Bulk Electronic Clearing System (BECS) Direct Debit is a popular Australian bank transfer system for recurring payments. It allows businesses to collect authorised payments automatically and directly from customers' bank accounts, a method known as direct entry. Since its inception in 1989, BECS has become a go-to method for managing regular bills, subscriptions and memberships. The system is an important part of the economy in Australia, where direct entry carries an average value of AU$15 trillion each year, which equates to the majority of consumer payments in the country, based on value.

Below, we'll cover what businesses need to understand about BECS Direct Debit, including how it works, which customer segments use it and why, and what is required to start using this system as a payment method.

What's in this article?

• Where is BECS Direct Debit used?
  
• Who uses BECS Direct Debit?
  
• How does BECS Direct Debit work?
  
• Benefits of accepting BECS Direct Debit
  
• Accepting BECS Direct Debit as a payment method
  
• Alternatives to BECS Direct Debit
  

Where is BECS Direct Debit used?

Growth drivers

• Digital shift: As of 2021, more than 80% of Australians said they preferred to check their account balances, make bill payments and transfer money online. The high adoption rate for online payments contributes to the popularity of BECS, as customers can easily set up and manage mandates through online portals or banking apps. Australia has also seen a major shift away from cash payments. In 2007, 70% of in-person payments were conducted in cash, a number that dropped to just 16% by the end of 2022. BECS supports this trend by reducing the need for cash or checks.

• Subscription boom: The rise of subscription services such as streaming platforms, meal kits and software-as-a-service (SaaS) products has fuelled demand for the type of automated payments that BECS offers.

• Convenience and ease of setup: Setting up a BECS mandate for recurring payments on Stripe is simple and straightforward, and it allows customers to avoid the hassle of initiating payments manually.

Control and flexibility

• Transparency and visibility: Users can track their BECS payments through web banking or banking apps and have access to detailed transaction history. This transparency fosters trust and empowers informed decision-making.

• Trends in personal finances: BECS provides users with the tools and information they need to manage their recurring payments effectively.

Regulatory environment

Consumer protections

• Australian Payments Network (APN) rules: These standards, which govern BECS's operations, set limited rules for consumer protection, security and dispute resolution to ensure processes are fair and transparent.

• Competition and Consumer Act 2010 (CCA): This consumer protection legislation, which is enforced by the Australian Competition and Consumer Commission (ACCC), prohibits unfair practices and establishes that customers must have access to clear and accurate information about their rights and obligations.

Payment system regulations

• Payment Systems (Regulation) Act 1998: This rule established the framework for regulating payment systems in Australia. As part of its mandate, BECS must operate in the interest of the public, in a manner that is safe, efficient and transparent.

• Anti-Money Laundering and counter-terrorist financing (AML and CTF) legislation: This legislation helps to combat money laundering and the financing of terrorism. BECS complies with these requirements to safeguard the integrity of the financial system.

Who uses BECS Direct Debit?

BECS Direct Debit's versatile and user-centric approach to automating, streamlining and securing financial transactions makes it a popular choice for a wide range of businesses and individuals in Australia. Here's an overview of who uses the system and why:

Business users and industries

• Utilities: Gas, water and electricity providers in Australia rely heavily on BECS payments. The system facilitates timely bill collection and reduces processing expenses.

• Telecommunications: BECS is an ideal payment method for phone, internet and TV providers who collect monthly bills. BECS offers timely payments, streamlines administrative tasks and minimises customer churn.

• Financial services: Banks and lenders leverage BECS for loan repayments and mortgages. The system's efficiency and accuracy in managing fixed payments are key advantages.

• Insurance companies: Australian insurance companies leverage the convenience of BECS payments for handling insurance payments.

• Subscription services: Streaming platforms, SaaS providers and online publications use BECS for collecting recurring subscription fees from subscribers.

• Charitable organisations: BECS simplifies regular donations, allowing organisations to count on sustained support. Thanks to being easy to set up and manage, it is an effective tool for fundraising.

• Government agencies: Local and national bodies use BECS for tax collection, fees and benefit disbursements. Its efficiency and transparency are ideal for managing finances in the public sector.

• Retail and e-commerce: While BECS is used less often for one-off transactions, the system facilitates recurring deliveries and subscription models in retail.

• Business-to-business (B2B) transactions: The streamlined approach of the BECS system supports regular payments between businesses for services and supplies. These direct debit payments can minimise the administrative workload and improve cash flow.

Customer segments

• Budget-conscious individuals: For budget-conscious Australians, the system's predictability aligns with their focus on financial planning and cost control. More than a quarter (27%) of Australians surveyed in 2022 said they planned to set up direct debits for regular payments in an effort to save on missed payment fees.
  

Specific use cases

• Subscription services: Many Australians use BECS to pay for gym memberships, streaming services and other recurring payments because of its reliability and convenience. This contributes to higher customer retention for businesses.

• Utility bill payments: Australian households often automate their utility bills through BECS to avoid late fees and to simplify bill management.

How does BECS Direct Debit work?

