A guest blog by Don Holingum from Direct Debit 101: https://cashlessuk.org/direct-debit-101/
Direct Debit has seen many advances since it was introduced over 50 years ago, and not just in the volume of payments collected. Direct Debit has seen many new stakeholders entering the market which has provided many new opportunities for collecting organisations.
All participants are governed by one set of the rules, namely The Service Users Guide and Rules to the Direct Debit Scheme, although the rules do allow for flexibility in given circumstances and this article seeks to focus on one of the opportunities this flexibility provides for.
Are your Direct Debit collections in the slow lane?
Historically, collecting organisations have had to rely on obtaining a paper based authority, (the Direct Debit Instruction) with their customer’s, the payers, ‘wet’ signature on it, to authorise the collection of monies from the payers account. This authority, once completed and returned by the payer, has to be recorded in the collecting organisations records ahead of onward submission, by post, to the payers bank or building society. The collecting organisation then has to wait a minimum period of 10 working days for the authority to be recorded on the payers account, by the bank or building society, before monies due can be collected.
Harnessing the benefits of Direct Debit
Recognising that this was a slow process with many opportunities for error / failure, an electronic process, AUDDIS (the AUtomated Direct Debit instruction Service) was introduced some 20 years ago. This process enables the collecting organisation to record the payers authority on the payers bank or building account themselves without reliance on the postal service, without reliance on the bank or building society to receive and accurately record the authority themselves. It also allows for the set up or lodgement steps to take place far more quickly, in effect with a minimum of 5 working days between the electronic submission of the payers authority and the collection of the (first) Direct Debit, where it is appropriate to do so. In addition any issues surrounding authority lodgement are identified and notified to the collecting organisation far more quickly (electronically via reports from the Bacs service).
The use of AUDDIS also enables the collecting organisation, as and when it is necessary, to amend or cancel the authority recorded on their payers account.
Whilst most larger collecting organisations have migrated to the use of the AUDDIS service, and new collecting organisations, where they are fully managing the Direct Debit process themselves, are required to adopt AUDDIS, there are a significant number of predominantly smaller collecting organisations that continue to rely on the paper (non-AUDDIS) service.
There are a number of reasons why these organisations have still to migrate to AUDDIS, and whilst some of these reasons can be justified, it is believed that many organisations have still to fully consider the benefits of AUDDIS to their business.
Whilst efficiencies associated with having control of the authority set up process and the reduced time to first Direct Debit collection may be understood, there are other factors that should be factored in, including the customer facing aspects, e.g., does the new customer perceive the collecting organisations business processes to be slow and rigid, and also there is the risk of loss of business to competitors who may be perceived to be more efficient.
Have you adopted paperless Direct Debits yet?
Importantly, and subject to the agreement of the collecting organisations sponsoring payment services provider, adoption of AUDDIS also opens the door for the use of paperless Direct Debit. The paperless model enables the collecting organisation to obtain the payers authority electronically, e.g., over the telephone or the internet.
This means that there are minimal delays between the completion of a contract with the payer and the obtaining of the authority to collect payments by Direct Debit. When a customer has to wait for papers to be received via the post and then for the authority to be completed and returned, there is always the risk of the customer changing their mind, the authority not being returned, and worse the returned authority being ‘lost’ in the post or within the collecting organisations internal systems, resulting in the whole cycle having to start again.
Whilst the need to be mindful of protecting the customers data is of paramount importance we are increasingly in a world where speed is of the essence. AUDDIS, with or without the use of the paperless model, enables processes and procedures to be completed far more efficiently for the benefit of both the collecting organisation and its customers.
Harness the benefits of Direct Debit with support from Direct Debit 101
The above is a very simple high level illustration of how you can enhance your existing Direct Debit processes.
Adopting, or migrating to, AUDDIS, may require more detailed consideration on a number of levels and we’d welcome the opportunity to discuss the use of AUDDIS with you, please email us at DirectDebit101@northeypoint.co.uk, visit us at www.directdebit101.co.uk or call us on 07590 538 820.