Do you want to process your own Direct Debit collections? Here are 4 things you should consider
It can sometimes be difficult to understand why a company which processes Direct Debit payments such as SmartDebit is needed. As a consumer you’re probably aware of Direct Debit; you may pay your Council Tax bill or your utilities using this payment method and know that, bar entering your details onto a paper or online form, your payment is collected from your bank account every month like clockwork. However as an organisation which needs to collect payments and looking at Direct Debit as a payment method for the first time, there is more to Direct Debit than may first appear and before committing to processing your own payment collections you may wish to think about the four considerations below.
1. You need sponsorship from your bank
In order to process your own Direct Debit collections, you need sponsorship from your bank or paying payment service provider (PSP) to be accepted as a service user of the Bacs Direct Debit scheme. The service user number effectively acts as a licence.
In order to sponsor an organisation, the PSP will generally require a minimum £1 million turnover and 18 months trading history, but each PSP is different in their criteria and compliance requirements. If successful, you will have your own service user number, or SUN, which will allow you to be a direct submitter to Bacs for processing Direct Debit collections. If you cannot obtain your own SUN, this will mean that you need a bureau which has its own SUN to assist you, otherwise known as a managed service.
2. You need Bacs software
Once you have your own SUN, you then need to ensure you have the necessary IT to process collections accordingly. Direct Debit collections are processed via file submissions to Bacs which have to be submitted via Bacstel-IP – a highly secure delivery channel which is the largest Public Key Infrastructure (PKI) in the world. Bacstel-IP can only be accessed via either approved Bacs software or the secure website Bacs payment services. With only a limited number of providers which pass the rigorous quality standards required, the investment in this software is often substantial.
3. You need dedicated and expert resource
Bacs has a guide book of rules and requirements for the Direct Debit scheme which is regularly updated and must be adhered to. Knowing these and applying them in practice requires training. There are also a large number of administrative tasks beyond file submissions, including managing payer notifications and checking and acting on processing reports supplied by Bacs. It is extremely likely that should you process Direct Debits you will require at least one dedicated and highly trained staff member, or most likely a team. Failing to adhere to the scheme rules can result in penalties, including revoking your SUN.
4. You may be missing out on further efficiencies
Using a bureau, such as SmartDebit, can take care of much of the administration headaches and scheme compliancy. However, beyond being handheld through the process of starting to collect payments by Direct Debit, there are many ways that using a bureau can help to make your collections more efficient. For example, using an API (Application Process Interface) can provide integration with your CRM system to give visibility of payments and interactions and provide a single source of truth. Using a bureau will also likely help you to achieve low levels of indemnity claims and errors, thanks to the value add of experience and built-in automated error resolution tools. SmartDebit customers achieved an average payment churn rate of 0.39% in 2018.
We often speak to organisations who currently process their own Direct Debit collections but are now looking for help. It can be an attractive prospect initially, but quickly the administration becomes heavy to handle and errors lead to higher costs and payers cancelling their regular subscriptions.
We’ve been processing Direct Debit payments for 20 years, and we like to think that in that time we’ve become pretty good at it. Specialising in Direct Debit processing has enabled us to get to know the Bacs system inside out, and we help organisations to get paid on-time, all the time. Contact us to find out more.