What is Direct Debit?

Direct Debit is an automated payment method that allows merchants to pull payment directly from their customers' bank accounts.


The system has two key features, from which almost everything else follows:

  1. Direct Debit is pull based - once given a mandate by their customer, it is the merchant who initiates Direct Debit payments. The customer doesn't need to lift a finger.
  2. Direct Debit payments are bank-to-bank - there are no card networks involved in the Direct Debit scheme. All communications happen directly between the banks.

Direct Debit is pull based

With Direct Debit, it is the merchant who initiates payment collection. This "pull based" nature has considerable benefits:

  • Cash flow. Direct Debit puts the merchant in control of when they are paid, and can reduce the number of late payments they receive.
  • Automation. The entire collection process can be automated, reducing admin for both the merchant and their customer.
  • Flexibility. Unlike standing orders, Direct Debit allows the payment amount and frequency to be varied, keeping the merchant in control.

The pull based nature of Direct Debit also necessitates strong customer protection. This is provided by the Direct Debit Guarantee.

Direct Debit payments are bank-to-bank

Direct Debit operates through the Bacs clearing scheme, rather than through the card networks. This has significant benefits when taking payments on an ongoing basis:

  • Low cost. Since Direct Debit payments are not routed through the UK's expensive card networks, they are extremely cheap.
  • High retention. Churn due to card expiry is completely eliminated, so Direct Debit relationships last longer than ongoing card payments.
  • Anyone can pay. Anyone with a UK bank account can pay by Direct Debit, including any UK business.

Using the UK's bank-to-bank infrastructure, rather than the card networks, also has a disadvantage: Direct Debit payments are not instant.

Direct Debit payments through GoCardless

GoCardless is an online Direct Debit specialist that manages the entire collection process on your behalf. Merchants can either collect and manage their payments using a simple online tool or can integrate with our REST API.

To find out more about collecting Direct Debits with GoCardless visit GoCardless.com.

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