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Barriers to saving millions revealed by BACS

A report aimed at saving millions of pounds for local government has been welcomed by BACS, the company behind Direct Debit in the UK.

The Audit Commission identified opportunities for massive savings on administration costs if councils and housing authorities move payment over to Direct Debit – but concluded that councils needed to understand the reasons for people choosing alternative methods in order to improve take up, information which has not been available to date.

Through its annual Consumer Payments Survey (CPS), BACS can reveal the key drivers for different customers to move to Direct Debit as well as help identify the reasons behind reluctance.

Michael Chambers, managing director of the not-for-profit organisation, said: “As the report showed, if uptake of Direct Debit for council tax collection were to increase to an average of 70 per cent nationally, the potential savings would be huge: more than £15 million - and that’s a substantial amount of money which could be used to great effect elsewhere. Hence we feel it’s important to share our findings with local authorities to help improve payment by Direct Debit.”

BACS research shows that more than a third of people (39 per cent) choose a method of payment other than Direct Debit because they feel it gives them control over when they make their payment. Offering flexible payment dates would help overcome the issue, with people nominating the best date for funds to leave their account.

A further 14 per cent say they are not offered the facility, with 13 per cent claiming there’s no financial incentive to move to Direct Debit. Six per cent simply haven’t thought about using Direct Debit to pay.

Conversely, BACS research shows that 82 per cent of all users say that saving time is one of the main benefits of Direct Debit, 78 per cent that it prevents them from forgetting to pay the bill and 76 per cent that it helps spread payments and make bills more manageable.

Michael continued: “We are aware of the particular challenges faced by local authorities and have been working with them for many years to encourage take-up, as well as highlight the benefits of a smoother and more cost-effective administration through use of Direct Debit.

“We are also in the early stages of working to improve understanding of Direct Debit among people who may be reluctant to use the service for household bills like council tax or rent.”

BACS, with 15 years of working directly with local authorities, is ideally placed to share best practice along with results from previous campaigns to improve uptake of Direct Debit. And the company’s case studies are not limited to those from local government, with learnings also available from commercial business sectors. Through its extensive research, BACS is also able to help organisations identify potential Direct Debit payers from customer bases.

Improving Income Collection: Efficient Collection of Council Tax, Housing Rent and Other Income by Direct Debit, from the Audit Commission, contains practical guidance for councils and housing authorities on how to increase take-up of the payment service.