Announcement for direct debit payment (Lastschrift)

Revolut makes an annoucement a day ahead a direct debit payment occurs. That is to short. With bunq, I am able to relase a payment manually within 5 days. So, if you are short of money on that account, you have time to fill it up

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I have thoughts about this.

  1. I am assuming it’s not Revolut making the announcement but the merchant. Regulators have defined how many times before due date SEPA direct debits should show up on a debitor’s account. Unfortunately, there are also numerous exceptions how merchants can reduce this requirement to just one day. I am not using Revolut with SEPA direct debits so I am not 100% sure here. This behind the scenes info is also not my main point.
  2. Bunq’s approach is unique and customer friendly. It definitely helps to prevent direct debits being rejected. Bunq uses here a grace period. The regulator has defined a period of days within a direct debit should be settled at the latest. (This feature does not rely on direct debits being announced earlier.)
  3. I see two potential problems with this which might explain why this approach is not adopted more widely by other players. First, SEPA direct debits are based on mandates. Merchants have to provide a certificate that allows them to withdraw funds under certain conditions. This is already proof of authorization. From a regulatory perspective, additional verification isn’t part of the agreement between debitor and merchant. Secondly, the mechanism delays the payment. Merchants have a contractual right to be paid on due date. The grace period is exploited here. If this would be common practice, this would negatively affect cash flow / interest for merchants.
  4. My approach would be slightly different: I would honor direct debits as they are supposed to work (payments on due date), but would put them on hold in case of insufficient funds for maybe 48 hours before declining them. This seems to be a good compromise between merchant’s and customer’s interests. Traditional banks often have both consumers and business customers as stakeholders. So they have an obvious interest in catering to both groups.
  5. Payment service providers currently work on various request-to-payment concepts. This has the potential to replace direct debits in some areas. A payment request, an invoice, shows up in a debitor’s account inbox, waiting for approval. Or a payment request pops up on one’s phone at the POS.

This direct debit feature and the “fake” credit card Bunq issues are undeniably creative features with the customer in mind. But they are arguably “controversial” from a regulatory perspective. The credit card might violate the regulation about proper payment card labeling (it doesn’t quite fit the definition of what regulators consider a “credit” card) and the direct debit feature handles payment obligations somewhat loose. This hasn’t been tested in a court or regulatory complaint. Probably because Bunq is a very small player. But it might explain why we don’t see other banks adopting it.

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with bunq, it works fine

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@Frank is right. That it works with Bunq is not really a sign that it’s above board. If you read the rule book (https://www.europeanpaymentscouncil.eu/sites/default/files/kb/file/2023-11/EPC016-06%202021%20SDD%20Core%20Rulebook%20version%201.3.pdf) you’ll find that while it is technically possibly to delay SEPA direct debits by up to 14 days, it is clearly meant to be the exception. The default settlement date is supposed to be the due date. The creditor has to give you a generous 14 days notice for variable or one off payments and for regular payments like rent or similar you have contractually agreed to the amount and due dates. So either way you know well in advance when it is coming and you should be able to plan accordingly.

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I still think a feature that puts a decline on hold (a day or two) would be a very good compromise here.

A declined payment results in additional costs for the merchant and delays the payment as well. If this could be prevented, both the merchant and the debitor benefit.

Revolut has a feature for card payments where they allow you to top-up the account when funds are insufficient during the 2FA process for online shopping. Sure it’s easy enough to plan ahead, but features like this are great UX design.

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Agreed, it would be a nice feature, but I believe that should come via the European Payments Council. Going consistently against industry standards is rarely helpful.

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Various banks (Bunq aside) handle this already differently. Some banks have multiple booking cycles per day for direct debits. When the payment fails at 08:00, they might try again at 16:00 for example. I don’t see why this approach can’t be designed with better UX: more active notification and an easy flow to top-up the account.

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