Direct Debit is a cashless payment method which revolves around the following two key elements:
- Pull-based payments. The merchant (or creditor) can initiate Direct Debit payments, providing that the customer has successfully completed a mandate outlining their authorisation to do so.
- Bank-to-bank payments. Direct Debit involves banks directly communicating with the scheme clearing house, Nets. There are no card networks involved.
Direct Debit is pull-based
Once a mandate is in place, Direct Debit allows the merchant to initiate payment collection without future action needed from the customer. This is called a pull-based approach and can be an optimal method of payment for the following reasons:
- Take control of cash flow. With Direct Debit, it is the merchant who controls when they get paid. This can dramatically decrease the number of late payments they receive.
- Convenient automation. Direct Debit can offer a high level of automation with the right tools, resulting in reduced admin hours for both merchants and their customers.
- Greater flexibility. Direct Debit allows the merchant to vary payment amounts and frequencies.
Due to the pull-based nature of Direct Debit, customer protection is provided under the Betalingsservice scheme rules.
Direct Debit payments are bank-to-bank
In Denmark, Direct Debit operates through the Betalingsservice clearing scheme, and as with all countries, avoids the need to use any card networks. Operating in this way can be beneficial when taking payments on an regular basis, for example:
- Lower costs. Direct Debit payments are typically cheaper than Denmark’s card network.
- Higher retention. Direct Debit eliminates the risk of customer churn from card expiry, meaning your customers can enjoy a longer relationship with your service.
- Open to everyone. Anyone with a bank account can use Direct Debit to make payments, as long as they have signed a debtor agreement with their bank.
Direct Debit payments through GoCardless
GoCardless is a specialist in online Direct Debit, enabling businesses to take recurring payments internationally without the need to manage the collection process. There’s a variety of ways to start collecting Direct Debit payments from customers; either through our simple online dashboard, connecting to one of our pre-built integrations with 100+ popular accounting and billing software providers, or by taking advantage of our modern REST API and integrating GoCardless into your existing software.‹ View table of contents Next page ›