SlimPay got the Payment Institution license (art. L.522-1 French monetary code) from the French regulator (ACPR). Contrary to banks (whose activities are described in art. L. 511-1), Payment institution cannot provide overdraft credits on their clients’ accounts. In other words, the balance on SlimPay payment account must always be positive.
When you debit your customers based on SEPA mandates, the debtor (or the debtor’s bank) can challenge a payment (refunds, returns) or the direct debit may fail for technical reasons (rejects). In these cases, we speak about ‘Reversed Transactions’.
The time limits to exercise these operations (rejects, returns, refunds) depend on the execution date of the transaction (date D = date of execution of the SEPA Direct Debit).
Rejects and returns can occur until the 5th working day after D, while refund requests from the debtor can be submitted in the 13 months following D.
These Reversed Transactions reduce the available funds on your payment account, facing the risk of a negative balance.
To mitigate the overdraft risk, SlimPay requires its clients to keep a Reserve on their payment account.
Your Reserve consists of a fixed amount (Fixed Reserve) and a variable one (Variable Reserve).
What is the Variable Reserve?
The Variable Reserve is a percentage of each transactions which is executed between the working period [D ; D+5]. This Reserve aims at covering possible Rejects (technical reasons) or Returns (e.g. insufficient funds on the debtor’s account – code AM04).
As its name suggests, the Variable Reserve is dynamic: during the 5 working days after D, the total amount of the SEPA Direct Debit is gradually released on your payment account until it reaches the whole amount of the transaction at D+5 (unless the transaction is returned or rejected).
What is the Fixed Reserve?
As its name suggests, the Fixed Reserve is a fixed amount blocked on your payment account to cover the risk of Refunds (usually code MD06) that may occur until the 13th month after D.
If you terminate the contract, your payment account shall remain operational to cover Refund requests related to the last executed SEPA Direct Debits. Therefore, your account cannot be closed as long as SlimPay is exposed to Reversed Transactions risks.
In practice, how does it work? In case of termination and during the 13 months after the execution of your last SEPA Direct Debit, a minimum amount is blocked by SlimPay on your payment account. If after this period the available balance on your account is positive, the amount is unblocked, and you can recover it.
NB: For the SDD B2B (business to business) there is no fixed reserve.
How is the Reserve calculated?
The Reserve depends on your transactions volume, amount and monthly Reversed Transactions rate (the Return and Reject rate for the Variable Reserve and the Refund rate for the Fixed Reserve). Thus, the Reserve can vary according to the payment orders acquired on your payment account.
Considering these regulatory restrictions, SlimPay reserves the right to modify your Reserve if it is no longer adapted to your creditor profile. Compliance team notifies you such changes on a real-time basis. The team is always available to discuss with you on Reserve and try to find the solution that meet your and our needs.