Re: Charge for not paying by DD

On Wed, 09 May 2007 11:40:55 +0100, James <James@xxxxxxx> wrote:

John Boyle wrote:
In message <5adf44F2o615uU1@xxxxxxxxxxxxxxxxxx>, James <James@xxxxxxx>
writes
<snip>


In the case of SOs then this is often the case. Ref number fields are
notoriously inaccurate with DDs and people often send wrong amounts.

Yes things do go wrong. I have had incorrect DD taken out of my account,
no advance notification was given.

The difference with a or DC SO is that it is easier for the customer to
sort out mistakes.

Indeed. It is *much* easier with a DD than with either of the others,
since either of them require you to persuade the recipient of the
money to0 refund it.



And why is this different for direct debits (which afterall are not
synchronous transactions).

I thought tis was obvious. When the originator originates the debit it
credits the internal account with the amount as being 'paid' at the same
time as originating the debit, as a single automated transaction. No
people, no reconciliation. the only human effort is needed when a DD
bounces.


This is not obvious at all. I'm surprised you think that the internal
account should be credited when the amount is requested, a little
optimistic wouldn't you say.

It is the normal way it works. At least in the few companies where I
have worked on their DD processing systems.

The account is then debited if the DD bounces, but those are rare
enough that it is more efficient to only have to reconcile the bounced
ones than to reconcile all of them.

Why not credit the internal account when
the money is actually received. This doesn't need any human intervention
either. Actually I don't think BT etc have human intervention even after
a bounce or late payment as this is also dealt with by automated systems.
So what exactly is the extra cost.


Processing time. Plus postage costs of sending out reminders etc.

And overall, the cost of writing those automated systems, although in
terms of cost per transaction, that should be insignificant.


I also don't understand you comment about thousands of people all
doing different things, do you mean the customers?

Yes, and their banks.
surely that is their cost and choice and irrelevant to the charging
company.

Yes, I was explaining a different point there.

The truth is that SO and DC, combined with late payment penalties, are
just as cheap to administer as DD.

That is not 'true' it is incorrect

A direct debit is not any more expensive than a DC which is paid on
time.

Correct.

But it is *slightly* cheaper.

I suspect you aid the opposite of what you intended there, but you
were actually correct :-)

The late penalty payment can cover the case where it isn't paid on
time.


It can. But most organisations seem to prefer to do it this way.


The main difference is that a customer who actively decides when to
pay by DC (and to a lesser extent SO) is more likely to decide to move
to another supplier and hence DD's tend to reduce churn, which is why
so many companies are so keen on them.

?? any evidence?

http://www.aptbacs.co.uk/information_DirectDebit.htm

See the bit headed retaining customer loyalty.

Pretty obvious I would have thought?

Yes. I do agree, except the bit about SOs. How significant that effect
is, I'm not sure, but I accept the argument that it does make a
difference.

You might also note the section headed "notification by exception",
which bears on what we are discussing earlier in this post regarding
reconciliation.

And the fact that there are another three benefits listed for the
organisation (plus one for customers).

--
Alex Heney, Global Villager
A chicken is an egg's way of producing more eggs.
To reply by email, my address is alexATheneyDOTplusDOTcom
.

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