Also in the Direct Debit Resource Centre:
Paperless Direct Debits (PDD)
The Benefits of Paperless Direct Debit
The paperless route was introduced in 1998 to increase the speed of the Direct Debit sign-up process. There are a number of possible approaches with paperless sign-up and each offers different advantages:
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Telephone
The Payer provides their authority over the phone by giving account details verbally to the Service User representative. If any account details are incorrect, they can be checked and verified by the Service User representative with the Payer on the phone. By doing this at the point of sign-up, the Service User representative can negate the need for further correspondence to avoid a failed set up. In addition, the immediate customer support offered by the Service User representative in this way is already strengthening the relationship.
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Internet
The Payer provides their authority by completing an on-screen Direct Debit Instruction (DDI) which is sent to the Service User over the Internet. This offers the advantage that Payers can sign-up at any time of the day or night which, depending on the business and Payer demographics, can be advantageous. For example, students and shift workers will often sign up to services in the evening whilst retirees, for example, may prefer to sign up during the day. A checking system can also be built into the screens to ensure that the Payer is unable to progress if details are entered incorrectly.
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Face to face
The Payer must be offered a paper DDI to sign. However, if the customer is willing, a Service User representative can enter the details straight into a computer without signing a paper copy. This offers the benefits that the DDI can be set up far quicker than if a paper DDI has to be forwarded and returned and the details then entered into the system. It also allows for immediate checks of the accuracy of information provided, as well as ensuring that the paper DDI is not taken away to be completed “at some point in the future” by the customer. That runs the risk of customers being lost due to their failure to complete the form.
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Telephone keypad / interactive tv
These are less commonly used. However, as above, they can be used to ensure that immediate checks are conducted on the data and that customers sign up there and then, rather than going away and possibly being lost.
Additional Benefits of PDD
In addition to the advantages mentioned above, Paperless Direct Debit offers:
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Quicker turnaround time
No waiting for a postal DDI. This means the Service User can collect monies faster and provide the Payer with prompt access to goods/services.
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Reduced paperwork and postage costs
Less paperwork reduced postage costs, and it’s environmentally friendly.
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Better service
You can gain business and competitive advantage, as customers like Internet/telephone options.
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Improved accuracy
Fewer keying errors and less poor handwriting to decipher – bank details are checked in real-time.
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Additional revenue
Getting more people signed up = additional revenue.
Paperless Direct Debit addresses some of the issues caused by paper sign-up:
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Poor handwriting on paper DDI’s
Often details can be keyed into a system incorrectly due to poor handwriting or missing information on a paper DDI. With a system where details are keyed directly into an interface and validated at point of entry/sale, this issue is negated.
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Moving customers away from other payment types
Sending out a paper DDI to move existing customers away from Standing Orders or other payment approaches provides an opportunity for the customer to opt-out of the service. By gaining authorisation during customer contact, i.e. with a Service User representative on the phone or face-to-face, the fears/concerns of the customer can be addressed and overcome, which is more likely to result in a successful outcome.
Paperless Direct Debit Signup – Issues to Consider
In order to operate a paperless signup system a Service User MUST:
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Obtain approval to run the system
Approval is needed from the sponsoring bank to run a paperless system. It will not be suitable for all organisations.
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Have live AUDDIS status
Live AUDDIS status is essential, as authority has to be transmitted electronically.
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Only use their AUDDIS SUN’s for paperless DD applications
The Service User should not submit a paper DDI under an AUDDIS SUN – they should only be used for Paperless DD applications.
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Obtain approval for documentation
Approval for all documentation must be obtained from the sponsoring bank before implementing Paperless DDIs. In particular, the script used by telesales staff, face-to-face representatives, telephone keypad and Internet screens, plus the DD confirmation letter, Advance Notice and DDI must be approved.
A paperless approach introduces additional liability/risk and therefore requires additional processes to be in place. It is therefore not suitable for all products or sectors. Service Users should be aware of the additional risks, and the need to:
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Verify the customer details
It is the Service User’s responsibility to verify the customer details. There are a number of ways that this can be done, including via existing customer records, electoral roll details, etc.
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Validate the payer’s bank details
It is the Service User’s responsibility to validate the Payer’s bank details, i.e. by conducting modulus checking.
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Confirm
Service Users must issue a ‘Confirmation’ that the direct debit set-up.
A further consideration is that Service Users cannot counter claim following receipt of an Indemnity Claim because “Payer disputes having given authority”.
Paperless Direct Debit Process
Paperless Direct Debit enables Service Users to capture Payers’ bank details over the telephone, online, or by any other means approved by their sponsor bank. Paperless Direct Debit is used alongside the traditional paper-based sign-up process.
The Paperless Direct Debit process is:
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Access
The Payer’s bank details are entered online and passed into the Direct Debit Management Software (Label – e.g. Finance Application, CRM Software) or taken directly by phone and entered into the suggested platforms.
