Payment Processing Blog

If you're a business that collects regular payments from your customers, then you could be missing a trick if you're not using direct debits to collect payments.

A few stats below may give you some comfort:

• 87% of Direct Debit users cite that it is a convenient way to pay bills
• 79% believe that Direct Debit is a hassle-free payment method
• 82% of Direct Debit users believe they save you time
• 84% believe that Direct Debit is a safe and reliable way to make bills
• 73% of Direct Debit users say that they can help to make your life easier
• 65% believe that using Direct Debit saves them money

Data Source: Bacs Family Finance Tracker 2010 (January-June)

So it may not be as difficult as you think to migrate customer payments over to direct debit.  A few propositions could be for example:

• Promoting a choice of payment dates to coincide as much as possible when your customer has available funds in their account
• Promoting more frequent Direct Debit collections e.g.weekly or fortnightly, to fit in with the budget cycle for those paid more regularly
• Offering appropriate advance notice for the collection frequency, and generally offering as much notice as possible and in as visible a manner as possible
• Offering additional or irregular Direct Debit collections if appropriate for the product/service being offered

And, most importantly, there are a whole host of benefits for your business too:

• Average 98% Payment Success Rate
• Consistently Get Paid On Time
• Amend your pricing without the need for additional paperwork
• Minimal Administration with a user-friendly, web-based interface
• Set payments up either face to face, over the phone, or via the web

Eazy Collect is a BACS Approved Bureau who can help you get the most from direct debit processing.

Ensure your advance notice letters are Scheme compliant and the formats being used have been approved by your sponsor bank or, if you use an outsourced BACS Approved Bureau, such as Eazy Collect, they will handle this for you.

The bank account holder must receive an advance notice when:

• Signing up to pay by Direct Debit,
• Changes are made to the amount previously advised, or
• Changes are made to the Due Date previously advised.

The Advance Notice allows payers to budget for the collections and question a collection before it is debited from their account.
The notice period for advance notice is most commonly 10 working days plus postal time (if applicable).

The Advance Notice must include:

• Service user contact details
• Collection Amount(s)
• Collection Dates(s)
• Direct Debit Reference Number
• Service User Number (SUN)

The most common method for providing advance notice is in letter format, though many sysems can use email if you have your customer's information.

An invoice, statement or payment schedule format is also acceptable if they include the above advance notice information.

Advance notice letters must not include material that may be deemed as marketing.

On occasions it is necessary to provide customers with verbal advance notice. This is only really recommended where a payer has initiated a collection.

Further advice can be obtained from Eazy Collect on 01242 650052.

Research by BACS (the UK Clearing House) at the end of 2010 found that half of Britain's SMEs were victims of late payment with £24 billion owed, that's an average amount of £27,000.

Coupled with that, a staggering 158 million working hours were lost to chasing overdue payments.

If your business collects regular payments from customers it could pay you to use electronic payment methods such as direct debit.

You could see a much improved cashflow as payments arrive on a set date, so you're not relying on an individual to remember to post your cheque, plus you won't have to wait a further 3-5 days for the cheque to clear before funds become available to use.

Processing electronic payments is much cheaper than cheques, so your bank charges will reflect that accordingly.

You could write to your customers and make them a special offer for signing up to direct debit, knowing you'll be on your way to more reliable payments in the future.

Ask a reputable direct debit provider to see whether direct debit payments would be suited to your business, and it could be that you'll no longer be amongst the 53% of businesses suffering late payment.

Direct Debit Collection rates are unparalleled with a collection rate of 98%* during 2010.

Are 98% of your customers paying you on time, or do you find yourself chasing late payments every month and sometimes struggling with cash-flow?

If it's the latter, then using direct debits to collect your customer payments may be the solution.

Using direct debit to collect regular payments has many advantages over cheque, card payments and standing orders:

• Predictable income flow
• Far cheaper than collecting card payments
• No card expiry dates to contend with
• Electronic rather than manual processing
• Failed payments automatically resubmitted
• Amend your prices without needing additional paperwork signed

If you want to know more about whether direct debit is suited to your business and how you go about implementing it in your business, we have an faq's and resources section in our website to help you.  It has a wealth of material and we're on hand if you need to chat live online.

Eazy Collect Services Ltd. are a BACS Approved Direct Debit Bureau.

*Source: BACS Annual Report 2010

Direct Debit is probably the most versatile way of collecting regular customer payments.

To start with, processing any customer payment comes at a cost:

• Bank charges for processing cheques
• Expensive percentage-based transaction charges for handling card payments
• Admin overhead in reconciling Standing Orders
• Late payments causing cash-flow problems

For businesses that collect regular payments, Direct Debit is now the best option bar none.

The recent 2010 Annual Report produced by BACS* showed that direct debit transactions grew by 2.8% in 2010 to 3.8 billion transactions with 72% of adults having at least one direct debit.  In addition the payment rate is unparalleled with a 98% success rate.

If your business would like to receive 98% of payments on time, then taking direct debit payments could help you, since:

• There’s no expiry dates as with card payments
• The banks are desperate to phase cheque payments out as the cost of processing them is expensive
• You could offer your customers payment options
• There’ll be no customer excuses of ‘the cheque's in the post’

*BACS is the UK body owned by Europe’s Leading Banks and charged with the provision of automated payment services and payment clearing.

