SEDA: the Italian way to Improved SEPA Direct Debits

The vast majority (97%) of Italy’s banks have already
started a single euro payments area (SEPA) migration project ahead of the 1
February 2014 deadline, according to a recent survey by the Italian banking
association Associazione Bancaria Italiana (ABI). Nevertheless, while the
migration of domestic payments to SEPA credit transfer (SCT) in Italy has
accelerated, the SEPA direct debit (SDD) adoption rate is still disappointing.
SDD is indeed a great opportunity for businesses to harmonise collections and
consolidate them via a single instrument across multiple countries, with
efficiency and liquidity gains. However for a successful implementation,
corporate clients need the strong support of their payment service providers
(PSPs).

To accelerate the SDD migration, financial institutions may
provide solutions to their corporate clients for mandate processing, including
the storage of mandates; value-added features such as conversion and
enrichment tools; and additional services defined at a community level.

According to the provisions of Article 16 of the SEPA end-date
regulation, Italy opted to delay until 1 February 2016 the mandatory usage of
standard message format ISO 20022 XML for payment service users who initiate
or receive individual credit transfers (CTs) or direct debits (DDs) that are
bundled together for transmission. By 1 February 2014, businesses can choose
either to adopt ISO 20022 XML format or to rely on the support of a PSP, or a
processor such as SIA, for conversion services, thus minimising the impacts on
their IT systems with benefits in term of time to market.

Another
requirement coming from Italian corporate creditors is to keep the continuous
alignment of mandate information towards the debtor banks, as they are
currently using the national electronic database alignment system Allineamento
Elettronico Archivi (AEA) in order to exchange information related to the
national Rapporti Interbancari Diretti (RID) DD scheme, with the goals of
protecting the debtor from any fraudulent collection and reducing the amount
of rejections.

To avoid regression from the current domestic
scheme, the ABI in conjunction with the corporate community, decided to
define the additional optional service named SEDA (SEPA-compliant Electronic
Database Alignment), to transpose the current AEA functions to the SEPA
standards.

Benefits of SEDA

SEDA enables
corporate users to electronically exchange information related to the SDD
mandate – before the collection, throughout the life of a mandate and through
the creditor banks – with the debtor banks for checking activities.

SEDA includes two models: ‘base’, which supports the creditor-driven mandate
flow (CMF) and ‘advanced’ where the debtor banks act on behalf of the
creditors for mandate acquisition and recording services.

In fact,
according to the SEPA end-date regulation, the creditor not only has
responsibility for the recording, amendment and cancellation of the mandate,
but also has the right to commission a third party (for example the debtor
banks) to act accordingly. In SEDA ‘advanced’, the debtor bank communicates
the new mandate acquisition to the creditor/alignment bank, which forwards it
to the creditor.

SEDA reachability will be mandatory for debtor
banks starting from 14 October 2013. Creditor banks may provide the service to
both Italian and foreign creditors, although they are not obliged to adhere to
it.

The use of SEDA provides advantages to both creditors and
debtors. Through SEDA, before presenting the direct debit collection, the
creditor can get confirmation that the account will be debited and of the
right to collect payment from the debtor who signed the mandate. In addition,
the creditor is swiftly informed about every alteration or cancellation by
the debtor bank. As part of the SEDA mandate service, the debtor bank
undertakes additional checks on the collections sent by the creditor, thus
providing the debtor with greater protection from frauds.

In the
SEDA context, the role of a technical facilitator such as SIA is absolutely
vital in helping financial institutions and their corporate clients to make a
smooth migration from the domestic system, through a gateway service that
provides access to the STEP2 pan-European automated clearing house (ACH),
technically managed by SIA on behalf of Euro Banking Association (EBA)
Clearing.

MyBank E-mandate

As a MyBank
certified service provider, SIA also supports EBA Clearing in the evolution of
the mandate information exchange via an electronic mandate (e-mandate)
solution, which will allow a fully automated end-to-end processing and will be
based on online banking services currently offered by debtor banks.

MyBank E-mandate will support the online creation, modification and
cancellation of one-off and recurring mandates for SEPA core DDs. The debtor
will initiate the mandate at the seller’s website and will validate it via
his online banking, so that the seller will be able to receive a valid
mandate in real time, with a rapid conclusion of the mandate acquisition.

Using E-mandate, public institutions and billers will benefit from
the reduction of administrative costs through increased use of electronic and
highly automated processes for mandate management.

According to the
EBA Clearing plan, a MyBank E-mandate pilot will kick off in October 2013, to
test the MyBank E-mandate solution for SEPA core DDs with regard to
reliability, security and usability.

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