Last year, a record 6.22 billion Direct Debit transactions were made in the UK. This is due in part to its sheer ease of use and airtight processing system, making billing and administration a doddle. You see, Direct Debit isn’t considered amongst the safest payment methods for nothing.
Behind-the-scenes, Direct Debits are processed in three stages. This comes into play for existing mandates, new mandates, accepted payments and rejected payments. Let’s explain further.
Bacs three-day cycle
Designed in the 1970’s, Bacs three-day cycle offers a Direct Debit processing timescale starting from the submission of a payment until the final account entry stage. It works like so:
Day 1 – input: Payment requests must be submitted to Bacs between 7:00am and 10:30pm. This info is dispatched to recipient banks overnight
Day 2 – processing: Data is then processed and the bank prepares to respond as necessary.
Day 3 – entry: Payments are debited from the payer’s bank account and credited into the merchant’s account.
It all sounds very simple and in an ideal world, it would be. But as we all know, payments sometimes bounce. In this case, the process will follow through as normal and the payment will still be credited to the merchant’s account.
It then falls on their bank to set the payment reversal in motion. This reversal operates in a similar fashion to the above and, in most cases, takes three working days to clear:
Day 3: Soon after the payment has been credited, a payment failure is submitted. In very small instances, this won’t take place until the following day and will push the process to four-working days.
Day 4: The merchant receives notification and further details on the payment failure through a payment failure report.
Day 5: Payment is debited from the customer’s account and credited back into the merchant’s account.
If a failure report isn’t received by the merchant in this time, then the transaction can be considered a successful one. Remember, submissions won’t be counted on working days. For more information on the Direct Debit process, get in touch with DFC on 01908 422026.