Eazy Collect Services Ltd. is a BACS Approved Bureau

Merchants who accept direct debit and credit card payments understand the need to balance the convenience of electronic payment methods with the security and privacy of their customers’ personal and financial data. The Payment Card Industry Data Security Standard (often abbreviated as PCI) has been developed by the leading credit card companies to help merchants implement systems, procedures and equipment to safely process transactions while protecting customer data.  Many of the security standards and practices overlap with those in the Direct Debit world.

PCI outlines security requirements for merchants and service providers to store, process and exchange cardholder data securely. The standard was implemented to reduce credit card fraud and hacking, and to increase consumer confidence in e-commerce and the security of their personal data.

Besides the obvious security benefits, it’s important for merchants to learn about and follow PCI standards because failing to do so can subject them to substantial penalties and, potentially, the loss of their ability to accept credit and debit card payments.

Major Requirements

Customer Privacy – Full credit card numbers cannot be stored after processing, and cannot be displayed on customer sales receipts. Customer account and transaction data must be stored separately, and should only be accessible by authorized personnel. Card verification numbers cannot be stored once a transaction is completed, and magnetic stripe data must be purged from your records and any equipment or software used in transaction processing once a transaction is authorized.

PCI Compliance Validation – For most merchants a Self-Assessment Questionnaire must be completed annually, and companies that store cardholder information or have processing systems connected to the Internet must also have quarterly scans by an approved third party. Compliance with these requirements is mandatory.

Protect Your Website – Work with your IT provider to ensure your site and internal networks are protected by a working firewall, keep applications and security patches current, change default passwords on equipment and online applications, encrypt data sent over public networks, restrict access to authorized personnel, and assign distinct user IDs and passwords to anyone who needs to access data.

Following these guidelines, and working with your payment processor to monitor any changes to PCI requirements, will help your company protect customer data and provide a safe shopping environment for your customers.

From a direct debits perspective, the above also applies to personal and bank account information.

Article adapted from: The Basics of PCI Compliance

Eazy Collect Services Ltd. provides direct debit services and card payment solutions for businesses throughout the UK.

Whatever customer data your business holds, the security of that information is of paramount importance for both parties. And, when it comes to financial data, it becomes even more important.

If you're considering in-house direct debit collection as a payment method in your company, there are some serious considerations over and above the standard payment administration processing.

Role-based Access means restricting access to sensitive information such as bank account details and transaction information to those who need to see it to perform their role in the business. If a role does not require the need to see this information, then through passwords and restrictions, the users must be prevented access.  If you don't have this in your business it's a complex project to implement and requires cross-function input and be implemented and maintained by an IT-driven process.

Locking-down your IT infrastructure to make sure the systems are not vulnerable to viruses and other denial of service attacks requires constant attention for any business, but often needs to be at a stronger level when incorporating financial systems.

Using a direct debit originator can allow businesses to securely outsource payment processing and leave the security headaches to someone else whilst you concentrate on your core business.  A businesses still owns and controls the process, however the infrastructure used to process payments is owned and maintained by the originator reducing many of the security headaches and overheads.

With most payment options, customers often find excuses not to pay, even happy ones!

For those customers that make regular payments to you, it has been proven that by using direct debit as a payment solution, customers rarely cancel  their direct debit if everything is ticking over nicely. And your payments come in like clockwork, much more reliable than waiting for cheques or manual BACS payments.

Customers Paying By Direct Debit Are Therefore Worth More To Your Business.

Direct Debit also gives you the flexibility to offer customers flexible payment options so they can spread their payments over an agreed period of time.

A direct debit bureau can give you advice on whether direct debit payments are suitable for your type of business.

Offering a range of payment options to your customers will help to convert more of your prospects into paying customers.

The offer can be marketed to encourage your customers to buy, by giving them the option of spreading the cost of the purchase and a choice of payment dates.  Incentives such as this can make the difference between winning and losing a customer.

And for businesses that provide an ongoing service, a direct debit is by far the most cost effective and reliable way of getting paid on time.

A full service direct debit set up only takes a few days, and you can be processing payments from your customers, usually within a week.

You can get unlimited food in a restaurant, unlimited texts on your mobile phone and unlimited warranties usually for an ongoing monthly payment or one single payment. It is undeniably a risk offering unlimited anything especially if you are a small business but this is increasingly what businesses are doing as a way to regulate cash flow and develop more of a bond with their clients.

A membership scheme would work for most businesses but especially those businesses whereby the development of regular clientele are the key to the cash flow and overall success. A good example of an industry that has not really embraced this concept in the UK is the hairdressing, grooming and beauty sector. In the USA a franchise chain called Kennedy’s All-American Barber Club seem to be blazing a trail in this respect.

In consideration, take a £10.00 haircut and somebody getting their hair cut every six weeks or about nine times a year. That particular client would therefore pay £90.00. If the monthly membership fee for the unlimited haircut scheme was £15.00 per month then the proprietor of that shop would exactly double that income and almost certainly not have to give that individual 18 haircuts!

By offering a club which allows the participant to receive unlimited haircuts, manicures, shaves or a range of services the proprietor is (hopefully) achieving a variety of things such as:

• Increasing customer loyalty
• Using a relatively innovative marketing strategy
• Improving cash flow and securing a more reliable income
• Giving customers more
• Obtaining client details so future promotional material can be sent to them
• and as highlighted above greater profitability

Using a Direct Debit Bureau these monthly payments can be set up, monitored and professionally collected with minimum set up and ongoing costs. There is no doubt that other companies in other sectors could also offer a similar service and maximise their cash flow by offering their clients unlimited access to their service, skills or product.