When signing someone up to pay by Direct Debit, it’s important to ensure that you collect accurate payer data. Part of this is ensuring correct sortcode and account details. Running a “Modulus Check” on this data can help ensure accuracy. In turn this will prevent failed Direct Debits, but what is Modulus Checking?
What is Modulus Checking?
Modulus checking is a mathematical validation process. It assesses whether it is possible for a given bank account number to exist at a given sortcode. These checks can alert an organisation if details are incorrect and the account can’t exist at a bank / building Society.
Service User Responsibilities
Bacs, part of Pay.UK, the owners and regulators of the Direct Debit Scheme “highly recommend” that Service Users apply modulus checking during sign up. It is mandatory however for Service Users to validate the payer’s account details by applying modulus checking’ prior to submission of the AUDDIS Instruction.
1. Paper-based sign-up and paper submission
If Direct Debit sign-up occurs with the payer signing a Direct Debit Instruction (DDI) and returning this to the Service User, it wont be possible for a Modulus Check to be performed at the point of capture.
If the paper Direct Debit Instruction is posted to the bank it will be for the bank to definitively confirm if the account exists.
2. Paper Direct Debit sign-up and submission via AUDDIS
If a paper Direct Debit Instruction is completed by the payer but the Service User retains the DDI and submits the information to Bacs electronically using the AUDDIS service, the Service User will need to run a modulus check prior to submission of the AUDDIS instruction.
3. Paperless Direct Debit Sign-up and submission via AUDDIS
If Direct Debit sign-up is taking place via paperless sign-up methods (e.g. telephone or internet), it could be possible to validate the payers account details by performing a Modulus Check – at the point of capture. Details could be checked electronically during collection and any errors flagged to the payer. The details, when checked can then be immediately confirmed back to the payer.
If sign-up methods such as electronic document signature are used, where the Direct Debit Instruction is not pre-populated, then it may not be possible to perform the modulus check at the point of sign-up. In this instance modulus checks should be performed prior to submission of the AUDDIS instruction.
Error Detection
The key benefit of running modulus checking occurs when it is performed at the point of sign-up.
- Immediate correction: By applying modulus checks, errors in data entry can be identified promptly. This allows the telephone operator or an internet prompt on screen to request that the payer immediately corrects the details. In turn, this reduces the risk of incorrect information being processed. Fewer failures at the point of submission to Bacs should therefore occur.
- Reducing admin: Ensuring correct data at point of capture will prevent any delays in setting up the Direct Debit. It also reduces subsequent administrative tasks arising from needing to recontact the payer for correct details.
- Speed to first collection: Ultimately, collecting correct bank account details first time around will prevent delays in achieving successful Direct Debit collections.
Considerations
- Choosing a provider: There are a number of different providers of modulus checking software. It can operate as stand-alone software or as part of an integrated approach. This is where it is built into the online sign-up screens, is part of a CRM (Customer Relationship Management) database, or is part of Bacs Approved Submission software. The organisation must carefully choose the appropriate provider based on their volumes, budget and approach.
- Regular Updates: The Industry databases are updated regularly as new sortcodes and account numbers are added / removed. Modulus checking options must also therefore be updated regularly. The Bacs Direct Debit Scheme Rules state that this must be done at a minimum frequency of monthly to ensure that the validation process remains accurate and reliable.
- Integrated: Modulus checking is most effective when integrated into existing systems and processes. Automation reduces human error, streamlines operations, and improves overall efficiency. Seamless integration with other data management systems or APIs facilitates real-time validation and minimizes disruptions to workflows.
- Non-standard details: It is worth remembering that some building societies have accounts that use nonstandard details. Service Users can obtain the Crediting and Debiting Building Society Accounts document from Bacs(you’ll need to log in to the resource centre) to validate these.
- Limitations: Modulus checking can confirm if it is possible for an account to exist – however, it doesn’t verify that the account details belong to the payer, i.e. that the payer ‘owns’ that bank account. Modulus checking is often mistaken as providing proof of bank account ownership but proving ownership of a bank account falls under KYC (Know your Customer) checks.
Modulus Checking Options
Modulus checking and the Industry Sortcode Directory (ISCD) are available as part of the Bacstel-IP package from the Bacs Approved Software suppliers. Options are also available for use in other applications direct, e.g. from Vocalink and others.
Questions?
Please contact us today if you have questions about modulus checking or how Direct Debit can support your organisation. We are here to help!