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5 Direct Debit myths debunked

We debunk the most common myths about Direct Debit

It’s been a British institution since the 1960s, but in the last half century, Direct Debit has gone from clunky and paper-based, to sleek, slick and simple.

In this post, we’ll clear up some common misconceptions around Direct Debit, so you’re up to date on the UK’s most popular method for collecting recurring payments.

Myth 1: Gaining access to Direct Debit is difficult

If you want to start processing payments by Direct Debit today, you can choose direct or indirect access. In the past, access to Direct Debit was only available directly, through your bank. The process was, and in some cases remains, slow. It also requires significant effort and expense for the person applying – in setup and ongoing management.

For very large businesses with high transaction volumes, who can meet the revenue criteria of banks and don’t mind hiring people to manage the process (and sourcing their own software), direct access may still be the preferred route, since it enables them to negotiate the lowest transaction fees.

The other way to access Direct Debit is ‘indirectly’ via a third party provider like GoCardless. These providers manage the Direct Debit process with the bank on your behalf. They are an attractive option for many businesses; they can provide an online plug-in-and-go service, significantly reducing setup time and cost and ongoing management and admin. And choosing a third party provider doesn’t necessarily mean high transaction costs (see myth 5).

Myth 2: Direct Debit is unsafe

Entrusting any organisation with electronic payments, especially if they are recurring payments, has given many a cause for hesitation in the past. Who can get hold of my bank details? What happens if a payment is taken fraudulently?

Thanks to the Direct Debit Guarantee, this method of bank to bank payments is the UK’s safest payment method, making it an attractive payment option for your customers. The Direct Debit Guarantee requires businesses to give advance notice of payment collection, allows customers to cancel a Direct Debit mandate at any time and receive a fast refund for payments mistakenly taken (often called ‘chargebacks’ or ‘indemnity claims’).

While the Direct Debit Guarantee protects customers, GoCardless also works to protect merchants from fraudulent chargebacks, for example by putting limits on high-risk transactions.

When it comes to security of financial data, GoCardless is regulated by Financial Conduct Authority and the Payments Service Regulator. Additionally we are certified by ISO27001 to ensure we can offer the most secure service for our merchants and their customers. Our security features include ‘tokenising’ payment data so merchants don’t have to store it themselves.

Myth 3: Direct Debit is inflexible

There is a misunderstanding at the heart of this myth. Standing orders and Direct Debit are often confused as they both involve bank to bank payments. When it comes to flexibility however, the two couldn’t be more different.

Unlike standing orders, Direct Debit allows you to take both fixed and variable monthly payments, to amend collection dates and even arrange for one-off payments. This makes Direct Debit an ideal solution for many businesses who take regular payments from their clients whether invoice payments, fixed retainers or subscriptions or ad hoc projects with existing clients.

Some bureaus offer even more flexibility in the form of multiple plans for certain customers and by integrating into billing or CRM systems.

Myth 4: Direct Debit is paper-based and admin heavy

If your Direct Debit process is paper-based and admin heavy, you should be looking for a different solution. Thanks to new technology and innovative suppliers in the market, Direct Debit doesn’t need to be difficult or slow.

GoCardless for example allows customers to create Direct Debit mandates online – and once you have received a Direct Debit mandate from your customer, it won’t expire unless they change their bank account. A Direct Debit mandate can be for life!

What’s more, with a modern provider like, like GoCardless, you’ll benefit from automatic reconciliation, immediate plain-English failure reports and automatic retries to keep admin hours to a minimum.

Myth 5: Direct Debit is expensive

Direct Debit innovators have created a competitive environment which keeps charges at a minimum, making it one of the cheapest methods for collecting recurring payments.

Opting to collect recurring payments with credit or debit cards can mean a double blow of higher costs per transaction (typically 2.5-5%) and higher payment failure rates, due to card expiration.

Costs associated with using Direct Debit providers vary. GoCardless aims to keep Direct Debit accessible and affordable for your business with free setup and transaction fees of 1%, with a cap of £2 and minimum of 20p.

There we have it, our top 5 Direct Debit myths debunked! Hopefully you’ll agree that it’s easy to see why 75% of all recurring payments in the UK are made by Direct Debit.

At GoCardless, we’ve brought Direct Debit into the digital age and made it accessible to all - and we’ll continue to invest in our unique Direct Debit technology to make sure it stays the best way for businesses to collect recurring payments.

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