- Bacs, Bureau Service, Direct Debit, Paperless Direct Debit (PDD), Security, Training
- 08, APR 2016
Do ‘KYC’ checks need software?
‘Know Your Customer’ (KYC)‘ checks are a mandatory requirement for any Paperless Direct Debit process, (e.g. where there is no paper Direct Debit Instruction (DDI) to be signed). Does a service user, the organisation collecting by Direct Debit (DD), need software for this?
Not necessarily. Whether KYC checking software is required actually depends on a number of factors and, more importantly, will be dictated by the service user’s sponsoring bank. This is typically prior to the approval of an application to use a Paperless Direct Debit method.
- Nature of the business/ organisation
- Current business processes and historical ‘customer’ data
- Number of regular sign-ups
- DD volumes & values
Choosing KYC checking software
It remains a challenge to verify whether a payer owns their bank account when using a paperless DD sign-up method. Although there are many software providers of real-time KYC checking tools, only a few are capable of offering a high rate of accuracy. If software is intended for Paperless Direct Debit sign up only, avoid buying costly systems before undertaking due diligence on what the direct debit rules say, coupled with what the sponsoring bank requires. Ask, does the solution exceed the requirement? Do existing systems and processes already meet the scheme’s KYC rules? As mentioned, the sponsoring bank has the final say on whether the service user has met the requirement.
What are the alternatives to software?
You may consider a Bacs Direct Debit Bureau as an alternative for your paperless DD process. A Bacs Bureau can submit transactions on a service user’s behalf and in some cases, can offer branded internet screens for direct debit sign-up online. There are many advantages to using a Bacs bureau including saving on the costs of website development, avoiding the challenges in meeting the requirements of the scheme and assisting with compliance to the KYC rules, keeping in mind that the sponsoring bank may have additional requirements of the service user.
Clear Direct Debit’s Bacs Approved Bureau service offers a number of benefits to running an efficient and compliant direct debit process. It is Bacs approved and fully complies with current direct debit scheme rules around ‘KYC’ and ‘modulus’ checks (the validation of sort-codes and account numbers). See more on our Bacs Approved Bureau.
Linked Blog: Concerned about Direct Debit Fraud? Do you KYC?
See more on Clear Direct Debits Bureau Service
See more on Clear Direct Debits Scheme Training
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