Electronic signature can be used to sign up new Direct Debit payers without using a paper Direct Debit Instruction (DDI). Other paperless sign-up methods include the telephone, face-to-face and the internet. Each method offers different benefits and carries different risks. Here we look at electronic signature.
What is ‘Electronic Document Signature’?
Electronic signature is defined in the Oxford dictionary as “data in digital form attached to an electronically transmitted document as verification of the sender’s intent to sign the document”. Bacs define ‘Electronic Document Signature’ according to the Electronic Identification Regulation (2016). They identify three types of electronic signatures:
- simple – such as a name at the bottom of an email address, ticking “I agree” on a website, a scanned image of a signature or the use of a stylus on a touch screen device,
- qualified, and
- advanced – often provided by a third party. They create the electronic signature on behalf of the signatory using a method of certification. There are lots of different providers of electronic signature software. They include Docusign, Adobe, E-Sign, Xodo, SignWell and others.
Paper vs Paperless
Note: If you email a Direct Debit Instruction to a payer and they print and sign it, then scan it and return it – this is a paper sign-up. It is not paperless because a wet signature is provided. If you email a Direct Debit Instruction to a payer and they provide an ‘electronic’ signature – either a picture of their signature or a signature written electronically – then this is a paperless sign-up.
How do you sign up a Direct Debit payer using Electronic Document Signature?
To sign payers up using Electronic Document Signature, a service user might simply forward an electronic DDI for completion. The payer would complete the relevant sections and return it. Alternatively, they may communicate with the payer first, e.g. by telephone (using an approved script), or on-line (using approved internet screens). The service user could then pre-populate details into the DDI and send this to the payer for e-signature. If using a third-party, the payer would typically receive an electronic message with a link to the documentation. They would access this link and sign. The documentation would then be electronically returned to the service user who can process the DDI using AUDDIS.
What are the benefits of using electronic signature?
Compared to a paper-based approach:
Electronic document signature as a paperless Direct Debit sign-up method offers advantages.
- it is quicker than posting out a Direct Debit Instruction and waiting for the form to be completed and returned;
- there are no postage costs;
- it can be operated remotely. It doesn’t require access to a physical location to retrieve paper forms, and
- it creates a better, more modern image of the collecting organisation.
Within the Business:
Often, especially within Business-to-Business, an organisation will have some form of electronic document signature provider. Typically this could be used to enable electronic signature of contracts. Using the same approach for Direct Debit Instructions means that the DDI can be completed at the same time as the contract. This can be quicker and more convenient for all parties. It may also be possible to embed the return of documents directly into the companies CRM thereby simplifying the process further.
Compared to other paperless methods:
Electronic Document Signature also offers benefits compared to other paperless methodologies such as telephone or internet, for example:
- Where it has been identified that more than one person is required to authorise a Direct Debit (often the case with Business accounts), it is not possible to use telephone or internet sign-up. With Electronic signature however, the request can be sent to all signatories at the same time, allowing paperless sign-up to progress.
- Another key benefit is the clear audit trail the methodology provides. For low value, low risk transactions, a face-to-face, telephone or internet sign-up may be best. If the transaction is of high value however, an organisation may feel reassured with time and date stamps; certified signatures and the retrievable audit trail that this approach offers.
What other considerations are there when using electronic signature?
With any sign-up methodology it is important to consider both the advantages it offers as well as other considerations and risks that may arise.
Compared to a paper based sign-up approach:
As with all paperless methodologies there are additional mandatory requirements regarding KYC (Know your Customer) checks. It is the organisation’s responsibility to verify the customer and validate their details (identity, account details, customer address). This can be complicated, though it doesn’t have to be, and we can provide advice on options.
Introducing Electronic Document Signature can create additional costs if a third-party provider has to be engaged. This is not always the case and many offer free or low-cost deals, but integration into existing CRM systems can add expense.
The organisation must first be live on AUDDIS to be able to use any paperless methodology. This is because the organisation will need to send the sign-up information to Bacs electronically.
Compared to other paperless sign-up methodologies:
With Electronic Document Signature, you may wish to pre-populate the bank details in the DDI. If so, you would need to take these details in advance, e.g. over the phone. Alternatively, you would leave the fields blank for the payer to complete. Either way, it is not possible to do a modulus check at the point of sign-up, i.e. at the point that authorisation (signature) is provided. If details are collected in advance, then it can be possible to do the modulus check in advance. If not, it will have to be after authorisation is given. Either way – it must be before or at the point of submission.
As with all Direct Debit methodologies, if you introduce a new approach, you must ensure that your sponsoring bank agrees. Each paperless method needs to be approved separately and your sponsor will want to approve your documentation / scripts / confirmation letters and approach, in advance of you starting to use it. This means completing forms and submitting copies of instructions. Again, this doesn’t have to be complicated – templates are available – and we can help.
Contact us for help
If you have questions about electronic signatures, Direct Debit Instructions – or any other aspect of the Direct Debit Scheme, you can read more in the The Guide and Rules to the Direct Debit Scheme. Alternatively, please Contact Us – we are very happy to help!