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Why use SEPA Core Direct Debit?

Credit card payments

Today, payment by credit card is the most popular means of payment in France. This makes payment simple, fast and secure for both national and international transactions. As a result, the majority of B-to-C payments are made using this payment method. In 2020, the 72.7 million French bankcards were used to pay for nearly 490 billion euros worth of retail and online purchases, representing around 60% of all consumer spending.

The use of bankcards also accounts for a significant share of the B-to-B sales market. Used as an alternative to bank transfers, cheques or account payments for small amounts, generally under €5,000, it is becoming increasingly secure, thanks in particular to the 3D Secure 2.0.

SDD direct debits popular with professionals

However, payment in the B-to-B sector is often governed by cumbersome, repetitive processes that are costly and time-consuming. Business-to-business payments are larger, and the risk of non-payment is lower, which is why companies are gradually turning to alternatives such as SDD (SEPA Direct Debit).

This method offered by payment service providers is based on the principle of direct debit. It can be used to collect payments in euros in the 34 SEPA(Single Euro Payments Area) countries, whether for one-off transactions, recurring payments, subscriptions, etc.

This means of payment establishes a set of rules and processes for all euro-denominated direct debits. There is therefore no distinction between domestic and cross-border euro direct debits. The same standards, deadlines and processes apply to all countries in the SEPA zone, and unlike credit card payments, SDD direct debit payments have no expiry date or purchase limit.

This type of payment offers several advantages:

  • Improved cash flow: companies know the exact date of receipt of euro payments from SEPA zone countries.
  • Better control over collection: unlike bank transfers, which must be initiated by the debtor, direct debits are initiated by the creditor.
  • Lower costs: no more additional charges for euro payments from other SEPA countries
  • Improved loyalty and conversion rates: unlike payment by credit card, there are no problems with limits or expiry dates.

Easier access to new markets: SDD direct debits make it cheaper and easier to collect euro payments across Europe.

Today, there are 342 million potential users of this payment method. After bankcards, SDD direct debits therefore have the largest potential audience. It generates around 36 billion euros in transfers every year.

Setting up SDD direct debits

SDD direct debits are set up in several stages. Firstly, the creditor must ensure that he has a SEPA Creditor Identifier (ICS), supplied by his bank, to avoid any rejection. Next, he collects the debtor’s bank details (IBAN and BIC), then draws up and signs the mandates. Before each direct debit, the creditor is obliged to inform the debtors (pre-notification). Lastly, he or she must keep all direct debit authorizations and send all SEPA direct debit orders to his or her bank.

As a payment service provider, CentralPay offers comprehensive solutions for automating complex collection processes, enabling e-tailers, platforms and marketplaces to optimize their transactions on a local and international scale.