Direct Debit – attitudes, usage, support and opportunities

1. Direct Debit – attitudes, usage, support and opportunities

2. Direct Debit – attitudes, usage, support and opportunities Sandy Gow – Royal Bank of Scotland Mike Hutchinson - Bacs

3. What we’d like to cover 01 The electronic payments market – an overview 02 What can be achieved? 03 What Direct Debit payers look like 04 Gift Aid and Direct Debit 05 Keeping Direct Debit customers once you’ve got them

4. Electronic payments • In 2007, just over 5.5 billion transactions were processed • 3 billion Direct Debits • 2.2 billion Bacs Direct Credits • 300 million standing orders • It is forecast that Direct Debit payment volumes will grow from 3.0 billion in 2007 to 3.9 billion in 2017. In that year, Direct Debits will be used for 66% of all personal regular commitments.

5. Credit Card payments • The annual spend by consumers on credit cards has seen no growth since 2003, amounts outstanding have been stable for the last three years and the number of credit cardholders in 2007 was nearly one million below its peak of 31.8 million in 2005. • It is expected that the market will remain subdued before picking up in tune with the economic cycle. • A boost may also come from the use of contactless cards. • Personal credit card payment volumes are forecast to grow to 2.6 billion in 2017, from 1.8 billion last year.

6. Cheques are in decline • The rate of decline in cheque use has picked up in recent years, and transaction volumes fell at their fastest-ever rate of 10% in 2007 to 1.6 billion. • Less than 10% of personal regular bills are paid by cheque • Cheques are expected to account for only 2% of personal non-cash payments in 2017

7. Cash is still King? • Cash is the dominant payment method in the UK in terms of the number of transactions made, with 22.4 billion cash payments in 2007 • Migration to automated methods will continue to cut the use of cash for paying regular bills. • Much of the expected decline in cash use will come for lower value payments

8. Personal regular payments • Defined as ‘all payments that arise from pre-existing household and individual commitments such as utility bills, mortgages, mobile phone subscriptions, insurance’ and regular lottery purchases • Direct Debit penetration of the regular payments market has been growing steadily. This trend has been driven by biller incentivisation and promotion, and by consumer preference for the convenience and the ability to spread payment that comes with Direct Debits. • The flip side of the growth in electronic payments is that cash and cheque volumes have been falling. In 1997 these methods accounted for 47% of regular payments; by last year this proportion had dropped to 20%.

9. To corporates It's cheaper than cheque and safer than cash You control the date of receipt into your account You get cleared funds in your account on a known date You can collect variable amounts on regular or irregular dates It can eliminate time consuming reconciliation. Only errors and non-payments will be notified to you, so you can carry out reconciliation by exception To consumers Spreads the cost of bills into manageable instalments Peace of mind – payments are made automatically Convenience – no need to write cheques or queue at the bank or post office Guaranteed – money back guarantee in the event of an error Can save you money – many organisations offer discounts Benefits of Direct Debit

10. Direct Debit - attitudes, usage, support and opportunities Mike Hutchinson - Bacs

11. Bacs? • A not-for-profit, membership-based industry body owned by 15 of the leading banks and building societies in the UK and Europe • Responsible for the schemes behind the clearing and settlement of automated payments in the UK including Direct Debit and Bacs Direct Credit, Bacs has been maintaining the integrity of payment related services for four decades. • Since its inception, • 68 billion transactions have been debited or credited to British bank accounts via Bacs. • In 2007 over 5.5 billion payments were made this way • 90.3 million items were processed in one day in Nov 2007 • Almost three billion Direct Debit payments are processed by Bacs a year and 75 per cent of adults now have at least one Direct Debit commitment. • Central marketing team – free advice and support

12. So, what can be achieved with Direct Debit take-up? 70% of the UK adult population have a positive attitude to Direct Debit PREFERRERS SELECTIVES CANNOT / WILL NOT 12% will not and 6% cannot pay by Direct Debit 24% are selective but positive about paying by Direct Debit 46% actively prefer to pay by Direct Debit

13. Payment of selected individual commitments by method 2007

14. So, how do we seek out likely Direct Debit payers? What type of people? How old? What messages will persuade them?

15. Profile of regular charity givers by DD / SO Profile of those donating on a regular basis by DD or SO is dominated by BC1. Slightly higher proportion of D’s donate by DD than SO Base: all GB adults who regularly donate to charity 2007

