05.14.10
Is direct debit a dirty word?
Visit any whirlpool forum and you will find 100′s of complaints regarding direct debit. Given this, I’ll pose a question, is direct debit really that bad? Or is it the use of these facilities by the merchant that is at fault? Is it a case of bill payers just not meeting their obligations?
Firstly, we should point out that direct debit is a growing billing method throughout Australia. APCA’s historical figures indicate a 10% year on year growth in transaction volumes for the past decade. So why are businesses continuing to look to direct debit as a favoured billing channel? The answer is it’s cost. Direct debit is an inexpensive and, in most cases, automated billing solution. It is also a secure and proven billing channel used across multiple industries.
As well as these advantages, direct debit also provides an end point in the billing cycle. Many billers issue an invoice and see a payment due date come and go without receiving payment. This generally requires them to follow-up by issuing a payment reminder or a collection order to recover their fees.
With direct debit, a payment date comes and results in one of two events, the funds are paid or the payment bounces. In the second instance the biller can attempt recover the failed payment by either rescheduling the debit with the client’s approval (or sometimes this can be automated) or arranging for the payment through some other means. My point is, the biller always knows their position with direct debit.
Direct debit’s strength is also it’s greatest weakness. By signing a direct debit form, bill payers feel they are giving up a degree of control, they loose some visibility of their funds, they forget when a payment falls dues and may have insufficient funds at the time of the transaction. These are all undesirable events.
Our experience indicates that in most cases, the issues billers and bill payers experience in using direct debit comes down to poor communication. At a minimum the biller must provide the payer with the following:
- The total amount to be collected (or the minimum amount to be collected as part of a contract)
- The amount, frequency and start date of payments
- The process for changing, suspending or canceling the direct debit
Additionally, by sending reminders (through email or SMS) billers can greatly reduce some of the issues experienced by payers.
When the biller provides clear, easy to understand information to the bill payer and the bill payer meets their obligations by ensuring sufficient funds are available to be collected, direct debit remains the most efficient billing option available for collecting recurring payments.
If you have experienced problems with direct debit, have been unsure how to a cancel and authority, please do not hesitate to contact us and we will assist you where we can.