Instant Direct Debit & ‘System Spaghetti’
Trevor Wistaff | FOUNDER & CTO
17th May 2021
If you’re a merchant who relies on direct debit for income, how much better would an instant direct debit solution be for your business?
We know you have a love-hate relationship with traditional direct debit. Sure, it’s great that you can set up authorised debits from customer bank accounts, but it’s slow, funds-balance blind, and clunky.
Delayed, constricted cash flow of dishonoured direct debit payments are the bane of every merchant’s existence. Frankly, waiting up to 72-hours to learn that a direct debit has been unsuccessful just doesn’t cut it in 2021.
Big, legacy financial institutions typically focus on deposits and lending. But their size and complexity often means they’re not so great in other areas like payments, automation and user experience—all supremely important to Gen Z and Millennials. These cohorts are reshaping the global economy in many ways—not least of which is their aversion to debt, interest and parental oversight in favour of Buy Now Pay Later and other ways to pay.
Karina Kwan—Adjunct Professor with the Discipline of Finance at the University of Sydney Business School, former Bank CFO and Treasurer, and Zepto Advisory Board member—describes legacy systems like traditional direct debit as ingredients in ‘System Spaghetti’.
“‘System Spaghetti’ is my term for the state of technology infrastructure of most large Financial Services organisations, who accumulate a multitude of systems over decades of growth. These systems don’t connect well, require bespoke bridging solutions, and a significant cost to support. Management spends a significant amount of time navigating the layers, processes and spaghetti, such that there is little ability to innovate and respond with agility to a changing environment,” says Kwan.
Back in 2018, Zepto responded by giving traditional direct debit the capabilities that merchants expect in 2021. We replaced faxed—yes, faxed—authorisation forms that get filed in back-office cabinets somewhere, with electronic mandates, faster settlement, no dishonours, and lower fees. Not only that, we created a seamless, cost-effective bridge to the rapidly approaching instant direct debit solutions of the future.
“Zepto’s offering not only lowers costs and lowers risk for corporate clients as well as their customers, it also delights customers by eliminating a big point of aggravation – direct debit dishonour fees,” says Kwan, describing our game-changing direct debit solution.
Looking forward, the next game-changer is the 2022 roll-out of NPP Australia’s PayTo platform. PayTo will replace some of Australia’s ‘System Spaghetti’ with world-leading capability for data-rich, customer-authorised, instant direct debit payments.
So, what’s the PayTo fuss all about?
For starters, PayTo instant direct debits will see settled funds in merchants’ accounts within two-seconds, not two (or three) days.
PayTo also hands the keys of the payment relationship back to the payer. Customer pre-authorisation sits at the core of PayTo instant direct debit agreements which can be paused, resumed or cancelled within a payer’s regular internet or mobile banking. Not only that, customers can easily move their PayTo agreements between their bank accounts or across to another bank altogether.
As an Identified Institution with the NPPA, Zepto has seen PayTo—previously known by its working title of ‘Mandated Payments Service’—coming for a few years now. We are a confirmed launch partner, and our system architecture has been purpose-built to support the PayTo framework and deliver a brilliant developer experience for our merchant partners.
Whether you’re a seller, a buyer or just a humble payments nerd—we see you—hit us up with any questions about the ins-and-outs of PayTo and instant direct debits.
We’d love to hear from you.
Zepto (formerly Split Payments) was named ‘Australia’s Most Innovative Technology Company’ at the annual Australian Financial Review / BOSS ‘Most Innovative Companies’ awards in 2020.