Direct Debit explained
Countries within the European Union have designed SEPA, which is a new format for transferring money across banks in the EU. Its main aim is to make trading within the EU equivalent to domestic trading. For example, if you live in the UK and want to transfer or buy something to any of the other countries in the EU, you will pay what you usually pay at your home country, which for most of the times is free.
What is SEPA direct debit?
SEPA direct debit allows businesses and individuals to collect and make payments in countries which have been implemented in the scheme. A customer only needs to give a mandate and the merchant will initiate the payment. The SEPA direct debit payment are done through banks. This means that there is no need for card networks because these banks are able to communicate with each other. The scheme will however not affect those in the UK who collect GBP currency. Nonetheless, those businesses using Euro direct debits will be required to migrate to the direct scheme.
Pros and Cons of SEPA payments
One of the biggest advantage of the SEPA scheme is that it allows electronic payments to move efficiently, simply and cheaply within Europe. It is also expected to bring about innovation as well as numerous economic benefits. This is mostly because SEPA payment methods offer consumers additional ways to pay for good and products they need. It also enhances competition since companies can now have a level playing to compete with each, which results in better products for consumers.
Consumers in the UK will also find it more efficient to use UK issued cards since they are now accepted in many places around Europe. Since there are no manual entries, having direct debits is more efficient and thus less prone to erroneous entries. In addition, SEPA payments allow for the data to be stored automatically in digital space, meaning it is easier to trace and retrieve the information should anything go wrong. The fact that there is no need to provide signatures also means that extra costs such as postage or printing costs are reduced. This paperless strategy is also good for the environment, thus meaning less trees are used.