# UK businesses need to embrace payment technologies to reduce financial damage risk
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-03-13
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: How Technology is Revolutionising Financial Services:
Meta Description: Discover how embracing Direct Debit and automation can help your business reduce late payments, improve efficiency, and enhance customer relations.
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/uk-businesses-need-to-embrace-payment-technologies-to-reduce-financial-damage-riskhtml

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**Terry Jones, CEO,** [**SmartDebit**](https://www.smartdebit.co.uk/)

The financial services industry has been significantly affected by the digital age. New technologies and the shift towards the cloud have improved overall efficiencies and already enable companies to operate on a scale that would otherwise be unattainable.  The upcoming revised Payments Service Directive (PSD2) will again disrupt the current rules of engagement, allowing the technology sector, especially fintech startups, and [challenger banks](https://www.financedigest.com/the-rise-of-challenger-banks.html "challenger banks") to take advantage of an area that is, at the moment, predominantly ruled by the major banks. It is no secret that the [financial services industry must keep innovating and embracing new technology](https://www.financedigest.com/financial-firms-can-use-technology-combat-todays-cybercriminals.html "How financial firms can use technology to combat today’s cybercriminals") to avoid falling behind, as consumers increasingly indicate how they will engage with, and buy from, chosen suppliers.

![Terry Jones](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/terry-jones-1736842927769-compressed.jpg)

Terry Jones

Of course, it’s not only financial services that need to be [smart](https://www.financedigest.com/open-finance-and-smart-ecosystems-wont-wait-for-banks.html "Open Finance and Smart Ecosystems Won’t Wait for Banks") with new technologies. A recent study by The Confederation of British Industry (CBI) revealed that UK companies alone could make £100 billion “in extra economic growth” by investing in [technology](https://www.financedigest.com/how-technology-can-support-insurance-business-growth.html "How technology can support insurance business growth"). Although the UK has a strong technology industry, the report claims that UK companies are unfortunately [lagging behind in the adoption of technology to improve levels of productivity](https://www.financedigest.com/apple-plans-to-cut-iphone-14-production-lag-between-china-india-bloomberg.html "Apple plans to cut iPhone 14 production lag between China, India – Bloomberg"). By increasing productivity and efficiency, [companies have the potential to run](https://www.financedigest.com/elon-musk-who-runs-four-other-companies-will-now-be-twitter-ceo.html "Elon Musk, who runs four other companies, will now be Twitter CEO") operations with more economies of scale, maximising turnover, and therefore increasing options around remuneration and benefits packages – ultimately giving employees a higher standard of living.

**‘SMEs owed £44.6 billion in** [late payments’](https://www.financedigest.com/the-late-payments-toolkit-how-to-keep-the-cash-flow-strong.html "THE LATE PAYMENTS TOOLKIT – HOW TO KEEP THE CASH-FLOW STRONG")

A critical area in which [technology can make a significant impact is helping businesses](https://www.financedigest.com/2016-the-year-of-technology-financing-the-year-of-business-growth.html "2016 – THE YEAR OF TECHNOLOGY FINANCING, THE YEAR OF BUSINESS GROWTH") reduce late payments. Such delays can seriously affect revenue streams, and therefore entire operations. Earlier this year, Zurich’s SME Risk Index Report revealed that £44.6 billion in [late payments](https://www.financedigest.com/technology-is-a-tonic-for-late-business-payments.html "TECHNOLOGY IS A TONIC FOR LATE BUSINESS PAYMENTS") is owed to SMEs, while Bacs (the organisation behind Direct Debit) claimed that 39% out of all 1.7 million SMEs in the UK, spend up to four hours a week chasing payments. This is an area where automation and services like Direct Debit can vastly improve the process, especially for those [businesses collecting frequent recurring payments from customers](https://www.financedigest.com/why-late-payments-are-hurting-your-customer-as-well-as-your-business.html "Why late payments are hurting your customer, as well as your business") or clients.

Interestingly, British [consumers actually prefer using Direct](https://www.financedigest.com/direct-to-consumer-the-rite-of-passage-for-retail-in-2022.html "Direct to Consumer: the rite of passage for retail in 2022") Debit. It is one of the most popular ways for households to pay their regular bills, with over 90% of people with [bank accounts](https://www.financedigest.com/now-is-the-time-for-banks-to-introduce-intelligent-account-analysis.html "Now Is the Time for Banks to Introduce Intelligent Account Analysis") having at least one Direct Debit.  However, surprisingly, there are plenty of UK businesses, particularly smaller ones, that haven’t yet taken advantage of this method of payment collection. This could be because a license (a Service User Number) from abank is necessary to be able to process Direct Debits.It could also just be for the simple reason that the organisation mistakenly believes the process isn’t within their reach.