16. Profile of regular charity givers by DD / SO Regular charity donor profile - 65yrs plus greatest influence. Very low 16-24 yr old profile Base: all GB adults who regularly donate to charity 2007

17. What to say to them? %ge agree Source: Bacs CPS 2007

18. What to say to them? %ge agree Source: Bacs CPS 2007

19. Why some people don’t use Direct Debit? %ge agree Selectives and Reluctants are significantly different at the 95% confidence level in agreement to preferers on all the statements

20. Why some people don’t use Direct Debit? %ge agree

21. Direct Debit is the payment method with greatest penetration of Gift Aid Base: all GB adults who regularly donate to charity 2007

22. Ever heard of Gift Aid? Just over 8 out of 10 (83%) British adults claimed to be aware of Gift Aid. Lower proportion of 16-24 yr olds aware of Gift Aid % Base: all adults interviewed CPS 2007

23. Ever heard of Gift Aid? Higher socio-economic groupings are more likely to have heard of Gift Aid % Base: all adults interviewed CPS 2007

24. Sign up via paperless Direct Debit (PDD) • PDD enables organisations to sign up customers for Direct Debit collections over the telephone, Internet, telephone keypad, face to face or interactive TV. • It speeds up and simplifies the sign up process, whilst at the same time further increasing an organisation's administrative cost savings (no paperwork, delays or postage) • It is more convenient for customers too, with no forms to complete or the possibility of delays • One on one marketing allows you to educate and inform • You can begin the collections process earlier, as you don’t need to wait for the customer to complete and return the DDI • Most large organisations already offer this service. • Additional scheme rules and mandatory training

25. Keeping Direct Debit customers once you’ve got them “Your most unhappy customers are your greatest source of learning” Bill Gates Chairman, Microsoft “Customers don’t expect you to be perfect. They do expect you to fix things when they go wrong” Donald Porter VP, British Airways

26. Do problems happen? % Direct Debit users with problems in last 12 months Base: 2007: Omnibus: Representative Sample Direct Debit users: 771

27. Where Do Problems Occur? % vs 06 • Gas 15% • HH Telephone 12% • Electricity 12% Core HH Bills -4 • Motor 10% • Life 5% • Health 2% Insurance +2 • CC Payments 4% • Other HP Loan 3% • Store Card 2% -4 Debt Repayment • Internet 7% • Gym 1% • Magazine 1% -5 Subscriptions -1 Mobile Phone • Mobile Phones 6% • Other Bills 4% • Mail Order 2% • Purchases 1% Other Bills +4 • Pension 1% • ISA 1% Savings +1 Base: All who have had a problem with Direct Debit (200) Direct Debit Problem Research| December 2007 | page 27

28. How do customers feel about Direct Debit as a result? % Less Happy No Change Happier Base: All Direct Debit problem (200) Two-thirds say their view of Direct Debits is unaffected - a similar proportion to before. A quarter though say they are now less happy compared with only 8% who say they are happier.

29. Impact of experience on future Direct Debit usage % Stop Probably Less Probably Same Probably More Definitely More Base: 2007: Sample Direct Debit Problem Users (200) Base: 2006: Sample Direct Debit Problem Users (200) Base: 2005: All who have had a problem with Direct Debit <12 months (400) Two-thirds say their future usage of Direct Debits is unaffected by their experience. 18% say they plan to use Direct Debits more BUT a similar proportion say they plan to use them less.

30. Keeping Direct Debit customers once you’ve got them • Review DD processes • Undertake a Training Needs Analysis • do you know what your customer facing staff knowledge levels are? • do you account for staff turnover? • www.bacslearning.com • Introduction, Working With and Managing Direct Debit e-learning courses • The Great Balloon Race – a free diagnostic tool to help you identify any knowledge gaps • Accredited face to face training • Direct Debit for Dummies • DD Guarantee ‘reminder’ cards bacsacademy@bacsservices.co.uk

31. Help is at hand – www.bacs.co.uk and www.directdebit.co.uk/helpcentre • Bacs Academy – knowledge centre • Direct Debit HelpCentre

32. Thank you Any questions? “Set your target and keep trying until you reach it” Napoleon Hill Author