Paperless Direct Debit
Bacs, Direct Debit, Paperless Direct Debit (PDD)
22, JUL 2020

Recently we have seen an increase in the number of organisations contacting us because they want to introduce Paperless Direct Debits (PDD). The Covid-19 lockdown has highlighted the difficulties inherent with a paper-based system. As offices and mail houses have been closed – interrupting the flow of paper Direct Debit Instructions (DDI) – many organisations have decided now is the time to embrace paperless. For those organisations that have yet to do so, here is further information about why it might be suitable for you – and remember, if you have any questions about this infromation, please contact us. We are here to help.

What ARE Paperless Direct DebitS?

Paperless Direct Debit, (PDD) is a method of signing up new Direct Debit payers without them having to fill out a paper Direct Debit Instruction. Instead the payer gives their authority remotely via one of the following methods:

  • Telephone – The payer provides their authority over the phone and provides their account details verbally so they can be checked in real time.
  • Internet – The payer completes an on-screen Direct Debit Instruction (DDI) at a time convenient to them. A checking system can also be built in to the screens to ensure that the payer is unable to progress if details are entered incorrectly
  • Face to face – A Service User representative can enter the details straight into a computer without the customer needing to sign a paper DDI. It allows for immediate checks of the accuracy of information provided.
  • Electronic signature of documents
  • Telephone key pad / interactive TV.

What are the advantages of Paperless Direct Debits?

Operating Paperless Direct Debits offers benefits for both Service Users and customers (payers).

Benefits for Service Users:
  • Quick turnaround – No waiting for a postal DDI. This means the Service User can collect monies faster and provide the payer with prompt access to goods/services
  • Reduced paperwork and postage costs (so more environmentally friendly too)
  • Better service – Customers like internet / telephone options and improving your customer service and company image means you can gain business and competitive advantage.
  • Improved accuracy – Fewer keying errors or poor handwriting to decipher – bank details checked in real time.
  • Additional revenue – Customers like face to face and telephone sign-up so it can help to get more people signed up!
  • 24/7 operation – With internet signup, an organisation can gain new payers outside of business hours which depending on the business and payer demographics, can be advantageous, i.e. students and shift workers will often sign up to services in the evening whilst others, i.e. retired payers may prefer to sign up during the day.
  • Avoids common issues with paper-based systems e.g. Poor handwriting on paper DDI’s that leads to incorrect re-keying, (Where details are keyed directly into an interface they can be validated at point of entry/sale).
Benefits for your customers:
  • Easy sign up – payers can sign up according to preference – phone or internet and there is no need for them to wait for opening times or for ‘office hours’ which might not be convenient.
  • One less thing to remember – no one has to remember to submit a cheque or phone up to pay on time
  • Peace of mind – Direct debits are protected by the Direct Debit Guarantee which means that any payments taken in error will be refunded. It avoids the possibility of cheques going missing in the post – or not being cashed promptly, and of cash being misappropriated.

How can I introduce Paperless Direct Debits into my process?

If you would like to introduce Paperless Direct Debits you will need to:

  • obtain approval from your sponsoring bank to run a paperless system.  It will not be suitable for all organisations. Approval can be applied for and implemented at the same time as AUDDIS. You will need to complete a paperless application form and undertake a basic test of your understanding of the rules and processes
  • ensure you have live AUDDIS status (as authority has to be transmitted electronically)
  • only use your AUDDIS SUN’s for paperless DDs and not for paper DDIs
  • submit all documentation to your sponsoring bank for approval prior to use (e.g. the script used for telesales staff, online sign-up screens, DD confirmation letter, Advance Notice and DDI).
  • have at least 2 of their staff complete Bacs’ e-learning PDD on-line training programme. Your processes may be subject to periodical reviews by your sponsor bank.

What else do I need to do differently if I operate Paperless Direct Debits?

There are additional considerations when using PDD – we would be happy to discuss these further with you. These include:

  • The need to carry out account validation – best done at the point of capture. This improves the quality of data input by Service Users, so that only valid bank details are stored for subsequent lodgement. Account validation incorporates an Industry Sort Code Directory (ISCD) check (The iSCD lists all UK Sort Codes along with allowed transactions) and Modulus checking – which checks that the given account number can exist with the sortcode listed. If a payer has entered incorrect details this modulus check will flag and the payer can be asked to re-enter valid details.
  • The need to have a KYC (Know Your Customer) process in place – As the Service User is not obtaining a signed instruction they are required to check the identity of the payer using a KYC (Know your customer) process. There are a number of ways that this can be done, including existing customer records, electoral roll details etc (Bacs have issued a recognised list of methods to verify a payers identity). This is required to minimise risks of customers using other peoples’ bank details. The verification method used is decided by your sponsoring bank, based on an assessment of risk associated to your business sector.
  • Impact upon Indemnity counter-claim process – The process relating to indemnity claims is affected. Service Users cannot counter claim if they receive an indemnity for the reason ‘payer disputes having given authority’ because without the paper DDI (and signature) they are unable to prove authority.
  • Confirmation following set-up. Following a Paperless Direct Debit sign-up, Service Users must send a confirmation letter or combined confirmation and advance notice letter to the payer. The confirmation letter confirms the bank details that will be debited, the Service User details and the Direct Debit Guarantee.

Expert Help and Support

If you’d like to introduce paperless direct debits but don’t have the resources available to get it set up, why not get in touch with us? We offer tailored direct debit consultancy to help organisations get started with direct debits. We offer a range of training options and of course, we can also process the direct debit files and send these to BACS for you through our direct debit bureau. Still have questions? Contact us now.