Direct Debit Blog

BACS Payment Schemes Limited, the company which sits behind the Direct Debit and Direct Credit schemes is owned by 16 leading banks and building societies based in the UK, Europe and the United States.  All of the members of BACS have a number of roles and responsibilities including:

• Settling at the bank of England
• Underwriting the Direct Debit Guarantee
• Guarantee BACS
• Fund BACS
• Underwrite all risks incurred by BACS
• Direct BACS and determine its plans
• Use BACS to support their customer propositions

In 2012, BACS processed more than 3.43 billion Direct Debits with the highest number of payments processed in one day topping a staggering 97.6 million (a value of £23 billion).  BACS also saw an increase in Direct Debit volumes of 3.2% - a figure not experienced in the last five years which goes to show that more and more people are turning to Direct Debit to settle regular invoices.  

Direct Debit remains extremely popular with the public, with 64% of people preferring to pay most bills by Direct Debit and 39% who would like to settle all bills in this manner.   

BACS, the company behind the UK Direct Debit Scheme has released details of their latest findings relating to overdue payments to Small to Medium sized enterprises.

The research indicates that 58 per cent of SMEs found that large companies dictated when they wanted to pay their invoices, and 44 percent of SMEs that experienced late payments said that larger companies were the main culprits when it came to paying late.

With an average wait of 38 days for their money, it is no surprise to find that the current national 'late payment' debt is around £30.2 billion. The average business is waiting for £31,000 in late payments and around 10 per cent of SMEs who experience late payments are owed £50,000 or more.

Being based in Cheltenham, we can't escape the fact that it's the Cheltenham Racing Festival here in the town.  Friday, March 15th is the last day of the festival, with the highlight of the week - the Gold Cup Steeple Chase - taking place at 15.20 over 3 miles, 2 1/2 furlongs.  

Eleven runners are taking part:

Bobs Worth (8)
Bog Warrior (9)
Cape Tribulation (9)
Captain Chris (9)
Long Run (8)
Monbeg Dude (8)
Silviniaco Conti (7)
Sir Des Champs (7)
Sunnyhillboy (10)
The Giant Bolster (8)
Wayward Prince (9)

Direct Debit is a flexible and powerful payment method which has a proven forty year track record. One of the reasons Direct Debit remains so popular is because the general public has complete trust in it because of protection offered by the Direct Debit Guarantee. In a blog article last year, we discussed how the Direct Debit Guarantee introduces an element of risk to collections by Direct Debit, and how that risk to the collecting organisation (Service User) needs to be managed.

In the current economic climate, it is become more and more important for small businesses to ensure that they receive payments on time.  Cash flow can become a serious problem if several invoices aren't paid in a timely manner and the 'cheque in the post' excuse begins to wear thin.  

Michael Fallon MP has been a supporter of the Prompt Payment Code which seeks to sign companies up who agree to the following three principles:

(1) To pay suppliers on time.
(2) To give clear guidance to suppliers regarding payment terms and systems.
(3) To encourage good practice within their industry sector and promoting subscription to the code.

A recent report from the Economist Intelligence Unit suggests that poor quality automated decision making is causing financial firms to lose money.

Financial firms increasingly rely on computerised decision making when making decisions on what products and services to offer its retail and corporate customers. A defined set of data regarding the customer's financial status, business and history are fed into the system, and based on predefined criteria, a decision is made by the computer. The EIU survey sponsored by Ricoh found that 37% of of the firms surveyed felt that they had lost money at least once in the previous six months and 31% felt that they had lost custom as a result of poor automated decision making.

The pervasiveness of computerised decision making has not gone unnoticed by the general public and satirists; most notably Carol Beer, a character from the comedy series "Little Britain" coined the phrase "Computer says no" which is now synonymous with inflexibility of the results of an automated decision.

From the 31st December 2012, changes took place to the way that Investment Advice is paid for by consumers.  

The FSA's Retail Distribution Review (RDR) effectively bans one of the key sources of income for Britain's IFAs - commission earned from fund providers when a client invests money in their product.  The FSA has suggested that the change in income structure will help reduce conflicts of interest; where rogue IFAs may suggest an investment based on the level of commission that they would receive as opposed to whether the product is suited to the client's needs.  

Many IFAs have suggested that they will struggle to change to the new structure where upfront fees are charged to clients as opposed to commission incomes.  It is suggested that clients will be reluctant to pay fees of around £200 per hour for investment advice where previously these were covered by commission arrangements between IFAs and their fund providers.