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Online paperless Direct Debits

I'm often contacted to discuss potential projects where many companies wish to opt to for a paperless Direct Debit process over the internet.  It seems an obvious enhancement to the processes of many businesses - take the paperwork away and everything becomes much easier to attract new customers.

If only it was that simple.  Your sponsoring bank will need to approve your web pages if your are directly submitting to Bacs, which most companies do.  All banks tend to have slightly different approaches to this approval process.  A private bank sent one of my clients a two page ticksheet listing all the relevant verification options (card details, personal info, mother's maiden name, etc).  On the other hand, a high street bank did not regard account validation as essential for online set-up.  Ultimately, the paperless sponsorship forms force the company to agree to the indemnity clause, meaning that the company concerned has agreed to the risk. 

It seems to me that many companies 'miss a trick' when they offer paperless Direct Debits.  They are too concerned about attracting clients that they forget that the web can be a useful customer service tool as well.  Introducing log-in areas where clients can manage their own payment collections details (changing amounts, dates, bank details, etc.) increases customer service and promotes a more proactive approach from your clients.  Not too mentioned the potential for up-selling where it adds value for the customer.

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Comments: (4)

John Dring
John Dring - Intel Network Services - Swindon 20 January, 2011, 09:18Be the first to give this comment the thumbs up 0 likes

Alan,

As I just asked on another blog, would it be an over simplification to say that online Direct Debit could be a simplified form of e-invoicing.

I mean if you filled out a DD mandate online, specified all the necessary payment details and then have the option for the DD to be a recurring and biller-variable one (normal), or a one time payment instruction for an amount yet to be approved.

When that DD instruction arrives at my bank, it gets put in an actions/to pay queue and I have to review and approve it?  That would be an e-invoice, yes?

A Finextra member
A Finextra member 20 January, 2011, 09:51Be the first to give this comment the thumbs up 0 likes

Hi John,

You need to consider Direct Debit mandates themselves - they are essentially open access to a customer's account.  When a bank approves a company to collect by Direct Debit, they will sign an indemnity agreement which is timeless and limitless. The banks have to balance the risk in this, hence the approval of the web pages used by every company setting the paperless facility up on their site.

Referring to your comment on reviewing the Direct Debit action to pay, the company controls this.  This means you either need to cancel or let the payment through - there is no approval process per collection for Direct Debits. 

The idea of the log-in area perhaps crosses over into e-invoicing, but then again it doesn't offer the customer as much flexibility to add to their existing agreement or purchases.

 

A Finextra member
A Finextra member 21 January, 2011, 08:42Be the first to give this comment the thumbs up 0 likes

Good morning John,

"would it be an over simplification to say that online Direct Debit could be a simplified form of e-invoicing"
No. Though online Direct Debit is more a payment instruction than it is an e-invoice. So a link to more detailed invoice info would be a nice to have for consumers and a must have in b2b e-invoicing.

And good morning Alan,

Research is showing that consumers are becoming more and more reluctant to head over to every single online portal where a invoice is waiting for them. It would be great if there were a simple solution to bring all these 'portal invoices' over the doorstep of a customer (just like current snail mail/paper invoices)

Cheers, Friso

A Finextra member
A Finextra member 21 January, 2011, 21:15Be the first to give this comment the thumbs up 0 likes

Hey Friso,

It's an interesting suggestion and certainly bridges the gap between online banking and your experience with each supplier.  With the growth of online technology and even SEPA, I would love to see more than the cancel button beside my Direct Debit list on my online banking service.

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