BECS payments – What are they & how do they work?

Did you know that Australians are the second most likely population to buy online from overseas businesses? Being one of the world’s most developed e-commerce markets in terms of volume, Australia is definitely an attractive market to enter. If you’re ready to launch, there’s one step you shouldn’t forget about. Namely, adding BECS payments to your checkout!

Below, we’ll discuss:

  • what BECS payments are;
  • why you should use them;
  • how they work;
  • what they’re used for;
  • what advantages they offer; and
  • how Stripe helps you accept them with ease.

Let’s dive in!

What are BECS payments?

First things first: what is BECS?

BECS stands for “Bulk Electronic Clearing System”. It’s an automated payment method in Australia and New Zealand.

BECS payments are managed by the Australian Payments Network, a self-regulatory body comprising more than 150 members and participants, including leading financial institutions in Australia.

Though this streamlined electronic payment method is mostly used to process low-value, bulk transactions, BECS can carry out payments of up to $100 million!

Why should you add BECS to your checkout?

Online business owners have a number of ways to collect recurring payments. You can accept cards, bank debits (such as ACH Direct Debit payments), bank redirects (such as Giropay or Sofort), bank transfers (such as SEPA payments), or virtual wallets (such as Apple Pay or Google Pay) as part of a plethora of options.

In a world where technologies are ever-evolving and consumers’ payment preferences change based on where they live, offering the right payment options is a critical factor for success!

If you want to expand your business to Australia, you should be aware of the fact that the country uses its own payment scheme to process bank-to-bank transfers. The BECS payment system carries an average yearly value of more than $15 trillion, making it a popular payment option on the continent!

How do BECS payments work?

Using the BECS payment system, card networks such as Visa and MasterCard are not involved. Instead, money is transferred bank-to-bank via the BECS scheme.

There are three types of BECS payments:

1. Direct Debits

BECS Direct Debit payments are electronic withdrawals made by companies that collect recurring payments, such as insurance or utility companies, for instance.

If you want to start accepting this automated payment method, you’ll need to first get approved and registered with a financial institution. After registration, you’ll receive a unique identification number.

To authorize your business to debit an account, you’ll need to collect a mandate from your customer. Furthermore, you’ll need to manage the mandate by storing, updating, and managing the Direct Debit contract.

Once a customer completes a Direct Debit request, you’ll be able to initiate BECS payments without any further action needed from the buyer.

The sum is taken off the buyer’s account as soon as the transaction is initiated, and payments are processed and settled on the same day. However, it can take up to three business days to receive notification on the success or failure of a payment.

Payment flow of BECS Direct Debit payments.

2. Direct Credits

This type of BECS payments is an electronic deposit into an account. Direct Credits are mainly used by companies to make bulk recurring payments, such as employee payroll or benefits.

3. One-off bank transfers

Most of the time, BECS Credit Transfers are used by individuals to make one-off bank-to-bank transfers. This type of BECS payments is less commonly used compared to Direct Debits or Direct Credits.

What are the advantages of BECS payments?

Although BECS payments are available to both businesses and individuals, BECS is more commonly used by companies with subscription models, accepting recurring bulk payments.

One of the reasons is that BECS payments provide a frictionless and low-cost payment method: since BECS processes only bank-to-bank transfers and doesn’t involve any card network, its fees are much cheaper compared to card payments.
With payments being settled in batches on a same-day basis, BECS payments also allow for smooth bulk payment operations.

Furthermore, as payments are bank-to-bank, you won’t be limited by card networks. BECS payments are open to everybody having at least one bank account in Australia or New Zealand.

Offering BECS payments at checkout also plays an important role in maintaining an effective dunning process. How? The BECS payment system uses the buyers’ bank account details instead of their card details. This way, payments will be processed even if the customer’s card has expired.

One of the advantages of BECS payments is that payments will be processed even if the customer’s card has expired.

On top of that, the pull-based approach of BECS Direct Debit enables you to have more control over the cash flow of your business, allowing you to know what payments to expect and when.

The entire process can be automated, reducing the time and effort required to manage late payments. It’s a win-win for you and your customers as well: BECS payments allow your buyers to avoid missed payments, late fees, and service interruptions.

Accepting BECS Direct Debit payments with Stripe is a breeze

If you’re already using Stripe as your payment gateway and want to expand your business to Australia, adding BECS payments to your checkout is a smart move to increase conversions!

You can enable BECS Direct Debit and other payment methods in the Stripe Dashboard without changing your code. Stripe will determine the list of supported payment methods to show each buyer by evaluating parameters such as the currency or payment method restrictions. It will also generate the required mandates to present to your customers.

According to the BECS scheme, you should notify your customers when a mandate is established and each time you debit their account. By default, Stripe automatically sends these emails to your customers. These pre-debit notifications help you avoid unnecessary debit failures and disputes.

If you’re collecting recurring payments of the same amount (as a subscription-based business, for instance), Stripe allows you to include multiple upcoming debits with corresponding dates in a single notice.

You might like to read: how to accept recurring revenue in your WordPress site.

Disputed payments

If you decide to accept BECS payments, it’s important to familiarize yourself with the dispute process as well.

A customer can dispute a debit payment for up to seven years through their bank without the need for an explanation. If their bank accepts the request to return the funds, Stripe immediately sends both the “charge.dispute.created” and “charge.dispute.closed” webhook events and removes the funds from your Stripe account.

What can you do to resolve the situation?

The best way to manage a Direct Debit dispute is by reaching out directly to your customer. Try to get more information about the reason for the dispute. If you’re able to come to an agreement, and your customer is willing to return the funds to you, they’ll need to make a new payment.

BECS payments in a nutshell

If you have a subscription-based business that intends to accept recurring bulk payments in Australia or New Zealand, adding BECS payments to your checkout should definitely be on your to-do list!

This automated payment method is transacted bank-to-bank, with no card networks involved. This means higher speed, lower costs, added security, and fewer lost customers due to card expiry. Furthermore, the pull-based approach of BECS payments enables you to have more control over when you get paid. The automated process means you’ll waste less time and effort chasing and reconciling late payments, and your customers will avoid missed payments, late fees, and service interruptions. A win-win!