BECS Direct Debit simplifies the payment process for businesses and customers. Here's how it works:

For customers

• Setting up a mandate: Customers choose BECS Direct Debit as their preferred payment method at a business's checkout or through a separate agreement. They then provide their bank with an authorisation, known as a Direct Debit Request (DDR), which includes their bank account details and authorises the business to debit specific amounts at pre-determined intervals.
  

Payment processing

• If everything is in order, the funds are transferred from the customer's account to the business's account.

• The customer receives a notification that the payment has been made. Usually this notification is delivered through the online banking portal or a mobile app.

Managing the mandate

Customers have complete control over their BECS mandates, which includes the power to:

• Cancel: Stop future payments altogether.

• Dispute: Raise concerns about unauthorised or incorrect transactions with their bank or the business.

For businesses

• Setting up BECS payments: Businesses integrate BECS into their payment systems by partnering with a bank or a payment service provider (PSP). They define the payment schedule and amounts for each customer based on their agreements.

• Initiating Direct Debit payments: On the due date(s), businesses submit DDIs to their payments provider. These DDIs contain information about the customer, payment amount, bank account information and reference number.

• Automatic payment collection and reconciliation: The payments provider processes the DDIs and facilitates the fund transfer from customers to businesses. Businesses receive automated notifications and transaction records for reconciliation purposes.

• Handling disputes: Businesses are responsible for resolving any disputes that customers raise concerning unauthorised or incorrect BECS payments. Businesses must work with the customer and their bank to reach a resolution within an agreed-upon time frame.

Benefits of accepting BECS Direct Debit

Accepting BECS Direct Debit as a payment method offers businesses many advantages, including:

Increased efficiency and reduced costs

• Reduced administrative burden: BECS reduces manual invoicing and eliminates the need to chase payments, freeing up time and resources.

• Lower transaction fees: BECS offers significantly lower transaction fees compared with credit cards.

• Faster settlement times: Typically, funds arrive in business accounts within two working days, compared with five to seven days for credit card payments.

Improved cash flow and predictability

• Reduced late payments: Direct debits in general boast an extremely high success rate for authorised transactions, significantly reducing late payments compared with traditional methods.

• Predictable revenue streams: Regular BECS payments provide businesses with reliable income forecasting and cash flow management.

• Improved budgeting and financial planning: Predictable recurring income allows businesses to plan expenses and investments more effectively.

Enhanced customer experience and retention

• Convenience for customers: BECS offers a convenient way for customers to pay their bills automatically, improving overall customer satisfaction.

• Reduced churn: Automated payments can decrease the customer churn that comes from missed payments or expired cards, leading to improved rates of customer retention.

• Subscription growth: By making recurring payments easy to set up and use, BECS can boost a business's subscription volume.

Accepting BECS Direct Debit as a payment method

Accepting BECS comes with specific requirements for both Australian and non-Australian businesses. Stripe offers a pathway for non-Australian businesses to integrate BECS. Here's a look at the requirements necessary to begin accepting BECS payments:

For businesses based in Australia

• Business registration: Businesses must be registered and have an Australian Business Number (ABN).

• Local bank account: A valid Australian bank account is needed to receive BECS payments.

• BECS service provider: Businesses should partner with a BECS service provider to handle the technical aspects of clearing and settlement.

• DDR service agreement: Businesses and their BECS service provider need to sign a DDR agreement, outlining the terms and conditions for processing Direct Debits.

• Compliance: You must comply with the relevant AusPayNet BECS rules and regulations.

For businesses based outside of Australia

• Australian partnership: Businesses located outside of Australia will need to partner with an Australian entity, such as a subsidiary or a trusted partner, to act as their BECS recipient and holder of the bank account that will receive deposits.

• Stripe BECS Direct Debit integration: Businesses can use Stripe's BECS Direct Debit functionality to initiate BECS payments from Australian customers. This requires:

  • A Stripe account with BECS Direct Debit capability
    
  • A payment configured with au_becs_debit as a payment method type
    
  • The currency set to AUD
    

Steps for accepting BECS

• Integrate BECS with your system: Configure your software or payment gateway to accept BECS payments. Stripe offers seamless integration for its business clients.

• Offer BECS as a payment option: Make BECS available during checkout alongside your other chosen payment methods.

• Customer authorises payment: Customers provide their bank account details and accept the Direct Debit Request, thereby authorising the payment.

• Payment processing: Your BECS service provider submits the payment request to the customer's bank through the network.

• Settlement: Funds are transferred to your account.

Additional considerations

• Fees: BECS service providers typically charge fees for processing Direct Debits.

• Minimum payment amount: Some BECS service providers have minimum payment amounts.

• Dispute resolution: Understand the dispute resolution process in the event of any issues with payments.

Alternatives to BECS Direct Debit

While BECS Direct Debits are very popular in Australia, there are other options that serve a similar function for businesses and customers.

For businesses

• BPAY: This popular bill payment system allows customers to pay bills electronically and directly from their bank accounts. Businesses can integrate BPAY into their invoicing system to receive payments directly.

• PayTo: PayTo allows customers in Australia to authenticate and approve agreements using their mobile banking app, and settle payments settle almost immediately.