The technical rejection of the customer’s direct order occurs following the transmission of the customer’s direct order to the bank or credit company, an action that is usually carried out once every month on the same date.
Unlike the events of type A and B, the reason for the refund is technical, and in the vast majority of cases, it does not occur through the customer’s fault and is less common. It often turns out that the organization itself is to blame for the payment technical failure and sometimes it is the bank that made a mistake.
In any case, this is a technical issue, and therefore a vigorous collection activity should not be triggered against a customer who probably acted in good faith.
Let’s look at common reasons for technical rejects:
Wrong account: a mistake was made in recording the account number on the direct debit form or in typing the form by the organization clerk or in typing the form by the bank clerk. Contact the customer and ask him for the correct account number while explaining that the next charge will be in addition to the previous charge, due to payment failure of the first charge.
Account does not exist: Same as wrong account.
Wrong Branch: Like wrong account.
No authorization: this case can occur in different circumstances, and all of them point to a failure in the customer’s acquisition process:
• The customer submitted a standing order that was not approved by his bank or the organization did not take care (or did not take care in time) to transfer it to the customer’s bank branch for approval;
• The bank clerk who approved the standing order for the customer did not update the bank system;
• The standing order forms were lost on their way to the bank, somewhere in the metaverse…
To solve the issue, you must first try to locate the standing order form and identify the specific failure. Only in cases where no solution is found, then, and only then, can you contact the customer again for a new standing order. The solution must come from analyzing the failures and strengthening the procedures and systems to prevent problems in the future.
Here’s a procedure example to prevent the loss of a direct debit order:
1. Obtain Clear Authorization:
- Verify account details: Ensure accurate account numbers and routing information for both the payer and recipient.
- Obtain written authorization: Secure a signed mandate form clearly outlining payment terms and consent.
- Confirm authorization: Verify authorization with the payer’s bank, especially for recurring payments.
2. Implement Secure Data Handling Practices:
- Protect sensitive data: Store account details using robust encryption and access controls.
- Limit data exposure: Restrict employee access to sensitive information on a need-to-know basis.
- Regularly update systems: Maintain current security patches and antivirus software.
3. Monitor Transactions Proactively:
- Set up alerts: Receive notifications for failed payments, account changes, or unusual activity.
- Review payment records: Regularly check for inconsistencies or errors in direct debit transactions.
- Reconcile accounts: Promptly identify and address discrepancies between bank statements and records.
4. Communicate Effectively with Payers:
- Provide clear instructions: Inform payers about upcoming payments, amounts, and withdrawal dates.
- Offer multiple communication channels: Allow for updates via phone, email, text, or online portals.
- Address inquiries promptly: Respond to questions or concerns regarding direct debit arrangements.
5. Establish Robust Contingency Plans:
- Set up alternative payment methods: Provide options such as credit cards or manual payments in case of direct debit failure.
- Outline recovery procedures: Have clear steps for re-establishing payment plans or resolving failed transactions.
- Train staff on procedures: Ensure employees understand how to handle disruptions and communicate effectively with payers.
Additional Recommendations:
- Utilize technology: Employ payment gateways with fraud prevention tools and recurring payment management features.
- Partner with reputable providers: Work with banks or payment processors with strong security measures and customer support.
- Ensure compliance: Adhere to local regulations and industry standards regarding direct debit transactions.
- Review procedures regularly: Assess and update procedures as needed to adapt to evolving threats and technologies.