Direct debit failures costly to businesses

Businesses risk losing money and customers due to mistakes made when setting up direct debit and credit payments

Businesses risk losing money and customers due to mistakes made when they are setting up direct debit and credit payments.

About six billion automated payments worth £4.3tn are made in the UK per year.

Almost a quarter (23%) of consumers have experienced problems when they set up or amend direct debits, and 14% have cancelled payments as a result, according to research carried out by Redshift research on behalf of payments software maker Bottomline Technologies.

Costly data input errors

The cost of rectifying failed direct debit and credit payments is high, with 60% of 200 businesses questioned believing the cost to be at least £50 each time. Over 40% of finance departments spend longer than four hours a month fixing direct debit mistakes, which 71% said occur because of sort code and bank account number errors.

The research revealed that 95% of failed payments from employers to employees are down to human error, with 59% of the businesses questioned blaming human error within the finance department and 39% claiming the employees put the wrong information in.

Customer loyalty at risk

It is not just the direct costs related to rectifying mistakes that are damaging business, but also the loss of customers. The research revealed 53% of businesses believe failed payments damage customer relations and 35% said revenue is lost as the customer switches to a competitor.

The most common failures are payments made by customers, according to 63% of businesses. A total of 38% said the most likely to fail are payments made to suppliers by businesses, and 21% said payments made to employees by businesses are most likely to fail.

When direct debit and credit payments are set up, the system will check that the bank account number and sort code exists, but does not verify whether it belongs to the applicant until later. This enables mistakes to get into the system, which then take longer and cost more to fix.

According to Bottomline Technologies, only 10% of businesses currently verify the applicant and details at the point of application.

Jim Conning, payments director at the company, said businesses would save time and money if they could verify the account and applicant in real time. “The current failure to check account information in real time is clearly undermining the experience and disenfranchising hard-won customers.”

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