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What Is a Direct Debit Provider?

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedApr 20233 min read

It’s in the best interests of any small business to make payment as convenient as possible for customers. Taken directly from a customer’s bank account, direct debit payments tick all the boxes with a combination of security, convenience, and efficiency. If you’re thinking about offering this method, there’s an array of direct debit providers to choose from.

How do direct debit payments work in the United States?

Direct debit payments are processed using different systems depending on the country. Within the United States, the Automated Clearing House (ACH) network is used to process bank-to-bank direct debit payments. This network includes over ten thousand banks and credit unions across the country. Settlement times can vary depending on when the payment is sent and the gateway you choose, typically around three to five working days.

Also called auto-pay, authorized withdrawal, or automatic transfer, direct debit must be authorized by the customer or bill payer. Once authorized, the business can withdraw money directly from the bill payer’s bank account. This is often at regular intervals, as with utility bills or software subscriptions. It provides a more convenient alternative to mailing paper checks or filling in card details each month for online payment. Once authorized, no further action is required on the payer’s part.

What do direct debit service providers do?

So, how do direct debit providers factor into this equation? Third party providers serve as the facilitator or middleman between the merchant and bank. They help streamline and collect direct debit payments with access to the ACH network. It’s difficult for a business to gain direct access to the network, particularly if you’re just starting out. Fortunately, many payment processors, banks, and accounting software providers offer ACH debit services.

There are two categories of direct debit service providers to be aware of.

Direct debit specialists focus purely on this payment method. They’re driven to reduce payment failure rates, integrate with accounting software, and maximize conversion rates.
Full-service providers facilitate direct debit payments as well as other payment methods. They’ll take card payments as well as direct debit or ACH payments.

List of direct debit providers

If you’re ready to get started, here’s a list of direct debit providers to choose from.

1. GoCardless

GoCardless is a direct debit specialist well-versed in managing pull-based bank payments. Its service manages payment collection with customer authorization, without any need for outside bank agreements. Customers benefit from convenience as well by authorizing their payments online with a simple one-time form, allowing your business to collect one-off or recurring payments. Set-up is quick and easy, with no monthly fees and over 200 partner integrations to streamline the payment process.

2. Dharma

Another option is Dharma, a simple ACH processing platform that allows you to set up recurring payments online. There’s also the option to accept in-person checks as well as phone payments, which is handy if you have customers who prefer traditional payment methods. However, one thing to note is that Dharma isn’t available for every industry.

3. Adyen

While providers like GoCardless are specialists, there are also full-service payment gateways out there. Adyen is one of the most popular tools, used by companies like Spotify and Microsoft. In addition to processing bank payments, Adyen also helps you collect debit and credit card payments. It provides data insights to help your business analyze buyer behavior online and improve your conversion rates.

4. Stax

Another platform that combines ACH and credit card payments is Stax. Unlike some others on this list, you’ll need to make monthly payments to access the service. However, it makes up for this in low per-transaction fees. That means it’s a good option for businesses with high volumes of monthly transactions. If you don’t want to get locked into a monthly contract, it’s probably not the best fit.

5. TrustCommerce

Finally, TrustCommerce is a payment gateway that connects businesses to an array of payment processors including the ACH network as well as Elavon and Chase. You’ll be able to take recurring payments for subscription services as well as one-off card payments. TrustCommerce allows you to create a payment portal for your customers to make payment easier.

How to choose the best online direct debit provider

As you can see, there’s a broad spectrum when it comes to direct debit processing services. You’ll need to factor set-up costs, monthly fees, and transaction fees into your budget. Businesses processing a high volume of transactions should look for full-service providers to tackle payment needs. If you are looking for an expert direct debit specialist, GoCardless allows you to take secure payments online.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.