Yet Direct Debit is a great example of how automation improvements have drastically [transformed a financial service offering – payment](https://www.financedigest.com/three-ways-blockchain-is-transforming-payments.html "Three ways blockchain is transforming payments") collections are as smooth as possible; minimising errors, keeping customers informed and streamlining accounts reconciliation.  The financial damage regarding missed Direct Debit payments can, however, also seriously affect a company’s revenue streamsand negatively [impact customer](https://www.financedigest.com/impact-com-fiscal-year-h1-2021-1-5b-valuation-150m-in-funding-bigcommerce-integration-69-customer-growth.html "impact.com Fiscal Year H1 2021: .5B Valuation, 0M in Funding,  BigCommerce Integration, 69% Customer Growth") relations. This is exactly why it is important that smaller [businesses review the opportunity](https://www.financedigest.com/autonomous-vehicles-market-emerging-growth-analysis-future-demand-and-business-opportunities-2026.html "Autonomous Vehicles Market Emerging Growth Analysis, Future Demand and Business Opportunities 2026") to createDirect Debit facilities.  Concerns can often be addressed by a reputable third-party payment processing service, and those organisations are also able to act as the interface between the biller and the [customer’s bank](https://www.financedigest.com/canadian-banks-fighting-brokers-back-for-customers.html "Canadian Banks Fighting Brokers Back For Customers") if additional support is needed.

**Too much room for user error**

Maintaining a positive cash flow is vital for businesses, but just as [important is recognising where it is possible to reduce](https://www.financedigest.com/the-importance-of-a-proactive-and-collaborative-approach-to-reducing-contactless-fraud.html "THE IMPORTANCE OF A PROACTIVE AND COLLABORATIVE APPROACH TO REDUCING CONTACTLESS FRAUD") repetitive tasks which could be automated, and simply overseen instead.  Paper [processes create](https://www.financedigest.com/growth-of-mineral-processing-and-mining-industrie-is-creating-demand-for-rotary-trommel-market.html "Growth Of Mineral Processing And Mining Industrie Is Creating Demand For Rotary Trommel Market") too much room for usererror and make auditing and compliance reports time-consuming and complicated.  [Automation benefits](https://www.financedigest.com/benefits-of-implementing-automated-testing.html "Benefits of Implementing Automated Testing") around Direct Debit can be identified in many areas, and are often more straightforward to implement than perhaps is realised.  [Companies can manage](https://www.financedigest.com/big-companies-manage-to-pass-on-soaring-costs-to-cash-strapped-consumers.html "Big companies manage to pass on soaring costs to cash-strapped consumers"), add or remove payers, search customer records in case of a query, amend details, edit amounts and view reports- all from a central dashboard. A further advantage is that should a payment collection fail, you will be notified immediately.

Reporting is now of paramount importance to any business due to increasing regulations and controls in the [financial services sector](https://www.financedigest.com/iot-for-the-financial-sector.html "IoT for the Financial Sector").  There is no denying that Direct Debit can be complex and tiresome for businesses. There are rules and guidelines set by Bacs that need to be adhered to and there is also the Bacs processing calendar that needs to be followed, but these are all [manageable with intelligent software](https://www.financedigest.com/document-management-software-market-to-expand-at-a-value-cagr-of-12-3.html "Document Management Software Market to expand at a value CAGR of 12.3%").

In addition, when outsourcing any processes that involve people’s personal data and money, strict compliance to data [protection regulation](https://www.financedigest.com/regulators-need-to-strike-the-balance-between-protection-and-strangulation.html "REGULATORS NEED TO STRIKE THE BALANCE BETWEEN PROTECTION AND STRANGULATION") must be followed. With the incoming GDPR regulationcoming into force in May 2018, additional measures will need to be in place and this is creating concern in the industry, as [business leaders will need](https://www.financedigest.com/setting-up-a-business-in-the-uk-heres-what-you-need-to-know.html "Setting up a business in the UK? Here’s what you need to know.") to understand exactly what is being asked of them.

**Fake news**

As data protection increases and consumers become even more savvy abouttheir rights, companies will [need to do more to remain compliant, and all associated processes will need to become integral to the business](https://www.financedigest.com/small-businesses-and-scams-what-you-need-to-know.html "Small businesses and scams: What you need to know").  Compliance should not therefore just be viewed as a separate business department that oversees systems and [demands changes](https://www.financedigest.com/rapidly-changing-fashion-lifestyle-is-expected-to-spur-demand-for-clothes-closets-market.html "Rapidly Changing Fashion Lifestyle Is Expected To Spur Demand For Clothes Closets Market").  Fake news is creating fear and panic, and companies need to either take more responsibility to self-educate or identify solid partners that they can trust to guide them through the maze.  This also brings opportunities, of course – in terms of business advantage.If small companies can learn quickly or partner with the right suppliers, they can [move ahead](https://www.financedigest.com/the-implantable-biomaterials-market-to-move-ahead-on-rpa-robotic-process-automation.html "The Implantable Biomaterials Market to move ahead on RPA (Robotic Process Automation)") of the bigger, but less agile, suppliers.

[Innovation has to happen – it can’t be in isolation of the ongoing business](https://www.financedigest.com/disruption-and-innovation-four-predictions-for-the-business-landscape-in-2016.html "DISRUPTION AND INNOVATION – FOUR PREDICTIONS FOR THE BUSINESS LANDSCAPE IN 2016") either.  Either buy-in the services that you need, or learn to [develop them within the business](https://www.financedigest.com/dan-hodgson-joins-verasity-as-director-of-business-development.html "Dan Hodgson joins Verasity as Director of Business Development"). Either way, make progress, because no-one else is standing still.


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