Direct Debit in a nutshell: A guide for merchants

The ultimate way to collect recurring payments


Direct Debit is a popular payment method in the UK, with around 60,000 UK organisations using it to collect bills of all kinds, including utility payments, membership subscriptions, charitable donations and B2B invoicing. In 2015, Bacs, the organisation that handles Direct Debit, processed 3.9 billion Direct Debit payments, an increase of 239 million compared to the previous year. As of June 2016, GoCardless processes £1.5 billion worth of Direct Debit transactions for over 20,000 customers.

Direct Debit is highly versatile

It’s great for:

  • Recurring bills for variable amounts. Direct Debit is a great way of collecting variable amounts for companies that invoice customers depending on how much they use or buy.

  • Fixed subscriptions or memberships. Direct Debit is perfect for recurring payments, such as magazine subscriptions or gym memberships, due to its low cost and high retention rates.

  • Taking payments on account. If you have an ongoing relationship with your customers, Direct Debit is a good option for them to spread costs or pay on account.

Direct Debit is perfect for regular payments

Collecting payments with Direct Debit has four main benefits:

  1. Direct Debit puts you in control. Late payments affect cash flow and admin time, as you have to spend time and effort chasing them. But Direct Debit lets you collect payments whenever they’re due. For example, Has Bean Coffee reduced its average payment period from 62 to 41 days, by switching to Direct Debit with GoCardless.

  2. Direct Debit can be automated. Once authorised, you can take payments from customer accounts with no further action needed from them. If you’re collecting fixed amounts at regular intervals, GoCardless lets you “set and forget” the payment. All the magic happens automatically.

  3. Direct Debit is cost effective. With Direct Debit, you can avoid costly credit and debit card transactions, which cost around 3% each. GoCardless charges only 1% per payment up to a maximum of £2, and even less if you’re collecting over 500 payments.

  4. Direct Debit gives you flexibility. Unlike standing orders, Direct Debit allows you to change payment amount and frequency without customers needing to re-authorise. So you can take variable amounts or increase prices whenever needed, with absolutely no admin hassle. This also gives your customers an easy way to spread the cost of their payments.

Direct Debit can be used for one-off payments too

Although Direct Debit is usually associated with regular and recurring payments, it can also be used for collecting one-off payments. It’s important to remember that Direct Debit is not an instant payment method so shouldn’t be used where immediate transfer of funds is needed, such as for e-commerce.

Direct Debit and GoCardless

GoCardless is the UK’s leading Direct Debit provider, used by over 20,000 organisations ranging from small businesses and sole traders, to large companies such as Thomas Cook, TripAdvisor and the Guardian. Our system can be set up in seconds and managed online, along with the option to integrate our API with your website and CRM.

We serve more UK businesses than any other Direct Debit provider. We’re also regulated as an Authorised Payment Institution by the Financial Conduct Authority.

To find out more about using Direct Debit for your business, check out our guide to taking payments with Direct Debit.


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