White Paper Addresses SEPA Migration Challenges

The demands of migrating to single euro payments area (SEPA) payment instruments in February 2014 are reviewed by Fraunhofer IAO in a white paper produced with the financial support of EBA Clearing, provider of the electronic authorisation solution MyBank.

The technology management institute, which is based in Stuttgart, Germany and works closely with both the local university and the Institute for Human Factors (IHF) says that the migration 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 SEPA-compliant electronic mandates and 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 mandate (e-mandate) solutions that provide the required security while being easy to implement.

Fraunhofer IAO’s white paper, entitled ‘Electronic Mandates for SEPA Direct Debit Transactions’, looks at various alternative forms of e-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.

The document is available in English and German and can be downloaded free of charge by clicking on the following link: www.e-business.iao.fraunhofer.de/emandates

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