Direct Debit Breaking through the glass ceiling Mike Hutchinson Head of Bacs Marketing

2. Purpose of today�s presentation Is there a glass ceiling for Direct Debit take-up? Seeking out likely converts What messaging to use Why some people don�t use Direct Debit Offers � can people be �persuaded�? The �Colchester Experience� Keeping Direct Debit customers once you�ve got them �The glass ceiling gets more pliable when you turn up the heat� Pauline R. Kezer Secretary of State, Connecticut 1990 - 1994

3. So, is there a glass ceiling for Direct Debit take-up?

4. Council tax compared to other bills?

5. Council tax penetration by region The places where council tax Direct Debit penetration is greatest are the South East (70%), West Midlands (69%), East Midlands (67%), North West (67%), Yorkshire & Humberside (69%), and North East (67%) London (58%), Scottish (58%) and Welsh (62%) households have the lowest levels of council tax Direct Debit penetration

8. So, how do we seek out likely converts? What you already know about your customers Cheque payers, SO payers Council tax band Location, location, location Ethnicity Benefit recipients What you can find out about your customers look at existing DD payers and seek out characteristics ACORN, Mosaic Income, age What we can infer and assume

9. Data mining Experian and Bacs have joined forces to utilise information from Bacs' Consumer Payments Survey as the basis for creating a suite of propensity models to help organisations maximise the take-up of Direct Debit. "Using the Bacs data mining tool to target potential converts, we managed to half the size of our mailing�and also doubled our normal response rate despite already having 72% of residents paying by Direct Debit."  Phil Pettit, Colchester Borough Council �Our Direct Debit marketing campaigns had started to hit a brick wall in terms of securing customer responses and we were struggling to maintain momentum. Employing the data mining software created by Bacs and Experian reinvigorated the marketing team and gave us some alternative routes forward.� Howard Middlemiss, Sunderland City Council

10. What to say to them? There are many reasons why Direct Debits are becoming increasinglypopular to pay council tax. These include the many benefits consumers cite when talking about Direct Debits in general: 84% of Direct Debit users cite that it is a convenient way to pay bills 86% cite using Direct Debits mean you don�t forget to pay your bills thereby avoiding unwelcome reminders or financial penalties 85% believe that Direct Debits are a safe and reliable way to pay bills 83% of Direct Debit users believe they save you time 75% of Direct Debit users say they can help to make your life easier 71% state that Direct Debits help you spread payments 75% say that Direct Debits are the better way to make payments.

11. Bassetlaw DC campaign � a great example Hassle free Worry free In control It�s also entertaining and well designed� How did you read this poster? Image� Quote� Headline� DD brand?

12. Are you targeting preferrers, selectives or reluctants? There are some marked differences between selectives/reluctants and preferers: They are less likely to be aware of the Direct Debit Guarantee than preferers They are more likely to want to pay bills in full whenever they can vs. preferers They are also more likely to agree with the following than preferers: I don�t trust some companies to administer Direct Debit correctly It�s a hassle getting money back from  organisations if mistakes are made I lose control of finances if pay too many  bills by Direct Debit I don�t use Direct Debit for bills where the amount varies each time My bank balance tends to be variable & I�m  unsure whether can cover bills paid by  Direct Debit.

13. Reluctants in particular like cheques Reluctants are more likely to agree with the following than selectives or preferers: I prefer to pay bills by cheque or cash over the counter at their bank I prefer to pay by cheque whenever they can I believe that paying by cheque is less hassle than Direct Debit. In summary, selectives and reluctants are much more likely to still see the benefits of cheques. The challenge is to change their mind set and behaviour - convey the messages and benefits of Direct Debit to this group in a compelling and motivating way and to remind them of the advantages of Direct Debit over and above cheques.

14. Usage and social class Penetration levels by those households paying by Direct Debit. Strong differences by grouping.

15. The �financially excluded� Control is a key barrier to usage for the financially excluded, particularly those who are older and who are on limited incomes or are job-seekers. Perceptions and feelings include: The fear of losing control of their bank account / balance The assumption that companies can dip into your account and take money �whenever they want� They don�t trust themselves to have the required funds by the due date Concerns over bank charges if they miss a Direct Debit payment; such charges would cause �havoc and chaos� to their budgeting Many have concerns about banks and originators making mistakes and this has led to a lack of trust. Control is the concept virtually all use to explain why non Direct Debit users manage and pay bills the way they do Direct Debits can appeal if they are seen to enhance financial control and not threaten it, and show that the customer is in control of the situation � not the bank or the originator.

