Bacs, Bureau Service, Direct Debit, Paperless Direct Debit (PDD), Security, Training
08, APR 2016

KYC (Know Your Customer) checks are a mandatory requirement for any Paperless Direct Debit process, (i.e. where there is no paper Direct Debit Instruction (DDI) to be signed). Does a Service User – the organisation collecting payments by Direct Debit (DD) – need KYC 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.

Factors include:

– Nature of the business/ organisation

– Current business processes and historical ‘customer’ data

– Number of regular sign-ups

– DD volumes & values

For more on information, see our pages on KYC.

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 KYC software vendors offering checking tools, not all KYC compliance software is capable of offering a high rate of accuracy. If the 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 KYC compliance 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 involved 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 for running an efficient and compliant Direct Debit process. It is Bacs Approved and fully complies with current Direct Debit Scheme rules concerning KYC and modulus checks (the validation of sort-codes and account numbers).

Want to know more?

If you want to know more about this subject, read our blog: Concerned about Direct Debit fraud? Do you KYC?

Check out our expert Direct Debit Training and book a course or a module. Need help now? Feel free to contact us.