Introduction

Direct Debit Mandate is an authorisation given to the creditor by the debtor, to collect future payments using direct debit. This mandate allows the creditor to initiate DD collections to debit the debtor’s account and at the same time, it allows the debtor bank to accept and process these instructions on the debtor’s account.

Direct Debit (DD) is the most efficient way for an organisation to collect regular or occasional payments from their customers. It has the following advantages:

• Saves time
• Reduces the cost of collection
• It is initiated by the organisation itself rather than expecting the customer to make the payment

The amounts and the DD collection can be fixed or variable (for example, the amount of collection for a monthly phone bill varies from one month to another but a collection to fund a savings account is normally a fixed amount).

From a processing point of view, the DD Mandates are further classified as:

• Debtor DD Mandates – These are the debtor’s view of the mandates. Their purpose is to protect the debtor account and is used for processing inward DD collection.
  • External DD collections – These are received through a clearing interface, from creditors being participants under the scheme.
  • In house DD collections – These are received from creditors who have their collection account within core banking (both credit account and debit account are within core banking).

The clearing channel through which the DD collections are received is irrelevant for the DD Mandate check. For example, a bank can move from one SEPA DD clearing provider to a different clearing provider. A creditor can move from an external bank to the Temenos bank or vice-versa.

• Creditor DD mandates – These are the creditor’s view of the mandates. These type of mandates are used in the outward DD collections process.

From a core banking perspective, such mandates are used by lending and deposit products in the DD collection process for loan repayments and deposit funding. In this context, the creditor is the bank itself and the Creditor Mandate is registered on the loan or deposit account and attached to the settlement conditions.

Previously, the DD module generated and processed the payment files. These were sent to clearing and the inward DD collection files were processed from clearing. The DD module provided a mechanism to generate or receive a text file. The specific formats of the inward and outward files were usually covered by the country or local implementations.

Most of the banks now have a payment system like Temenos Payments Hub, which ensures the payments and direct debit processing. DD module is used to manage the DD Mandates and send the DD collections initiated by Temenos business applications to the payment system.

Product Configuration

This is covered as part of feature configuration. There is no specific product configuration.

Illustrating Model Parameters

This section covers the high-level specifications required for the Direct Debit (DD) module.

S.No.	Parameters	Description
1.	DD.EVENTS	This application allows the user to define the list of events to be used by DD module, which can be used in the Status field of the DD module applications like DD.DDI, DD.STANDALONE and DD.ITEM.
2.	DD.REASON.CODES	This application allows the user to define the reason codes applicable for the clearing module and linked through DD.CODES application with various possible events. In addition, it allows the users to define various clearing codes in outward claim file based on the underlying events in DD.ITEM or DD.DDI.
3.	DD.CODES	This application allows the user to define various codes with the respective events for a clearing system. These codes can be mapped to the outward file format when the Reason Code field is defined in DD.OUT.FORMAT application.
4.	DD.TXN.CODES	This application allows the user to specify the transaction codes that has to be used while generating accounting entries from DD Module for various events.
5.	DD.OUT.FORMAT	This application allows the user to define the prescribed file format for Outward Claim Submission and Return. For outward claim generation, format details have to be attached with the relevant DD.PARAMETER record.
6.	DD.IN.FORMAT	This application allows the user to define the prescribed file format for Inward Claim Submission and Return.
7.	DD.PARAMETER	This application allows the user to define the details related to direct debit system. It contains details like Clearing Account category, Suspense Account category and Standalone Mandate category. It is also used to specify the following: Claim date period for generation of Direct Debit header file can be specified. The number of days after which a file is moved to history. If standalone mandates are allowed, and the currencies and holiday regions to be checked.