Direct Debit - An Insight

October 27, 2015

One of the most fundamental concepts of economics is supply and demand.

One of the most fundamental concepts of economics is supply and demand. It is the backbone of our market economy. I’m going to discuss the effects of the technological revolution on business interactions done through our banking structure. I will focus on financial transactions in the UK with Direct Debit providing the basis for the discussion. I will look at the supply of Direct Debit software and services as an effective cog in the mechanisms of prosperity and growth. The demand for secure and efficient payments has never been more apparent in the on-going battle against fraud as we increasingly utilise the web for every-day activity. In conclusion I will look at the demand of Direct Debit services and software and how Interbacs can help your business.

Malcolm Forbes said “the art of conversation lies in listening.” It’s when we learn most and I suppose it’s why your mouth shuts but your ears never do. But the ideal person listens so they understand rather than listening in order to reply. I’ve heard about businesses which have gone bust overnight, losing sight of, or simply not knowing about, the fundamentals of business. I’ve listened to people tell me stories of their early forays into business with a thirst for profit, not realising that cash flow is king. I’ve spoken to start-up companies, entrepreneurs, sole traders and some of the most industrious and influential UK financial organisations, both private and public. What reigns true with each of them is the importance of knowing when their money will be in their account. Therefore what do UK companies require?

  • Well, the company needs to control the date of receipt into its account (not waiting for a customer’s cheque in the post for example)
  • The company wants cleared funds in its account on a known date (remember, cash flow is king)
  • Finally, time-consuming reconciliation should be reduced (accounts people will be glad of this)

However I am getting ahead of myself; let’s backtrack a little and take a look at a micro aspect of our innovative banking system, and ask why it is the envy of the financial world? Since 1990 the number of Direct Debits and Credits has increased year on year. In October 1990 the value of Direct Debits which Bacs processed stood at £22,260 million. Bacs processing flourished as the technological revolution took a foothold. In October 2008 (GDP: 2008 Q4: -2.2% during the 2008 Recession) the value of Debits processed was £84,978 million and the total value of the Credits made was £267,551 million. This was an increase on the previous year and, as mentioned, has increased consistently for the value of Direct Debits and Credits. Since the initiation of AUDDIS in 2008 where the data is sent electronically to Bacs (no more paper Direct Debit Instructions getting lost in the post!)

The usage of this financial transaction method has accelerated and the statistics support this. Error reduction is reduced again when the compulsory Modulus checker is introduced so that Sort code and Account numbers are checked against a huge database maintained and updated monthly. In 2015 records were shattered again when on 31 July – the equivalent of 6.65 million payments an hour, or nearly 111,000 every single minute was processed during the available window A total of 103 million payments in one day. Bacs places a limit of £20m on a single transaction (incidentally this dwarves that of the Faster Payment service) so it is not really surprising that the value being processed by Bacs consistently increases month on month as economic growth returns to the UK. Look, here’s the thing, Banks do not want to do Direct Debits or Credits which is where we come in

Interbacs is a longstanding provider of Direct Debit solutions. If you want to out-source your Direct Debits or administer the work in-house; Interbacs can provide you with the info on how to implement this increasingly popular method of making financial transactions. Furthermore we provides a variety of services and bespoke software which is future proof and scalable. Take a look at our website for testimonials, this will give you an idea of our company culture and the importance customer service is for us.

Making regular payments by Direct Debit has become second nature for millions of consumers, with eight-out-of-ten adults in the UK having at least one Direct Debit and around 71 per cent of household bills paid this way. Even the DVLA have pulled up their socks and motorists now have the option to pay via Direct Debit. Yet businesses still send out invoices. I can’t help but feel it’s a typically British notion of goodwill, “Pay that, when you can, within the next 30 days” seems so… outdated and futile does it not? In the digital age immediacy is a new norm so it’s time to adapt. Look at the simplicity of setting up a Direct Debit. A child could do it, all you need is a sort code, account number and the account holder’s name. And even if for some absurd reason a child did set up a Direct Debit (willing suspension of disbelief is required here but do bear with me) then the customer is always protected by the Direct Debit Guarantee. An innovation which increases security:

“If an error is made in the payment of your Direct
Debits, by the organisation or your bank or
building society, you are entitled to a full and
immediate refund of the amount paid from your
bank or building society”

I’d say these kind of innovations are part of the reason our banking sector is envied and respected globally. For such a small island nation we don’t half punch above our weight with some things. Anyway, enough of the overbearing appreciation of the British Isles.

In years to come our children will look back at how we banked and laugh. The time is now to implement a Direct Debit solution no matter how big or small your operation is. By contacting Interbacs for a free consultation you are taking the initiative and making sound judgement thereby moving your business in a positive direction. The statistics are plain to see. In 2014 Bacs handled nearly 3.7 billion individual Direct Debits valuing in the hundreds of billions of £’s. The question regarding Direct Debit is not ‘if’ but ‘when’ you should start enquiring about sponsorship to become an Originator.

What’s an Originator I hear you say? If you contact Interbacs today we can work towards removing your pains and making your life easier. The supply is available and demand is increasing! No wonder with the innovations in Cloud software, which the developers at Interbacs have programmed in recent months. We have at our disposal every service and the cutting edge software your business needs to implement a Direct Debit system. From our robust Management systems which can be installed or hosted via the Cloud to the out-sourced collection of Direct Debits by our expert accounts team your cash flow will improve safely and efficiently in the hands of Interbacs.

You can also find additional information and updates on our social media pages, LinkedIn,Twitter, Facebook and Google+.

Ciaran Mitchell – Interbacs Ltd.

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