Direct Debit: Making Life - and Fraud - Easier

The Direct Debit scheme has revolutionised the way infull set of details. Because of the way the system
which bills are paid, and has drastically cut the numberworks, when fraudulent payments are found, they are
of people who couldn’t manage to pay their bills onusually considered to be processing errors rather than
time. Since 1995 the number of Direct Debita fraudulent transaction and are only recognised after
transactions has increased by a staggering 200the real person notices they are making payments for
percent according to APACS. Furthermore, over 48%things they have not authorised.
of the UK bill-paying population has declared DirectSo, how do they do it? Fortunately for the fraudsters
Debit to be their preferred payment method, with 74%there are an ever increasing number of services that
of users agreeing that Direct Debit makes life easiercan be purchased by regular Direct Debit payments
and 80% of users believing it saves time. The ease ofsuch as mobile phone contracts. When purchasing a
using debit cards to pay bills and use in store, over themobile phone the customer is required to take out a
internet and on the phone has certainly made livesDirect Debit to pay for the cost of the phone and the
easier and has probably contributed to helping thosecontract. The checks that are currently in place to
that are financially stable remain that way.validate the details are relatively rudimentary and will
Additionally, there exists plenty of scope for theoften pass through validation systems. The "customer"
continued growth of both Direct Debits and Directleaves the store with a new phone and up to two
Credits, with Direct Debits expected to grow by ayears of free phone usage paid for with someone
further 125% over the next eight years and Directelse's bank account details.
Credits by over 200%.Unfortunately this type of fraud is only detected when
However, does this ease of use also come with anthe originating organisation or the customer’s bank
increased ability for others to use the system to theirreceives a complaint either because the payment has
advantage? The introduction of chip and PIN providednot been made or received, or because an
increased security for consumers; and it is likely thatunauthorised payment has been made or received.
many of the same consumers assumed Direct DebitAlthough much fraud is believed to go unnoticed as
and Direct Credit payments provided the same levelfraudsters focus on high volumes of low payments
of security. Unfortunately, they are now discovering(and individuals receiving misapplied payments are
this is not the case as fraudsters have found ways tounlikely to draw attention to them), large unauthorised
target these kinds of payments and use them to theirwithdrawals have been recorded.
advantage.However, more organisations are becoming aware of
It is easy to understand how thieves have usedthis hole in the system and are looking for solutions to
people's credit cards to make purchases in the past.help keep transactions more secure. Direct Debit and
They simply stole the actual cards and madeDirect Credit fraud is possible because the systems in
purchases in store, over the phone or online. It wasplace to check on the accuracy of customer-supplied
simple to get all the details necessary just by pickingpersonal and bank information are currently limited to
up a wallet. Most people don’t realise that it is justchecking the format validity of bank account data. A
as easy for fraudsters to get a hold of your detailssolution to combat this kind of fraud would be to allow
and use cards to make Direct Debit payments.for these systems to cross reference and match the
Often, fraudsters pose as legitimate customers with acustomer's details with their bank account details.