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

Common Direct Debit error messages

Direct Debits are renowned for being easy to manage. Only in around 1% of cases does a payment fail. Nonetheless, it’s still important to keep track of failures and changes to Direct Debit Instructions.

Bacs will send Direct Debit handlers reports detailing the status of payments post collection, as well as making daily reports available from 6am onwards. A series of codes will give you the information you need as to why a payment has failed or changed. These fall into the following categories:

 

Direct Debit Instructions notifications

  • Automated Direct Debit Instruction Service (AUDDIS) – AUDDIS notifications relate to issues surrounding the setup process as well as cancellations initiated by the seller.
  • Automatic Direct Debit Amendment and Cancellation Service (ADDACS) – these messages provide information on Direct Debit changes or cancellations initiated by the customer.

Payment request notifications

  • Automatic Return of Unpaid Direct Debits (ARUDD) – you will receive an ARUDD message when a payment fails.
  • Direct Debit Indemnity Claims Advice (DDICA) – DDICA notifications take place when a customer raises an indemnity claim against you. This will be for one of three reasons:
    • The customer denies all knowledge of setting up a mandate.
    • A payment has been collected after a mandate has been cancelled.
    • There are problems with a specific payment collection.

 

Direct Debit Instructions notifications

AUDDIS notifications

Errors in bank account details provided by customer

Code                                 Bacs explanation
2 Payer deceased
3 Account transferred
5 No account
B Account closed
C Account transferred
L Incorrect payer’s account details

 

Further errors in submission or Direct Debit Instruction

7 Direct Debit Instruction amount not zero
I Payer reference is not unique
M Transaction code/user status incompatible
O Invalid reference
P Payer’s name not present
Q Service user’s name blank

 

Unable to setup Direct Debit Instructions on account

F Invalid account type
G Bank will not accept Direct Debits on account
N Transaction disallowed at payer’s branch

 

Errors cancelling a Direct Debit Instruction

1 Instruction cancelled by payer
6 No instruction
H Instruction has expired
K Instruction cancelled by paying bank

 

ADDACS notifications

Direct Debit Instruction cancelled

0 Instruction cancelled – refer to payer
1 Instruction cancelled by payer
2 Payer deceased
B Account closed
D Advance notice disputed

 

Direct Debit Instruction altered

3 Account transferred to a new bank or building society (collection suspended)
C Account transferred to a new bank or building society (DDI transferred without any issues)
E Instruction amended
R Instruction re-instated

 

Payment request notifications

ARUDD notifications

Insufficient funds                  

0 Refer to payer

 

Mandate failure

1 Instruction cancelled
2 Payer deceased
3 Account transferred
5 No account (or wrong account type)
6 No instruction
B Account closed

 

Payment request submission mistakes

8 Amount not yet due
9 Presentation overdue
A Service user differs

 

Customer disputes payment

4 Advance Notice disputed
7 Amount differs

 

Get in touch with Debit Finance for any further questions you may have surrounding the Direct Debit process. Alternatively, leave them to collect your Direct Debits whilst you concentrate on running – and growing – your business.

Why do businesses choose Direct Debit?

More and more people are using Direct Debit to make their regular payments to a company. The Direct Debit payment process is time and money saving for customers, but it’s equally convenient for businesses, not least because their customer’s love it.

Whether you’re talking your bottom line, customer service or streamlining your processes, Direct Debit is a worthwhile strategy to consider. We’ll name just a few of the main benefits below.

 

Declutter your administration process

Running a company can be exhausting, particularly when you don’t have a handle on incoming payments. Your struggles will end with Direct Debit as this payment method supports your company’s cash flow and encourages payment flexibility. It’s easy to track incoming and outgoing payments because you’re in control.

 

Reward your customers

Direct Debit is the cheapest payment method available in the UK. Many organisations, particularly leisure facilities and retail, channel this into member discounts.  Special offers and incentives for people signing up by Direct Debit will make your business even more attractive to prospects and fend off local competition.

 

Easy marketing

Discounts and incentives aren’t the only way to prick the ears of potential customers. Online joining portals, like DFC’s FastDD, are available 24/7 and easily accessible, whether it’s during morning commutes or sitting back on one’s smartphone. This can be promoted across numerous channels, be it digital or printed collateral, encouraging people to sign up at their convenience.

 

Doing your bit for the planet         

Corporate social responsibility is a buzzword that doesn’t look set to lose popularity anytime soon. Thankfully, paperless Direct Debits allow you to get customers started without you having to think about paper, printing, and storage. This is beneficial to you as it is to your customers and it’s great news for the environment!

 

 

DFC provides revenue management solutions tailored to the needs of your company and clients. You can leave us to collect your Direct Debit’s whilst you concentrate on running – and growing – your business.

Recurring card payments vs Direct Debit – the winner is…

  • 01 Aug 2017
  • Blog
  • Comments Off on Recurring card payments vs Direct Debit – the winner is…

Direct Debit and recurring card payments are amongst the most common methods of making regular payments. Whilst the concept of both is similar, there are slight variables between the two which cause confusion time and time again.

So what’s the difference?

  • Direct Debit – by signing up to Direct Debit, you give an organisation the authority to take money directly from your bank account. Payment times and quantities can be fixed or flexible, but advance notice must be given to you prior to any changes in the amount debited. You have the right to cancel at any time.
  • Recurring card payment (also called a continuous payment authority (CPA)) – recurring card payments operate in a similar fashion, except you give a company or organisation the permission to take money from your debit or credit card. Amounts can be variable and you have the right to cancel at any time.

Choosing between the two comes down to whether you would rather go through a bank (Direct Debit) or a company (CPA). Ultimately, however, you’re guaranteed a much stronger safety net with the bank. This way, you have a middleman orchestrating the process. In fact, the Direct Debit process offers greater protection overall.

 

Make the right decision

A recurring card payment gives companies the authority to charge whatever they want, whenever they want.

This is also true of Direct Debit of course, but stronger safeguards hinder wayward activity. The Direct Debit Guarantee acts as a failsafe so that if an error occurs, you’ll receive a full and immediate refund of your money from your bank rather than the company itself.

Moreover, expect a bigger slog on cancellation, particularly if you’re also thinking about cancelling your credit card. A bank won’t cancel your card instantly. It will likely take a few months to ensure all payments have been processed. Recurring card payments can still take place in this time, forcing your account to stay open for longer.

Finally, it’s worth considering the failure rates and costs of a CPA. Recurring card payments characteristically go hand-in-hand with a monthly fee for a merchant account, as well as a 3% margin and 20p cost per payment. You can also expect a 5% failure rate. On the other hand, Direct Debit charges less than 1% per transaction with a failure rate less than 1%.

If you feel your company could benefit from streamlining its payment process, give us a call on 01908 422 000.

Follow us on Twitter and LinkedIn.

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.