Recurring payments, without the recurring problems

Most businesses running recurring payments think the main choice is between Direct Debit and credit cards. That’s no longer the case. Recurring Pay by Bank brings a new flexibility to recurring payment collection that benefits from the cost-efficiency of Direct Debit while replacing the high fees of credit cards. Getting that distinction right changes how you think about your whole payments stack and where the opportunities to improve your operational efficiency lie.

Quick summary

• Card-on-file is expensive and prone to failure — card issues cost businesses around 3.5% of monthly revenue

• Direct Debit remains the right tool for fixed-amount, high-volume recurring collections at low cost — Recurring Pay by Bank doesn't compete with it on price

• Recurring Pay by Bank is an account-to-account payment method that handles variable amounts with same-day settlement and a funds check before every collection

• The right move for most businesses: replace card-on-file with Recurring Pay by Bank, keep Direct Debit running exactly as it is

• GoCardless routes automatically between both — so you get 100% UK bank coverage from day one with one integration

The problem with card-on-file

Card-on-file — storing a customer's card details and charging on a recurring schedule — has become the default for variable recurring payments. But it's an expensive default, and the failure rates reflect it.

Our own research found that card payment issues cost businesses on average 3.5% of monthly revenue. And 42% of business leaders spend three or more hours every week managing failed card payments alone. Cards were built for one-off transactions, and recurring collection was retrofitted on top. This is where the structural weaknesses begin to show: cards expire, get reissued, trigger fraud flags when billing amounts change, and can't tell you whether funds are available before a collection attempt. You only find out after something's gone wrong.

73% of businesses report ongoing issues with card systems, and that number is high because the problem is structural, not incidental. These issues are baked into how card payments fundamentally work.

Solving the right problem

Direct Debit solves different problems. It's the lowest-cost recurring payment method available, deeply embedded in UK consumer behaviour, and right for any fixed-amount, predictable billing at scale. Billions of Bacs Direct Debit payments are processed in the UK every year — the infrastructure is proven, and the familiarity is near-universal.

But consumer purchasing behaviour is varied, and as more complex products and services develop, so do the requirements of the payment methods that support them. Direct Debit is not designed for varying amounts and changing frequencies - the use cases where cards typically sit. Settlement typically takes three to five days for Direct Debit, not hours. And failed payments only surface after the attempt — once the service has been delivered and the window to act has closed.

For fixed-amount, high-volume collections, Direct Debit remains the more cost-efficient option, and there's no business case to move those collections. The opportunity is in replacing card-on-file, where the opportunity and the cost efficiencies really come into play.

Where Recurring Pay by Bank wins

Recurring Pay by Bank is an account-to-account (A2A) payment method that lets businesses collect variable amounts on any schedule from a single customer authorisation, without asking customers to re-approve every change. Payments go directly from the customer's bank account to yours via Faster Payments and settle the same day.

The reliability gap is just as significant. Bank accounts don't expire, don't get reissued, and don't generate chargebacks. A funds availability check runs before every collection — if the balance isn't there, you know before the attempt, before the service is delivered and crucially before the cost has started compounding. We found 89% of businesses believe Recurring Pay by Bank would significantly improve their cash flow, and 91% expect it to reduce operational costs.

Faster settlement adds to the picture. Same-day settlement means money is confirmed and cleared on the day you collect it, not three to five working days later. For businesses with variable billing — usage-based energy bills, flexible savings contributions, and insurance premiums that adjust with risk, that timing difference is meaningful.

The best of both worlds

Choosing the right combination of payment methods to complement your business, but minimising costs and maintaining operational efficiency, is key.

We recommend using Direct Debit with Recurring Pay by Bank, handling what card-on-file currently does: variable amounts, faster settlement, and real-time confirmation. Direct Debit handles what it already does well: fixed recurring collections at the lowest cost available. Both run through one GoCardless integration, and the routing is automatic. If a customer's bank isn't yet live on the scheme, the payment falls back to Direct Debit — no gaps, no manual management, no lost revenue. You leverage the breadth of account-to-account payments without the expensive fees and with better visibility.

Talk to our sales team to walk through your use case.