoicing and collecting payments. Furthermore, SEPA Direct Debit transaction fees are significantly lower than the various card scheme fees for bank card direct debits.
