Direct debit & credit payments are risky business for retailers

Q0EkUnZwRetailers who rely on automated payments made by direct debit or credit are at risk of losing both money and customers as a result of mistakes made during the initial set up.

Payments made by customers, payments made to suppliers by businesses, and payments made to employees by businesses are among the most common failures within the six billion automated payments that take place in the UK per year.

With each failed payment, retailers are losing their share of the £4.3tn delivered by these automated payments. According to research carried out by Redshift research on behalf of payments software maker Bottomline Technologies, nearly a quarter (23%) of consumers claimed to have had problems when they set up or amended direct debits, and 14% were so put off by the negative experience that they went on to cancel the whole payment.

Even if consumers choose to stay with the retailer there is still a high cost to be absorbed in rectifying the payment details with 60% of 200 businesses asked deeming the cost to fix each individual error to be at least £50, not to mention the time wasted by staff in doing so. Adding to the strain is the risk of damaging customer relations, as the research revealed 53% of businesses believe this to be the case.

Currently when direct debit and credit payments are set up, the system will only confirm that the bank account number and sort code exists, rather than making sure it is linked to the person in question. In fact, only 10% of businesses actually verify the applicant and details at the point of application, according to Bottomline Technologies and unfortunately once the mistake is in the system, the roll out of detrimental effects occurs.

Jim Conning, payments director at Bottomline Technologies, 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.”

With human error believed to be the main cause for concern, retailers are surely keen to take advantage of the automated data capture technologies that are less likely to make mistakes, like barcodes, RFID, bokodes, OCR, magnetic stripes, smart cards and biometrics (such as iris and facial recognition system). The issue however is finding the right automated solution for the both retailer and customer who is expected to embrace and trust the new system. Over coming the various scenarios such as the customer giving information in house or by post, over the phone or via the internet is the challenge that retailers and technology providers now face.

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