continuous payment authority, Direct Debit, Direct Debit Guarantee, Know Your Customer, security
26, JUL 2017

With the huge rise in the use of technology in all aspects of our lives, many people now make many payments over the telephone or online. With this constant exchange of sensitive information, it’s understandable that people have become increasingly concerned about fraud. This might lead many people to question the security of direct debit solutions – so we’re here to answer that question, so that you can reassure your customers.

Setting up a direct debit

The process of setting up a direct debit is protected by a number of safeguards. If your organisation uses a paper form, your customer must return it, signed. While it is your responsibility as the Service User to verify the identification of the person setting up the direct debit, a signed direct debit form is good evidence of this.

Paperless direct debit

You may find that customers are more concerned about security when it comes to paperless direct debit. No signature is required – and customers provide bank details over the telephone, the internet or face to face but with the details entered into a device such as PDA, laptop or handheld device. While customers might well be worried about someone else getting hold of their bank details and setting up a direct debit on their account, you can reassure them with information about the ‘Know Your Customer’ process.

The BACS scheme rules require that when a signature is not obtained when setting up a direct debit, the Service User must verify the identity both of the payer AND of his or her address. This means that it is difficult for someone to set up a direct debit on another individual’s bank account.

The sponsor bank must also approve the paperless sign up procedure you wish to use – another layer of security that should reassure your customers.

More secure than online card payments and Continuous Payments Authorities

In many cases, direct debit offers a far more secure solution to customers than making card payments online. The requirements on the Service User to verify the identity of the payer and his address is a far more rigorous process than simply dictating your card details out over the phone or completing an online payment form.

In addition, if a customer provides card details to set up a Continuous Payment Authority, there can be problems in the future for customers who are not aware that future payments may be taken, with no notice about increases or changes. In the past, there has also been a problem with the ongoing storage of customers’ card details.

The Direct Debit Guarantee

Underpinning the security of direct debits is the Direct Debit Guarantee. This is arguably the most important aspect of the whole scheme, and one of the key reasons why customers should be reassured about using direct debit solutions. The Direct Debit Guarantee means that any error in the direct debit process will be immediately refunded by the paying bank or building society. The Guarantee also requires customers to receive notice of any changes in payment amount, payment frequency or payment date.

Getting it right for your customers

As a Service User, it’s important to understand your responsibility to check and verify the identity and address of the individual setting up the direct debit. Make sure all your staff understand the fundamental importance of this, and ensure that you have a process in place to underpin this responsibility.

Regular training and updating of your staff is vital to ensure the smooth running of your direct debit solutions. You can also work with a direct debit bureau to ensure your processes are secure. We can help with both these aspects of direct debit – get in touch to find out more!