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Data entry
Bank details must be entered directly into the back-office system holding the Payer’s bank details (i.e. once only, at the point of sale).
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Validation
Bank account validation must be performed at the time of entry.
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Confirmation
Confirmation of the Direct Debit set-up is given to the Payer by letter or electronically. This can be combined with the Advance Notice.
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Advance notice
The Advance Notice advising the Payer of the collection schedule is sent with the confirmation or separately, as appropriate.
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Lodgement
The Paperless Direct Debit Instruction is lodged at the Payer’s bank using AUDDIS.
Due to the additional liability and risk associated with it, Paperless Direct Debit isn’t appropriate for all types of business and client bases. Paperless Direct Debit cannot be used if:
- Two signatures are required to authorise payment from an account
- A paper Direct Debit Instruction is requested by the payer
- Any Paperless Direct Debit Script question is not answered satisfactorily
The Paperless Direct Debt process will require you to make changes to your procedures and systems. Your Paperless Direct Debit processes must be compliant with the Scheme rules and signed off by your sponsor bank.
Paperless Direct Debit Script
All Service Users operating Paperless Direct Debit must follow a prescribed process when signing up Payers without the use of a paper Direct Debit Instruction. This process is known as a Paperless Direct Debit script. All Paperless Direct Debit scripts must be Scheme-compliant and signed off by the sponsor bank before use.
Key steps of all Paperless Direct Debit scripts are;
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Identification of the payer
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Capture and validation of account details
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Confirmation of payments and service user’s name
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Option to hear / read the Direct Debit Guarantee
On-line (internet) sign-up Paperless Direct Debit scripts also requires;
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SSL Server Security must be present and be a minimum of 128bit
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A printable Direct Debit Instruction
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Customer service telephone number, postal and email address
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Online advice of the advance notice
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Advice of the bank statement narrative used for collections
Account Validation
Account validation improves the quality of data input by Service Users, so that only valid bank details are stored for subsequent lodgement. Account validation incorporates:
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Industry Sort Code Directory (ISCD)
Lists all UK Sort Codes and along with allowed transactions
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Modulus checking
Tables to validate many sort code and account number combinations
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Debiting and Crediting banks and Building Societies
Rules applied to non-standard account numbers for Bacs processing
The first two, or even all three, aspects of account validation are already used in your Bacstel-IP submission processes, but will also be required at point of data entry when interacting with the Payer via a Paperless Direct Debit sign-up process. Account validation data is available directly from Bacs or from Bacstel-IP software providers.
Payer Verification
Payer verification is required to minimise the risks of customers using other peoples’ bank details. The verification method used is decided by your sponsoring bank, based on an assessment of risk associated with your business sector.
To verify Payers, Service Users can utilise historical data for existing customers, and a selection of external data for new customers. Bacs has issued a recognised list of methods to verify a Payer’s identity, available from your sponsor bank. The list includes verification methods using external data sources, for example, credit reference agencies, postcode/address data, and electoral roll data. The method used is decided, agreed with and signed off by your sponsor bank, and is appropriate to the level of risk associated with the fraudulent set-up of DDIs. Certain business sectors will require more comprehensive Payer verification methods than others.
Confirmation of Direct Debit Set-up
Following a Paperless Direct Debit sign-up, Service Users must send a confirmation letter or combined confirmation and Advance Notice letter to the Payer. The confirmation letter confirms the bank details that will be debited, the Service User details, and the Direct Debit Guarantee.
The confirmation letter must include: account holder name, sort code and account number, Direct Debit Instruction reference, Service User Number (and name), and Direct Debit Guarantee.
The confirmation letter must be addressed to the Payer, i.e. the bank account holder, who may not necessarily be the customer. Confirmation letters must be sent within 3 working days of sign-up, or no later than 10 working days prior to the first collection date, as long as this is within 1 month of the sign-up if incorporated with the Advance Notice letter. The confirmation letter may be issued electronically as long as it is formatted in the same way as a paper copy of the confirmation letter would be.
Paperless Direct Debit Implementation
Paperless Direct Debit (PDD) is a service that must be applied for by the Service User. It can be applied for and implemented at the same time as AUDDIS. Approval must be obtained from the sponsor bank for: telephone script/Internet screen text, account validation implemented at point of sale, confirmation (or combined) letter and DDIs and Guarantee. The sponsor bank determines the method of customer verification.
All Paperless Direct Debit Service Users must have at least 2 of their staff complete Bacs’ e-learning PDD online training programme. Your processes may be subject to periodical reviews by your sponsor bank.
Additional assistance from Clear Direct Debit
If you require additional assistance regarding Paperless Direct Debits, we offer Bacs Accredited Training or Consultancy to enable you to be confident your entire Direct Debit Collection Scheme is compliant, efficient and effective. If you have any questions, please don’t hesitate to get in touch to find out more about how we can help.
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