One of the many benefits of Direct Debit is that payment failure tends to be lower than credit cards. That being said, Direct Debit isn’t infallible and when payments do fail it can have a significant impact on your business, disrupting cashflow and tarnishing customer relationships. Here’s how to deal with a failed Direct Debit.
What happens if my direct debit fails? As a service user you’ll receive a notification via an ARUDD (Automated Return of Unpaid Direct Debit) report, citing a reason for the failure. The most common reasons are insufficient funds or where a payer has cancelled their instruction. Other reasons include:
When a Direct Debit collection fails, you can try and collect the payment again. This is known as re-presenting. However, before trying to re-present, it’s important to understand why the failure happened in the first place, using the reason code in your ARUDD report as a starting point. A re-presentation should only then be made if the collection is likely to be successful. Otherwise, it wastes time and money. If you do decide to re-present, here’s the criteria you have to meet:
Thankfully, the success rates of collecting failed Direct Debit payments is high and over double that from a credit card. In fact, Chargebee showed that an average of 25% of payments were recovered through dunning.
Give your organisation the stability and freedom it needs to drive higher levels of growth by seamlessly automating your payment processes.