Modulus Checking: What, Why and How?
Modulus checking is mandatory at the point of customer signup when you operate Paperless Direct Debit, (PDD). It is highly recommended at the point of customer sign up for users of both AUDDIS (Automated Direct Debit Instruction Service) and paper based Direct Debit systems. Are you aware of why and what your options are?
1. What is modulus checking?
Modulus checking is a validation check of sort code and account number combinations. It confirms that the account number that a customer has given you can validly be paired with the sort code that they have provided. It does not verify that the account is correct for the named beneficiary, but does ascertain if the account COULD be correct. Often Debit collection was returned unpaid.
Note: Modulus checking is different from a sort code lookup. With a sort code lookup, you are simply looking up the sort code of the bank or building society to see if it is correct and to see which bank and branch it relates to.
2. Why is modulus checking at the point of customer sign up important?
Conducting a modulus check at the point of customer signing up to pay by Direct Debit means you can make sure customers’ account details are taken accurately at the point of sale. This offers a number of benefits:
- Reduces errors. Getting it right the first time takes far less time and effort than trying to sort out errors at a later time.
- Prevents subsequent payment runs being affected – reducing the number of returned payments and a costly correction process.
- It improves customer service. If a Direct Debit payment is not collected when a customer expects it to be they will most likely blame the collecting organisation for making the error, (even if they have provided incorrect details!). Avoiding errors prevents customer inconvenience which in turn ensures higher customer confidence and fewer aggravated phone calls!
- It allows Straight-Through-Processing (i.e. the data can be keyed in once and passed through for processing rather than any details having to be re-keyed). In turn this reduces administration costs and improves efficiency.
3. How do I perform modulus checking and sort code lookups?
There are various options available for both sort code lookups and modulus checking. We have provided some examples below – though others are also available. The most suitable option for your organisation will depend on factors including the number of checks you have to make, the number of administrators making these checks and the frequency with which you require checks to be conducted.
- Vocalink provide a free, on-line service called Sort Code Finder. You need to register to use it (a simple process) and you can then check up to 5 different sort codes a day to see if they are valid. http://www.vocalink.com/products/sort-code-finder.aspx.
- http://findsortcodes.co.uk/. You don’t need to register for this free service and it will provide bank address details as well.
Modulus checking services can add up but here are some options to look at:
- http://www.postcodeanywhere.co.uk/bank-account-validation/try-it-now/. This site allows you to check some details for free. It also offers a free trial.
- http://www.experian.co.uk/payments/product-demos/bank-wizard-live-demo-sign-up.html. You can access a free bank wizard trial on this website but you do have to register to use it.
- https://www.unifiedsoftware.co.uk/freetrial/trial-register-int.php. This site also offers a free trial where you can use the service for 30 days for free – or 300 hits, whichever expires soonest. You will need to register to use it.
Note: All Bacs approved software packages include sort code look up and modulus checking which is applied at the point of sending the payment file to Bacs. This is important (and mandatory for AUDDIS users) as entries with incorrect account numbers are usually rejected either by Bacs or the receiving bank and returned as unpaid or unapplied. These software packages do not necessarily apply the checks at the point of customer signup however and this is when, particularly with Paperless Direct Debit, you have the ability to check the details with the customer and correct any unintentional errors.
Do you still have questions about modulus checking or sort code lookups? If so, please contact us.