SEPA direct debit uptake “unacceptable” says ECB
The European Central Bank says that the speed of adoption of direct debits in line with the Single Euro Payments Area standards is “unacceptable” and urged regulators and payment service providers to make greater efforts to push the instrument or risk damaging the reputation of the scheme.
In its first Report on the Migration towards the single Euro Payments Area, published today, the ECB admits that the SDD core scheme “so far fails to capture a substantial transaction volume”. It says that “given the popularity of legacy direct debit payment instrument in certain countries and the challenges associated with the new SDD collection process, the current situation is unacceptable”
Migration to the SDD is due to be complete by 1 February 2014, and a late migration would introduce risks that “could damage the reputation of the new direct debit scheme, which could then be difficult to restore”.
The ECB suggests that countries that already work on the basis of a creditor mandate flow model should “strive to migrate” more than 50% of their legacy direct debit transactions by the end of the third quarter of 2013, while countries that originally worked on the basis of the debtor mandate flow model (which is harder to migrate from) should strive to migrate at least one- third of their transactions by the same deadline
“To generate a breakthrough, payment service providers should not only make their customer servicing channels ready for SEPA, they should also devote sufficient resources to familiarise end-users, both debtors and creditors, with technical, business and contractual issues related to migration to SDD,” says the report. “Moreover, payment service providers should provide substantial assistance to debtors in order to explain how consumers’ protection measures established under the legal framework could be exploited. The public’s trust in SEPA, in general, and in the SDD scheme, in particular, is of utmost importance and is a precondition for a smooth transition process.
The ECB also says that national regulators “will need to find effective ways in which to cooperate at the pan-European level” and says that the Eurosystem central banks will be ready to assist the relevant competent authority when local decisions could have a broader impact on the integrated payments market”.