It’s not often you hear the words “ice cream” and “direct debit” in the same sentence.
While one conjures up images of idyllic summer holidays, the other brings back memories of filling out direct debit authorisation forms to pay bills automatically from a bank account, then scrambling to cover payments via other methods while waiting for confirmation that the direct debit has been set up.
However, it turns out that the direct debit, which recently hit the “big five-oh”, has its origins in Unilever’s desire to collect payments from ice cream vendors more efficiently.
It seems fitting, therefore, that Duesday‘s recurring payments business should be headquartered in the home of Cornish ice cream.
The move to Cornwall
After a number of years living and working in London, Marcus Kern decided to pursue his dream of buying a bolthole by the sea in Cornwall. While renovating his holiday house, he was struck by the thought that perhaps he could actually make his home on the South West Peninsula.
Encouraged by Superfast Cornwall, an initiative that enables 90% of premises to access fibre broadband1, Kern moved to the popular tourist destination and co-founded Duesday in the market town of Liskeard.
Disrupting direct debits
As Kern points out, direct debits were invented in the ‘60s; well before computers became commonplace, and decades before smartphones enabled people to manage their money on the go. The rest of the world has moved on, but a payment method rooted in the paper-based banking systems of another era lives on relatively unchanged to this day.
An archaic procedure that can cause anxiety
Unsurprisingly, younger people who have grown up with contactless and mobile payments are unaccustomed to the procedures and wait times involved in setting up direct debits.
And people on tight budgets can be reluctant to set up this payment method due to difficulty in ensuring they’ll have enough money in their bank accounts to cover an array of bills totalling varying amounts that will be debited at different times; typically 10 working days after they receive their bill. Clearly, the budgeting challenges are significant, and potential for financial anxiety is high.
Additionally, the fact that a direct debit can only be taken out of one account creates issues for people who need to split bills, e.g. house sharers. While some people get around this by setting up joint accounts, this workaround is only an option for people who are closely connected to their housemates, e.g. family or partner.
An app that allows house sharers …
Duesday’s early release makes it easier for house sharers to split and pay bills.
Imagine you’re sharing a house with a few friends (or strangers). From time to time, gas, electricity and water bills arrive, all totalling varying amounts with different payment dates. These bills need to be split between all housemates, but how do you do it? Often, one person takes responsibility for collecting money from everyone and making sure the bills get paid.
… to split bills and pay with a swipe
But wouldn’t it be easier if each housemate could download an app that splits the bill for them, tells them how much they owe as an individual, allows them to pay their share with a swipe, and settles the whole bill amount with the utility company?
Sole bill payers can pay a bit early, at the normal time, or a bit later
Duesday also offers an alternative functionality for bills that do not need to be split. It allows people to pay a bit earlier or later than the actual bill due date.
For example, if a gas bill had just arrived and the sole payer was feeling flush with cash, they might prefer to pay their bill right away.
On the other hand, if an electricity bill arrived with a due date a couple of days before someone’s wages were due to be deposited into their bank account, they might prefer to pay their bill after they are sure the funds have cleared.
Free for customers
Currently in alpha testing, Duesday is free for the customer, but partner organisations such as utility companies issuing regular bills pay a small payment collection charge.
Merchants pay transaction fees
Naturally enough, when a new payments service launches, a key stumbling block can be that not enough merchants accept the payment method, and customers are therefore unwilling to adopt it.
Works even if the merchant hasn’t signed up
However, the app works regardless of whether the bill issuer has signed up to partner with Duesday. If, for example, a gas company is not a partner, Duesday can still help customers split and pay their bills. All that’s necessary to facilitate the payment is access to an online payments portal.
All it needs is a merchant with an online payments portal
In this case, the bill payment service remains free for the consumer, but Duesday will not receive a fee from that particular gas company.
The vision: closer customer-merchant relationships …
In operational terms, Kern notes that the company has other recurring payments in its sights, such as gym memberships and rental payments to letting agencies.
In broader terms, underlying it all is a conviction that things would be better for everyone if only customers and service providers communicated more effectively. This could happen via the app.
… with transparency and constructive dialogue …
For example, if a customer was having difficulty paying an electricity bill, Duesday could facilitate a constructive dialogue with the electricity provider about when the customer could pay, or about spreading payments. This would have the potential to reduce anxiety for the customer, and lessen the chances of them resorting to high interest financing options, such as predatory payday loans.
It could also increase the likelihood of the customer paying future bills, reduce the costs to the company of writing off or selling on debts, and lessen the chances of the customer moving to another provider. In effect, dispute resolution could be conducted in a non-confrontational way via the app.
… leading to customer retention …
In a similar vein, if someone discovers they’re not using their gym membership, they might simply cancel their direct debit with the bank and never set foot in the gym again. But what if the gym had the opportunity to communicate with the member via the app to offer them a different package, or to have a conversation about what would make them use the gym?
… and lower churn
In a world in which we are encouraged to constantly shop around for the best deal, Kern urges service providers to forge transparent, trusting relationships with customers. In that way, companies could shift more emphasis from customer acquisition to retention, and consumers would no longer have to expend time and effort researching better deals and moving to alternative providers.
Potential to tap customers for financing
Kern’s longer-term vision extends to companies leveraging strong customer relationships to reduce funding costs. He cites the example of an eco-friendly energy company that wants to raise money to build a wind turbine. If enough customers took up an option of paying the next few months’ energy bills upfront in order to finance the turbine, then the company would not have to resort to more expensive methods of borrowing. At the same time, customers would be less likely to switch because they’d paid in advance and bought into their energy provider’s environmental initiative.
From Cornwall to Mexico
Building on its UK offering, Duesday will roll out a dedicated payment solution tailored especially for the Mexican market starting from November.
Whereas direct debits are well established in the UK, with nearly nine out of 10 British adults using them2, the payment method is much less common in Mexico. There, around 95%3 of adults use cash when making payments up to MXN 500 (USD 26) 4. Residents therefore typically receive a paper utility bill at their home address, queue up at their local convenience store, and pay in cash.
Together with HP and Banamex, Duesday’s Mexico initiative will enable customers to make payments via the app, shopkeepers to accept QR-based payments, and service providers to receive payments more efficiently.
In time, this will mean that customers will be able to pay via the app, as in the UK. However, they will also have the option to use an app-loaded smartphone to pay in cash at the store, without having to take along a paper bill.
Cream of the crop
Only just back from a Department for International Trade mission to Finnosummit in Mexico, Kern recently learned that Duesday has landed a place on Tech Nation’s prestigious six-month programme aimed at the UK’s most promising fintechs.
It seems that living in a rural idyll just steps from the beach is no barrier to success.
1Superfast Cornwall (©2018) Connecting Cornwall to the World. Available at: https://www.superfastcornwall.org/ (Accessed: 18 September 2019)
2Direct Debit (©2011-2019) About Us. Available at: https://www.directdebit.co.uk/Resources/Pages/AboutUs.aspx (Accessed: 20 September 2019)
3National Institute of Statistics and Geography (INEGI) Encuesta Nacional de Inclusión Financiera 2018. Presentación de resultado. Available at: https://en.www.inegi.org.mx/contenidos/programas/enif/2018/doc/enif_2018_resultados.pdf (Accessed: 20 September 2019). Spanish language source discovered via link in footnote 4.
4Blaise, P. (2019) ‘Mexico – local payment methods usage overview’, The Paypers, Netherlands, 19 August. (Available at: https://www.thepaypers.com/expert-opinion/mexico-local-payment-methods-usage-overview/780272 (Accessed: 20 September 2019)