16. Some specific groups Level of income Very low income people mainly use �pay as you go� prepayment cards and the system works very well for them They are aware that they are paying more as a result but are frightened of accumulating bills because one large bill will cause weeks of problems. Cash income Those who are paid in cash find it most convenient to pay their bills in cash It is actually an inconvenience for them to put the cash into the banking system in order to use non-cash payment methods. �Younger� and �working� These non Direct Debit audiences are more receptive to using Direct Debit in the future. Should a number of their present concerns be overcome, then they may start using Direct Debit. Older Working / Non-Working People Typically, half had actually used Direct Debits but stopped because of charges or mistakes Were far more set against returning to Direct Debits Vehemently disliked having to pay charges for missed Direct Debits

17. Targeted messaging and support Simple product propositions that can appeal to these groups include: Promoting a choice of payment dates to coincide as much as possible with when the customer has available funds in their account Promoting more frequent Direct Debit collections e.g. weekly or fortnightly, to fit in with the budget cycle for those paid more frequently Offering appropriate advance notice for the collection frequency, and generally offering as much notice as possible and in as visible a manner as possible Offering additional or irregular Direct Debit collections if appropriate for the product / service being offered

18. Bacs support Leaflet aimed at non-users for whom control and flexibility are the key barriers to use. This leaflet is available free of charge from Bacs and the content can be provided electronically for LAs to include in their own material. In March 2008 we launched an online and telephone based help centre for consumers who have an issue with a Direct Debit, accessible via www.directdebit.co.uk/helpcentre Sections include how to set up and cancel a Direct Debit, what to do if a payment is taken after cancellation, taken on the wrong date taken by an organisation not recognised. It outlines the correct process for making a complaint  and includes sample letters and contact details for both  Bacs and the Financial Ombudsman Currently both the CAB and the Consumer Council (Northern Ireland) are making the help centre available to their staff

19. Offers � can some people be persuaded?

20. Offers � can some people be persuaded? Offers alone are highly unlikely to change negative attitudes but for some selectives and reluctants, they will make a difference if they�re relevant In general, make offers related to the bill, the organisation and/or the customer and ALWAYS TEST FIRST

21. Test everything It�s important to learn something from every piece of activity Test, measure and react Ensure robust sample sizes � a combination of expected response rate, margin of error accepted, confidence interval Online tools to help - http://www.db-marketing.com/dbm/calc/sample_size.shtml

22. The Colchester BC experience � Phil Pettit

23. Keeping Direct Debit customers once you�ve got them �Your most unhappy customers are your greatest source of learning� Bill Gates Chairman, Microsoft �Customers don�t expect you to be perfect. They do expect you to fix things when they go wrong� Donald Porter VP, British Airways

24. Do problems happen?

25. How do customers feel about Direct Debit as a result?

26. Impact of experience on future Direct Debit usage

27. Keeping Direct Debit customers once you�ve got them Undertake a Training Needs Analysis do you know what your customer facing staff knowledge levels are? do you account for staff turnover? www.bacslearning.com Introduction, Working With and Managing Direct Debit e-learning courses The Great Balloon Race � a free diagnostic tool to help you identify any  knowledge gaps Accredited face to face training Direct Debit for Dummies DD Guarantee �reminder� cards

28. Keeping Direct Debit customers once you�ve got them And a final thought�. Bacs Efficiency Initiative - supplies personalised performance reports looking specifically at unpaid data, identifying problem areas and offering best practice advice for improving processes and protecting the customer experience 300+ local authorities have registered to date 84% are satisfied with the reports, with 44% very satisfied Almost 9 out of 10 (89%) said the report was valuable to their LA (62% agreeing strongly) �The report clearly showed how we are performing in relation to DD collections & provided useful recommendations for the areas where we can improve�

29. Hopefully we�ve covered�� Is there a glass ceiling for Direct Debit take-up? Seeking out likely converts What messaging to use Why some people don�t use Direct Debit Offers � can people be �persuaded�? Keeping Direct Debit customers once you�ve got them �There ain�t no rules around here. We�re trying to accomplish something� Thomas Edison �Set your target and keep trying until you reach it� Napoleon Hill Author