IT Strategies for Mandate Management in the SEPA Direct Debit Process

Direct debit has long been used as a payment method,
especially in the business to consumer (B2C) sector and the introduction of
SEPA Direct Debit (SDD), will mean that mandate management becomes a necessary
‘to do’ for every company to implement. Mandate management provides a company
with an overview of approved direct debit authorisations.

However, much
greater demands are involved than with the existing direct debit system. The
question of where, from a technical architecture aspect, mandate management
should be anchored within the company depends to a great degree on how its
heterogeneous enterprise resource planning (ERP) landscapes are structured.

In the case of conventional direct debits, the creditor must receive a
mandate from the debtor that authorises account access for him.
Administration of these mandates derives from two sources: the customer data
in the ERP system as well as the dynamic information from payment
transactions. Until now, there has been an entry in the customer data for
these standard direct debits that relates to whether the payment method is
approved. Normally, the entry is supplemented with a link to the customer
authorisation with signature.

Rules on the Purpose of
Mandates

Collection of direct debits will not function as
simply in the future SEPA area. In its place is a complicated, formal process
for obtaining direct debit authorisations, which is subject to various
international laws and regulations relating to, for example, revocation and
obtaining of direct debit authorisations. A company must store a substantial
volume of information for every individual mandate ID in the payment
transaction; for example, the beginning of the mandate, last changes, the
dedicated purpose of and the amount of the mandate. General powers of attorney
are no longer sufficient per se. With the new process, an electricity
provider can include both gas and electricity with one mandate or demand one
single mandate for all. However, a holding company may no longer issue just
one mandate to be used globally for all its subsidiaries.

Management of direct debit authorisations will therefore become more
complex. Business to business (B2B) relations will become even more
complicated. In the case of B2B, the debtor must additionally provide written
verification to the bank that he issued the mandate to the creditor. The
direct debit can only be released, and clearing take place, once the bank has
matched both mandate IDs.

Mandate Management will Become
Obligatory

Until now there has not been any real mandate
management in this sense, but with the introduction of SEPA it will become an
obligatory process for direct debits. With this context in mind, questions
need to be asked. How is this information to be structured and where should a
company ideally place mandate management within the IT architecture – at the
master data in the backend ERP systems, or centralised in a payment
transaction solution?

In scenarios where there is currently just
one homogeneous ERP – for example, SAP in its newest release with integrated
payment transaction and integrated mandate management – all indicators point
to leaving the process as it is. Mandate management is configured
‘out-of-the-box’, direct in accounting and resides in the master data. It is
included in the scope of maintenance because it is generally provided in the
standard package by the ERP provider. In the case of SAP, it resides in the
FI-CA and FI-AR modules and must be activated in customising via the
transaction code for a SPRO node.

ERP landscapes are
Heterogeneous

However, in the real world, the ERP
landscape for most companies is heterogeneous and the payment transactions of
the company are run as a centralised process. Various release versions of a
SAP system run alongside ERP systems from other manufacturers such as Oracle
or Sage, and the mandate management varies from case to case or may not even
be present.

Quite often it is not possible to update older SAP
versions due to time constraints and many of the older SAP versions have
already mutated into ‘individual solutions’ as a result of subsequent
developments. No company harmonises its ERP landscape purely for the sake of
optimising payment transactions. The docking of separate mandate management
tools from third party manufacturers is made feasible by SAP via business
application programming interfaces (BAPI); however this is associated with
repeated license and implementation costs and, in some cases, poses a further
challenge in the direct debit process. The results of an ERP-side
implementation are therefore heterogeneous and not scalable processes in
mandate management.

Liberating Mandate Management from ERP
Systems

One logical alternative for companies could be that
of liberating mandate management from ERP systems by bundling it in a
transaction payment solution (TPS) in which it is controlled as a central
process. If the TPS is also SAP-integrated, then the customer data is also
always immediately available from accounting.

For this reason,
Treasury Intelligence Solutions (TIS) generalised its cloud platform for bank
account management and made it available for mandate management purposes.
Customer master data and mandate data can be displayed in a manner analogous
to how the Bank Account Manager (BAM) manages accounts. Due to the SAP
integration of the software, the customer master data and mandate information
are bundled at a point where a direct connection to the payment transaction
exists via the TIS cloud platform – thus the company is independent of ERP
release versions and has a flexible, scalable solution for managing direct
debit authorisations.

Conclusion

Whether mandate management takes place on the ERP side or in the central
payment transactions is a question with ramifications that will endure beyond
the introduction of SEPA, as there are still no best practices for the most
logically structured architecture.

The solution involving
centralisation in a cloud-based payment transaction solution is one option
that has been tried and proven when working with customers. Even if direct
debit for B2B companies makes up just a marginal portion, any delays in
processing can sensitively impact liquidity status – which a company can
circumvent if enough thought is given in advance to how mandate management
should be implemented.

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