Last editedJuly 20234 min read
Quick overview of PayTo and PayID
What is PayTo?
PayTo is a simple and secure way to collect both one-off and recurring payments in real-time directly from your customer's bank account to yours. Payers only need to provide single approval, regardless of whether they’re making a one-off payment, setting up a recurring payment plan or doing both at the same time.
The streamlined approval process gives businesses and payers better peace of mind as it automatically requires payers to verify that they have access to the bank account they want to use for payments, which reduces the risk of fraudulent payers.
What is PayID?
A person needs to register for PayID and connect it to their bank account, but once set up they can change the ID to either their mobile number, email, ABN or even ORG ID, whichever is most memorable for them. This means that when someone wants to pay or get paid, they simply need to enter the other party’s memorable ID number rather than their full BSB and account number.
What are the similarities between PayTo and PayID?
PayTo and PayID are both bank payments
Let’s start with the most obvious similarity - both PayTo and PayID are digitally managed bank payments. This means you need an online bank account or mobile app to collect and send payments. The plus side of both is that because they are directly linked to bank accounts, payers can see and manage all PayTo and PayID activity in one place.
Both PayTo and PayID are bank payments created by the Australian New Payments Platform (NPP)
You don’t need to deep-dive into the technicalities of who the NPP are (that’s our job to do as a payments platform). What you do need to know is that any payments built by the NPP offer the same speed and payout timings. So for PayTo and PayID, you can request and collect payments 24/7/365 and they will be paid out into your account within two business days. They both also offer instant payment confirmation.
You can use your PayID for both PayID and PayTo payments
As we mentioned above, once you’ve registered to use PayID and connected it to your bank account, you have the option to update the ID to something more memorable. This can be a phone number or your email address.
When setting up a new PayTo agreement, so long as your bank offers both PayTo and PayID, you have the option to use your BSB and account number OR your memorable PayID. This makes it even easier to set up payments.
What’s the difference between PayTo and PayID?
One of the biggest differences between the two payment methods is the level of control a payee has. As PayID and PayTo are NPP payment methods, they have the same foundation and are both forms of push payments. However, because of the way it’s set up, PayTo acts more like a pull payment, collecting - or pulling - money automatically out of a payers account.
How they work:
PayID - PayID allows you to request a payment, but as it's a push payment the payer has control over when to pay and how much they’re transferring as they have to actively initiate (or push) the payment from their account to yours.
The downside of using this as a business is that it relies on a customer entering the correct amount and paying you on time. There are no set timelines enforced by banking apps and a payer could try to be cheeky and pay you a few dollars less in hopes you won’t notice, or won’t go to the effort to chase. Overall, it leaves you vulnerable to an unknown cash flow.
PayTo - PayTo are third-party-initiated push payments. This means that when setting up a new agreement a payer gives a third party, like GoCardless, consent to connect to their bank account and initiate payments for them. They appear to work just like pull payments as every time a payment is requested, the third-party pushes the money on the payer’s behalf - so they don’t need to take any manual actions.
This makes PayTo great for recurring payments as payers don’t have to worry about missing payments or making manual updates, and businesses have peace of mind over their cash flow knowing the payments are automatically pushed to them every time they’re due.
One-off VS recurring payments
PayID requires the payer to:
Set the amount that needs to be paid
Initiate and approve the payment from their account for every payment
As a business, you need visibility over when you’re getting paid in order to manage your cash flow. So, it might not be surprising to hear that PayID is better suited as a one-off payment method.
On the other hand, PayTo can be used for both one-off and recurring payments. If you decide to use PayTo for recurring payments, then you can also set up notifications that let you know when a customer has paused or cancelled their agreement - keeping you one step ahead and able to manage any potential churn.
There are a variety of different use cases for PayTo, including taking a one-off upfront payment when setting up a recurring payment agreement. The reason PayTo works so well for this is that the customer can do both at the same time, in the same checkout flow, and they only need to give approval once. See how this works for yourself by watching our short demo.
PayID requires manual payment matching
If someone pays you via PayID, you will see the transaction in your account alongside their memorable ID name or number. This is fine if it’s a friend or family member, but if you’re a business processing dozens or maybe hundreds of payments, there’s no quick way to know who is connected to which transaction. This means you or your team will have to spend time manually matching up the amounts to any outstanding invoices and payment requests.
PayTo is far more business-friendly as it will show you all the details you need to easily identify and reconcile payments, think of it as providing you with all of the information and functionality of Becs Direct Debit but with added speed, security and visibility.
Can you summarize the key benefits of using PayTo for my business?
There are a lot of benefits to collecting your payments through a PayTo-powered product. You can read more on the benefits and use cases here, but this is a quick round-up to help you decide if it’s a good fit for your business.
One-time authorization from the payer, even for recurring payment agreements
Real-time, instant payments that go at the same speed as PayID
Less chance of accidental churn as bank accounts don’t expire or get lost on a night out - unlike credit cards
Great visibility with notifications for when someone pauses or cancels their payment agreement
Convenient for customers as all they need to complete the set-up is access to their online bank account or banking app
Lower cost compared to credit cards
Added security as payers provide upfront verification, meaning you can reduce the risk of fraudulent payers signing up for subscriptions they have no intention of paying for