In 2017 4.2 billion payments totaling £1,305 billion were made by Direct Debit in the UK. This is up from 3.9 billion payments made in 2015, growth that is expected to continue as the use of paper checks declines and customers request alternative forms of payment.
There are many benefits to using Direct Debit to receive payments, including better visibility of cash flow, improved compliance with Bacs scheme rules and a more efficient workforce.
However, if not managed properly, the number of failed transactions can be daunting. According to KPMG, for some organizations the failure rate of Direct Debit due to inaccurate data can be as high as 20%.
Additionally, in an effort to combat identity theft, payment fraud and terrorist financing, more and more banks are requiring Direct Debit users to conform to Know Your Customer (KYC) policies at the point of sign-up.
It’s more important than ever to ensure your organization is set up for success when receiving payments via Direct Debit.
There are seven steps your organization can take to take full advantage of Direct Debit:
1) Provide customers with multiple ways to sign up for Direct Debit.
2) Validate bank account information and complete a KYC check to verify account details.
3) Add verified payer information to a secured database.
4) To stay compliant, send advance notifications and set up a Direct Debit Instruction according to scheme rules.
5) Submit the collection file to Bacs.
6) Collect Bacs reports in a timely manner to stay on top of successful transactions and notifications of amends.
7) Update your systems to communicate Direct Debit failure and amendments as required.
To learn more about the benefits of setting up Direct Debit right, download the brief “Cash Wars: Getting Direct Debit on Your Side.”
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