Businesses are now eager to set up direct debit because of the simple and stress-free payment method it offers. Direct debit also has some interesting facts.
Did you know that Alistair Hanton, as an employee of Unilever, introduced the idea of direct debit in 1964 when he saw the need to efficiently collect payments from thousands of ice cream vendors?
Did you know that it was still a paper transaction back then? Imagine the amount of paperwork required for that. But did you also know that myths are circulating that prevent businesses from taking full advantage of direct debit? Yes, there are.
Here are some of these myths debunked
Difficult to Set Up
This myth would probably be true in the era of Alistair Hanton. During that time, to set up direct debit means to sign several documents and have as many face-to-face communications.
However, we now are in the era of information and the internet where every transaction is lightning fast and easy to track
Your customers can easily fill out an authorisation form digitally and need only three steps to finalise the process:
- Identify the debtor (or customer)
- Authenticating the debtor’s identity
- Signing the authorisation
It is as easy as that. No paperwork, no clutters, no confusion.
It can be Expensive
This myth is perhaps the most laughable because direct debit saves your business money.
You don’t need to hire manpower to chase your customers for delayed payments, your transaction costs will be less than credit card payment, and failure rates (<1%) are very low compared to credit card payment (>5%) because the latter can be cancelled or expire.
The only maintenance you’ll need to set up direct debit is for your payment tracking or monitoring. That means all of your other costs can be absorbed by your business as capital.
It is Only for Big Business
This myth may be true in the absence of payment providers. In the past, only big businesses with endless funds and staff could set up a direct debit. Thus, companies with low transaction volumes did not see it as a cost-effective measure.
However, now with the right payment provider, your business of any size can benefit from direct debit.
Size does not matter now. What matters is cash flow, and direct debit can help you maintain that cash flow by ensuring timely and successful payments for your customers.
It is Unsafe
Anyone can say this about any internet transaction. The key to ensuring safety in direct debit is to trust the right payment provider.
Payment providers can rarely be fraudulent as they are heavily scrutinised and inspected before being authorised to operate
The banking industry is intensely monitoring them regarding the security of their transactions as well as efficiency.
It would be best if you got a payment provider with reasonable safeguards for both you and your customers, such as advanced notification, immediate refunds in case of error, and cancellation any time before the due payment.
The law also protects you as all debit authorisations should be a formal agreement subject to litigation.
Direct Debit: A Modern Solution for the Modern Business
Now that we have done away with these myths, your intention to set up a direct debit for your business is always the right choice
It’s fast, easy to use, efficient, and beneficial for you and your customers. Direct debit is your partner in your quest to maintain your cash flow in the modern world.