Credit transfers and direct debits
Credit transfers and direct debits are by far the most commonly used payment instruments in Germany and are therefore sometimes referred to as "traditional payment instruments".
A credit transfer scheme encompasses functions, procedures, agreements, rules and instruments, on paper or in electronic form, enabling the execution of a payment instruction, which a payer issues to his payment service provider – for instance his house bank – in order to transfer funds to the beneficiary (the payee). One-off invoices or tax arrears are often paid by credit transfer, for example.
A direct debit scheme encompasses functions, procedures, agreements, rules and instruments, which allow the authorised debiting of the payer's account. Direct debits are initiated by the payee, either as an individual payment or as a series of payments and are based on the payer giving his consent (mandate) to the payee, his payment service provider or to the payment service provider of the payee. Typical examples of recurring direct debits are electricity or telephone bills while an example of a one-off direct debit would be a retail payment requiring a signature (also known as the electronic direct debit scheme or ELV).
In principle, credit transfer and direct debit schemes entail risks which need to be monitored and mitigated in order to maintain customer confidence in these payment instruments. In particular, these take the form of legal risks, operational risks, financial risks and management risks with varying degrees of weightiness. For example, inadequate management of the payer's direct debit mandate can result in financial risks, which may ultimately lead to the "debtor" rejecting a debit transaction parallel to the creditor being credited.
From the Eurosystem's perspective, credit transfer and direct debit schemes should
- have a solid legal basis in all relevant legal systems
- ensure that comprehensive data, including information about financial risks are made available to all the relevant parties
- provide for an appropriate degree of security, operational reliability and business continuity
- have effective, reliable and transparent governance in place and
- be able to manage and contain financial risks associated with the clearing and settlement process.
The Bundesbank monitors market developments in the area of credit transfer and direct debit schemes and is involved in the shared oversight of SEPA direct debits and credit transfers through the Eurosystem.
In order to ensure harmonised monitoring across the Eurosystem, two oversight frameworks were published in October 2010: the Oversight Framework for Credit Transfer Schemes and the Oversight Framework for Direct Debit Schemes, both containing five standards (see above). These standards were developed on the basis of the identified risk profile and are addressed to the competent governance authority of the credit transfer or direct debit scheme. Though designed for use with the newly created SEPA Credit Transfer and SEPA Direct Debit schemes, they can also be used by the national central banks of the Eurosystem for the oversight of national instruments. During the development stage, the Bundesbank was actively involved in drawing up this oversight framework as well as the related methodologies.