What is a Direct Debit?
A direct debit is a payment method where a business (the originator) collects funds directly from a customer's bank account with their authorisation. The customer sets up a Direct Debit mandate giving the business permission to collect payments, which can be for fixed or variable amounts.
How Direct Debits Work
The customer provides their bank account details and authorises the business to collect payments by signing a Direct Debit mandate. The business then submits collection requests to the banking system (Bacs in the UK), and funds are automatically pulled from the customer's account on the agreed dates.
Direct Debit vs Standing Order
- Direct debit: The business initiates the collection. Amounts can vary. The business controls the timing and amount.
- Standing order: The customer instructs their bank to pay a fixed amount at regular intervals. Only the customer can change it.
Direct debits are more flexible for businesses because they can adjust the collection amount (for example, when a utility bill changes) without requiring the customer to update their bank instructions.
The Direct Debit Guarantee
In the UK, direct debits are protected by the Direct Debit Guarantee. If a payment is collected in error, the customer's bank will immediately refund the amount. This gives customers confidence to set up direct debits, knowing they are protected against incorrect charges.
Setting Up Direct Debits
To collect direct debits, businesses need:
- A Service User Number (SUN) from Bacs
- A sponsor bank or bureau to submit collections
- The customer's bank account details and signed mandate
The bank details are typically collected through a secure form — either online or over the phone. When collecting over the phone, the same security considerations apply as with card payments: the bank details should be captured securely without agents seeing or hearing them.
Paytia's bank account capture service securely collects bank details for direct debit mandates over the phone. Customers enter their sort code and account number on their phone keypad, and Paytia's DTMF suppression ensures agents never hear the digits. The details are captured, verified with Confirmation of Payee (COP), and tokenised for secure storage.
Frequently Asked Questions
How long does a direct debit take to process?
In the UK, direct debits processed through Bacs take three working days: Day 1 the instruction is submitted, Day 2 the funds are debited from the customer's account, Day 3 the funds arrive in the business's account. Faster Payment direct debits are also becoming available.
Can a customer cancel a direct debit?
Yes. Customers can cancel a direct debit at any time by contacting their bank. They do not need the merchant's permission. The business will be notified of the cancellation.
Is it safe to give bank details for a direct debit over the phone?
Giving bank details over the phone carries risk if the agent can hear them. Secure phone payment solutions use DTMF masking to capture bank details without the agent hearing the numbers, and Confirmation of Payee (COP) to verify the account holder's name.
See how Paytia handles direct debit
Book a personalised demo and we'll show you how our platform works with your setup.
Request a Demo