Last editedJun 20243 min read
When running a business or organisation you want your payment process to run as smoothly as possible. Payment failures make the process more frustrating and time consuming for both you and your customer and are often completely avoidable, e.g. failures due to a customer submitting incorrect personal details.
Direct Debit payments use bank account details – account number and sort code. If a customer uses incorrect account details or an account which doesn’t support Direct Debit payments then the payment will fail. By checking your customer’s details at the earliest opportunity you can make sure their account details are taken accurately at the point of sale and fix any mistakes there and then rather than dealing with failed payments and trying to fix errors later.
Sort code checker
One way to reduce payment failures is to check if a sort code supports Direct Debit using a “sort code checker”. This looks up details of the provided sort code from a database, and tells you what functionality should be available at that sort code. If the sort code supports Direct Debit it is said to be “reachable” by Direct Debit.
In the UK, the Payments Council has created an online sort code checker which checks against the Extended Industry Sort Code Database (EISCD). It can tell you whether a sort code can receive Faster Payments, Bacs Credit and CHAPS Payments and whether you can clear a cheque to that account.
Why would a bank not be “reachable”?
While most banks in the UK support Bacs payments, and in particular Direct Debit, some smaller banks don’t. In addition, some large banks have sort codes which are dedicated to savings accounts on which Direct Debit is not supported.
If a bank does not support Direct Debit it is said to be “unreachable” by that scheme. There’s a little more nuance, however: some banks support paper Direct Debit but not AUDDIS (online Direct Debit).
How effective is using a sort code checker?
The EISCD is the UK’s canonical source of information about sort code functionality. It’s used by all the UK’s banks, and if a sort code isn’t present in it, it may as well not exist. However, the information it contains about each sort code is by no means infallible.
At GoCardless we wanted to test the reliability of the EISCD, so we allowed our customers to enter payment details that the EISCD would categorise as unreachable. With the most cautious definition of “unreachable” - including any bank who claimed to be inaccessible via AUDDIS - we found the EISCD was wrong almost 90% of the time:
14,073 successful payments against “unreachable” sort codes
1,794 failures (13%)
With a stricter definition of “unreachable” - including only banks which claim not to offer any Direct Debit functionality - the results are better, but the EISCD is still wrong a third of the time:
104 successful payments against “really unreachable” sort codes
211 failures (67%)
While you do want to keep failed payments to a minimum - and sort code checkers can help with this - you don’t want to stop anyone paying who can pay. Telling customers that their bank does not accept Direct Debit payments when they know that they do is not only going to slow the payments process down but it’s going to annoy, and potentially lose, a customer. Therefore, while sort code checkers can be useful you probably don’t want to be too cautious when it comes to using their findings.
GoCardless and Sort Code Checkers
Because of this, at GoCardless we are currently compiling our own sort code checker database using the EISCD database coupled with our experience of whether a particular bank can accept Direct Debit payments. This technique is similar to that we’ve seen used for SEPA Direct Debit, where SWIFT monitor real transactions and use the results to update the information in their database.
We also automatically check your customers’ bank account details using our modulus checker. Our modulus checker checks that the account number and sort code provided by your customer are a valid combination at the point of entry. If the sort code and account number do not match then the details won’t be accepted and your customer will be asked to check them and resubmit. By checking these at the point of sale you can fix any mistakes there and then rather than dealing with failed payments at a later stage, making the payments process easier for both you and your customers. If you'd like to find out more about modulus checking you may find this post helpful.
For more information on how GoCardless helps you to collect accurate details from your customer or on collecting Direct Debit payments with GoCardless, get in touch with our Direct Debit experts.
Of course, if you think GoCardless might be the right option for you, sign up now for free and start taking payments today.
