Direct Debit takes friction out of telecom and utility payments

As consumers all over the globe continue to struggle with the rising costs of goods and services, industry sectors such as telecom and utilities are among those facing greater pressure in the collection of consumer payments. In the United States, for example, the average cable and broadband bill has gone up 52% over the past three years. In the UK, the prices and average cost increases have been much lower at 14%. Even with rising pressure on consumers’ pocketbooks, a frictionless, reliable source of recurring consumer payment has emerged for companies using Direct Debit.  

To see how Direct Debit has positively affected consumer payments let’s focus on the UK. According to UK Finance Direct Debit volumes in 2023 rose 2% to 4.7 billion payments accounting for 10% of all transactions. Now let’s focus on one of the sectors that depends on Direct Debits for payments: internet service providers. With more than 66 million internet users any company that plays in this sector has challenges of scale, recency and frequency. Direct Debits – if done correctly – are the best way to efficiently address those challenges.

A good example can be seen with Plusnet. It has been providing broadband since 1997, combining top notch service with value-based rates. Bottomline and Plusnet have worked together for 20 years to ensure vital finance processes are completed efficiently. The partnership began with the automation of Direct Debit processing. When a Plusnet customer signs up for a new contract, the first month’s fees are paid by card. Customers also complete a Direct Debit mandate to cover their monthly charges with Plusnet. The company collects 33,000 Direct Debits a day, 28 days per month, which can add up to around £1.5m on the Bottomline PTX platform.

“Where Bottomline really adds value is in streamlining, automating and simplifying our payments processes as well as giving us greater visibility over these payments,” says PlusNet’s systems operations team leader Mairi Macconnell. “It reduces the manual effort required to complete vital financial activities such as collecting monthly payments or issuing refunds. This frees up valuable time to focus on other activities that benefit the customer.”

That manual effort was magnified by the scale of the company’s payments, which were a two-way street. Processing customer payments for refunds and paying out cashback incentives was a time-consuming process that involved sending out paper cheques as payments when they couldn’t be made directly to a credit card. However, Bottomline’s print service eliminated a lot of the manual effort involved. During Covid lockdowns, when access to premises was restricted, Plusnet turned to Bottomline for help in further reducing cumbersome and slow cheque processes.  PTX Payouts modernised existing cheque processes enabling PlusNet to give customers a link to a secure branded portal where they enter their banking details. Each day, a refund payment file is generated which goes through internal checks. Once approved, a direct credit is made to each customer’s bank account. Customers prefer this as they receive the funds more quickly and with far less effort on their part.

More recently, Plusnet has implemented PTX Webforms to securely capture and validate customers’ bank details which reduces the risk of future collection failures and minimises the number of queries that might require multiple touchpoints to resolve.

While PlusNet has tamed its scale and frequency issue, Open Banking waits in the wings to help it and other companies manage Direct Debits. One of the features of open banking is variable recurring payments (VRPs). VRPs let customers safely connect authorised payments providers to their bank account so that they can make payments on the customer’s behalf, in line with agreed limits. VRPs are a complement to Direct Debits. They are both processes by which regular payments are taken, as agreed by the end user, and through which variable payment amounts are possible. While VRPs use the UK’s near real-time Faster Payments rails to transfer funds directly between customer and business bank accounts, Direct Debits use the traditional three day Bacs ACH payment process to facilitate their transactions.

“For example, consider subscription payments for entertainment services, software, gyms etc. VRPs will let customers see which institutions they have agreed to make recurring payments to and the limits of each payment permission,” states a report from OpenBanking.org. “In contrast, banks can’t provide a list of all the subscriptions paid for by card, and while they can show a list of subscriptions paid by Direct Debit, there is no cap on what future payments might be.”

We don’t know what the likely adoption of VRPs will be once they move beyond the current pilot stage, we do know for the telecom and utilities sector both will have a place in the payments equation.

“Where Bottomline really adds value is in streamlining, automating and simplifying our payments processes as well as giving us greater visibility over these payments,” Macconnell says. “It reduces the manual effort required to complete vital financial activities such as collecting monthly payments or issuing refunds. This frees up valuable time to focus on other activities that benefit the customer.”