What is a Modulus Check?

When you operate a Paperless Direct Debit (PDD) system, a modulus check is mandatory at the point of customer sign-up. For users of both AUDDIS (Automated Direct Debit Instruction Service) and paper-based Direct Debit systems, it is highly recommended at the point of customer sign-up. What is it? Why is it important? And what are your options?

 

1. What is modulus checking?

Modulus checking is a validation check of bank sort code and account number combinations. It confirms that the account number 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 find out that the account COULD be correct. If the bank sort code and account number, don’t match up, then the Direct Debit will fail, meaning you have to start chasing for the right information to correct the error. It’s so much easier to get it right the first time.

Note: Modulus checking is different from a sort code look-up. With a sort code look-up, you are simply checking the sort code of the bank or building society to see if it is correct, and 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 a customer signing up to pay by Direct Debit means you can make sure the customer’s bank account details are taken accurately at the point of sale. This offers a number of benefits:

– It reduces errors. Getting it right the first time takes far less time and effort than trying to sort out errors later.

– It prevents subsequent payment runs being affected—reducing the number of returned payments and avoiding 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 (STP), i.e. the data can be keyed in once and passed through for processing, rather than any details having to be rekeyed. This reduces administration costs and improves efficiency.

 

3. How do I perform modulus checking and sort code look-ups?

There are various options available for both sort code look-ups 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 provides a free, online service called Sort Code Checker. 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.
Try 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:

– The Royal Mail’s postcode finder allows you to check up to 50 postcodes per day, free.

– Unified Software are “specialists in fraud detection, payments processing, and bank detail validation”. They offer a range of services and, if you’re interested, you can request a demo.

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 sign-up, however, but this is when, particularly with Paperless Direct Debit, you have the ability to check the details with the customer and correct any unintentional errors.

 

Still have questions?

Modulus checking is something that can if you get it right, save you a huge headache and a lot of inconveniences. If you still have questions, feel free to get in touch.

Did you know we’re a Bacs Accredited Direct Debit Training Provider? Check out our range of training courses and get in touch to book a session—in person or online.