In this guide, we walk you through options for accessing the Direct Debit Scheme, so you can find the best fit for your business.
There are two main methods for accessing Direct Debit: going directly through your bank, or through one of the Direct Debit bureaus.
With the direct access method, large organisations wishing to manage their Direct Debit collections in-house can become ‘direct submitters’. This ensures the lowest transaction fees possible, but the system is complicated and requires significant resources to manage.
To become a direct submitter, you must apply for a Service User Number (SUN) from your bank. The bank assesses your application according to your business’s ability to meet the Direct Debit scheme requirements.
It’s worth keeping in mind that applying for direct submitter status can be a long process, often taking months. What’s more, the banks are unlikely to approve many small businesses because their turnover is too small. Some banks require £1m turnover for the business to even be considered.
Once approved for a SUN, a direct submitter must build the technical expertise in-house to collect, store and submit correct payment information to Bacs. This requires in-depth Direct Debit expertise, as well as Bacs approved Direct Debit management software.
Direct Debit management software is necessary if you want to use the direct access method. It’s also useful for consolidating various payment types into one tool. Full-featured packages, such as Bottomline, offer integration with other systems, along with the ability to take payments using a range of Direct Debit schemes, including SEPA and Bacs.
Using the direct access method is not cheap, costing around £15,000 in setup costs and ongoing maintenance charges. There are also transaction fees to consider, along with the costs of Direct Debit management software packages - an unavoidable part of the direct access method.
For large organisations with high payment volumes, the relatively low transaction fees of direct access may outweigh the high overhead costs of setup and management. But for businesses that don’t have the resources or the desire to go down the direct submitter route, there’s also the option of accessing Direct Debit through a bureau.
Traditional Direct Debit bureaus
If you use a traditional bureau, you’ll collect Direct Debit mandates yourself. But instead of submitting payment details directly to Bacs, you’ll need to upload or email an Excel file to your bureau.
The bureau handles the Bacs submission on your behalf and emails you with details of any failed payments. When handling your Direct Debit payments, bureaus can either use a SUN specially appointed for you, or their own SUN. Here are more details on what each method involves.
Using a specially appointed SUN: The bureau sets up an SUN for you, which is a good option if you want your business name to show up on customer bank statements.
Using the bureau’s SUN: The bureau submits and manage payments on your behalf. This option is useful if you want to start taking payments more quickly, and don’t mind the bureau’s name appearing on customer bank statements.
Traditional bureaus typically withhold approximately 5-20% of the value of each collection to cover any future indemnity claims.
Direct Debit bureaus typically charge for some or all of the following: setup, monthly usage, per transaction, per submission and per mandate. They may also charge penalties for failed payments.
Traditional Direct Debit bureaus can handle some of the manual processes on behalf of your business. But bureaus often come with opaque costs, lack of flexibility and may still require significant amounts of admin.
A new solution that addresses these concerns is needed, which is where GoCardless comes in.
GoCardless: Direct Debit for the digital age
As a dedicated online Direct Debit provider, GoCardless manages the whole payment collection process for you.
GoCardless hooks into your existing business processes, via pre-built integrations with popular accounting and billing software, or via our flexible API for more tailored integrations. There’s also the option to manage your payments through a simple online dashboard.
With GoCardless, you can do away with cumbersome paper mandates and get your customers to set up Direct Debit payments online. As soon as a mandate is in place you can start collecting one-off or recurring payments from your customers automatically.
GoCardless charges a simple domestic transaction fee of just 1% +20p (maximum £4), with no setup fees or hidden charges. All funds are paid out after three working days and there’s no limit on the number of transactions you can make.
What’s more, the GoCardless Plus plan offers merchants their own SUN, to maintain brand consistency on customer bank statements.
Here’s a handy comparison chart so you can see the different methods side by side:
|Direct Access||Traditional Bureaus||GoCardless|
|Signup method||Via your bank||Various providers||GoCardless|
|Application timeline||3-6 months||4-8 weeks||Instant online sign-up|
|Set-up costs||£15,000+ per year||Yes||None|
|Direct Debit offering||Paper, phone, online||Paper, phone, online||Online as default, plus paper and phone available on Pro plan|
|Admin||3+ employees||1-3 employees||< 4 hours a week|
|Fees||Software licensing fees, monthly fees, transaction fees, new mandate fees||Setup costs, monthly fees, transaction fees, new mandate fees, penalty fees||Simple transaction fee. No hidden costs.|
|Failed payment fees||Bank fees apply||Yes||None|
|Chargeback fees||Bank fees apply||Yes||None|
|Tech requirements||Manual payment management software||Typically no API||Simple, flexible API|
|Restrictions||Bond with sponsor bank (£100k+)||
Withhold % of funds.
£800 max transaction
|Type of business||Corporates managing payments in-house||Smaller businesses needing paper-based Direct Debit||Any size of business needing online Direct Debit|
|International Direct Debit offered?||No||Usually just UK, sometimes UK and Eurozone||Yes, including the UK, USA, Eurozone, Australia, New Zealand, Canada, Denmark and Sweden.|
Using GoCardless for accessing Direct Debit
As the above summary table shows, GoCardless offers advantages over other methods of accessing Direct Debit. You can sign up online and start taking payments immediately, avoiding hefty setup times of weeks, or even months, that come with other methods.
Setting up GoCardless is free of charge on our standard plan, with a simple per transaction fee once you start taking payments. There are no new mandate fees, penalty fees or any other hidden charges.
For businesses already using billing and accounting software, GoCardless offers integrations with the most popular packages, including Xero, QuickBooks, Zuora and Sage.
What’s more, if your business needs more flexibility, you can use the GoCardless API to create your own tailored integration.