A who’s who of Direct Debit

Much like with any banking or payment process, the Direct Debit cycle involves a number of key players who work tirelessly behind the scenes to ensure Direct Debit mandates move forward without a hitch.

Thanks to these guys, the public can submit a Direct Debit quickly and easily from the comfort of their couch without any hassle. Businesses can also take a break from lengthy administration duties and maintain a better grasp on their finances. Who exactly are we talking about?

The organisation that the customer is paying to

If a customer is happy to utilise the services of an organisation, they might set up a Direct Debit with them. This can either be for ongoing or one-off payments and can be set up over the phone, the internet or via a Direct Debit Instruction form. This information will then be passed on from the organisation to the bank, giving the bank permission to collect money from the customer account.

 

The bank/building society

Banks and building societies operate as the middleman between the organisation and customer. They are responsible for responding to all requests, be it sending money to and from accounts, handling default payments and refunding money taken in error. The Direct Debit process operates over a three-day window from the submission of a payment until the final account entry stage.

 

Bacs Payment Schemes Limited

Bacs is the organisation responsible for the efficient operation of the Direct Debit scheme. They write the rulebook on what is and isn’t acceptable and ensure that the scheme upholds the highest industry standards. They don’t have a direct relationship with customers. Instead, they remain in the background overseeing the process and ensuring it remains airtight for consumers and businesses alike.

 

Financial Ombudsmen

This is the independent service set up by Parliament for settling financial disputes and maladministration between consumers and businesses. They will make circumstantial decisions in each case based on what is fair and reasonable.  They must take into account relevant laws, codes of practice and industry guidelines and standards.

 

Direct Debit bureau

Direct Debit bureaus, like DFC, are the experts in managing all aspects of the Direct Debit scheme from setup through to collection. This takes the onus of busy organisations which don’t have the time or knowledge to manage their collections themselves. Direct Debit bureaus improve cash flow and collection rates and can even offer advice and guidance on the best ways to get new and existing customers on board.

 

Get in touch with DFC today. Our mission is to help you improve your relationships with your customers so that they stay longer. You can leave us to collect your Direct Debits, while you concentrate on running – and growing – your business

Direct Debit processing timescales

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.

Follow us on Twitter and LinkedIn.

Is my business eligible for a Bacs Service User Number?

  • 31 Jul 2017
  • Blog
  • Comments Off on Is my business eligible for a Bacs Service User Number?

A Service User Number (SUN), also known as an originator ID, is a unique identification number. It is used by Bacs as a distinguisher between organisations that collect Direct Debit payments.

Your SUN is a six numbers long and can be found on all forms of communication as a way of maintaining transactional records. This is handy in the event of, say, payment errors or fraud.

Suppliers can either apply for their own SUN or submit indirectly through a Direct Debit Bureau.

 

How do you obtain a SUN?

In order to obtain your own SUN, you must first apply for sponsorship. This is usually done through a bank. Each bank has its own standards which need to be met. However, it is compulsory that a business:

  • Has a UK sterling bank account
  • Completes and lodges an indemnity with their sponsor

Furthermore, other variables include:

  • An organisations contractual capacity
  • Its financial standing
  • The quality of its administrative control

 

SUN via a Direct Debit bureau

Alternatively, if you don’t have access to your own SUN, you can manage your Direct Debit collections through a third party. This will still necessitate a SUN, but it doesn’t have to be your own. There are two options for this:

  1. Facilities Management – the direct debit bureau will collect and administer Direct Debits themselves through a SUN set up specifically for the merchant. The Facilities Management will maintain ownership of this SUN.
  2. Payments Institution – Payments Institutions are regulated under the Payments Service Directive and manage all their operations via one single SUN. Payments go through the bureau before being paid onwards to the client.

At DFC, we operate using our own SUN. Even so, a large number of our clients still use us to collect payments on their behalf using their own SUN – the choice is yours.

Find out more by getting in touch here or contacting us on 01908 422026.

Follow us on Twitter and LinkedIn.